Superforccasting:How To Upgrade Your Company’s Judgment
Superforccasting:How to Upgrade Your Company’s Judgment
Thearticle Superforccasting:How to Upgrade Your Company’s Judgmentby Paul Schoemaker and Philip Tetlock proposes the best approach forbuilding progressive organizational forecasting capabilities thatguarantee success. The article gives an anecdote of unreliableforecasts made by the National Intelligence Council back in 2002concerning the production of mass destruction weapons in Iraq(Schoemaker & Tetlock, 2016). This anecdote brings out threevital lessons. One, talented generalists are capable of making moreaccurate forecasts compared to specialists. Second, predictivecapabilities can be enhanced through wisely designed training.Lastly, well-managed teams can outclass individuals in the realm offorecasting.
Thearticle asserts that wrong judgments can lead to dire consequences.Similarly, creating a predictive edge that constantly improves afirm`s predicting capacity can result in innumerable benefits. Theauthors advise that a company should not focus on issues that areeasy to predict using econometric and operations research toolsbecause they cannot yield any gains for the organization. However,they recommend that a company should concentrate its efforts onforecasts that require the use of data, logic, and analysis. Besidesthat, the authors express that good judgment and vigilant questioningare vital. For example, the projection of commercially viable drugsin clinical trials necessitates both technical knowledge and goodbusiness judgment (Schoemaker & Tetlock, 2016).
Thearticle proposes three steps that can help an organization improveits forecasting capabilities. The first action is training for goodjudgment. Under this step, training the forecasting personnel inreasoning and de-biasing can boost the predictive competence of anorganization. Again, the company should teach the basics to clearroom for errors followed by a clear comprehension of cognitive biasesthat can skew judgment. Here, employees are advised to take the"outside view" as proposed by Daniel Kahneman, whichentails a careful assessment of previous similar projects (Schoemaker& Tetlock, 2016). Training can also help eliminate psychologicalfactors that cause biased estimations. The organization shouldembrace customized training programs that focus and lay emphasis onspecific forecasting domains, particularly where previous performancewas poor. The authors note that narrow programs may be tough todevelop and implement, but they yield superior benefits, compared tobroad programs.
Thesecond step should be building the right teams. The organizationshould consolidate a team characterized by careful, humble,open-minded and analytical individuals. The team should also beintellectually diverse with each member having an area ofproficiency. The last step should be tracking performance andproviding feedback. These two elements are crucial to improving anorganization`s predictive competence. Performance audits should beperformed to evaluate the performance of a team. The authors proposethe Brier score as the ideal measure of the precision of predictionsbecause it allows companies to make direct and statisticallyconsistent comparisons among the forecasters on a range ofpredictions (Schoemaker & Tetlock, 2016). This can indicate areasof weakness that require strengthening to improve the organization’spredictive competency.
Theinformation contained in this article applies to the field ofactuarial analysis. Actuarial analysts work in the insurance industryand apply statistical models to evaluate the probability and costsassociated with future events such as death, damage to property, andaccidents among others. As such, actuaries should be well-trainedindividuals who can make reasoned judgments without succumbing tosituational, emotional or psychological biases. Proper training ofactuaries can improve their skills, and eventually enhance a firm’spredictive competency. This can give the firm a predictive edge inthe industry, which can boost its profitability.
Schoemaker,P. J., & Tetlock, P. E. (2016). Superforccasting: How to UpgradeYour Company`s Judgment. HARVARDBUSINESS REVIEW, 94(5),73-+.