The first step towards making better financial predictions or choices is to do two types of evaluation in such cases.
What we do mostly is evaluating numbers, facts, the options we see and on that basis build assumptions to arrive at possible outcomes.
Sounds as everything one should do.
Yet what is missing is an evaluation of how we have done this evaluation.
A self-evaluation.
The analysis of the facts and figures can yield very different results depending on our mental filters, pre-existing expectations and more.
Yet not how much effort is put in understanding how we arrive at our valuation.
For starters what we can do is ask ourselves:
What assumptions am I making? How could this be FALSE? How confident am I and why? If I had to argue against my own prediction, how would I do it? If someone else made this same prediction, would I trust it as much as I do my own? What is the probability of my prediction being correct? if below 100% Why isn't it higher? if 100% What makes me absolutely sure that others are wrong?
Beyond that, there are ways of building a consciousnesses of your disposition to different biases and tools for managing them.
You cannot manage what you don't measure. And there are ways of managing even something we are not currently conscious of.
T
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