Finally I hit the Holy grail of decision making when I accidentally listened to dr. Phil Tetlock give a presentation at fora.tv.
If are very interested like me in psychology of decision making then this is a great presentation. Iam a big fan of Nassim Taleb but unfortunately Taleb teaches about uncertainties but not how to deal with uncertainties except to say be safe and don't take risk.
Phil classifies people into two different categories Foxes and hedgehogs.
Hedgehogs are the visionaries and have one main theme in life or in markets or in politics.
Some Examples of hedgehog thinking are-
- We are going to see massive deflation and Dow will fall below 5000.
- we are going to see hyper inflation and gold is going to hit $5000 and oil $200 a barrel.
-USA has seen its final moments and is going to disintegrate.
- China is going to have revolution and communists will be thrown out.
Hedgehogs get married to their positions and can never change, even when their positions don't happen. They justify it by saying that it will happen in the long run.
Foxes take best of many worlds
- They do not have any entrenched positions but combine many positions.
- They change their positions quite often when presented evidence.
Here are the results-
Foxes on average are better decision makers than hedgehogs
Foxes do not get as much attention like hedgehogs.
When hedgehogs are right they have fame come along with it.
Hedgehogs do not even do better than basic computer algorithm.