Power of Precision Flashcards
What is the flip side of using natural language terms that express likelihoods ?
- Are useful but blunt instruments.
- The “drive to improve” on your initial estimates is what motivates you to check your information and learn more. If you hide behind the safety of a general term, there’s no reason to improve on it or calibrate.
- Terms that express likelihoods mean very different things to different people.
- Using ambiguous terms can lead to confusion and miscommunication with people you want to ‘engage for help’.
How can you be more precise in expressing probabilities ?
As percentages.
makes it more likely you’ll uncover information that can correct inaccuracies in your beliefs and broaden your knowledge.
You can use your answers to the Mauboussins’ survey to help you convert natural language terms to exact probabilities.
How do you express probabilities as percentages ?
In addition to making precise (bull’s-eye) estimates, offer a range around that estimate to express your uncertainty.
Do this by including a lower and upper bound that communicate the size of your target.
What does the size of the range signals ? and how does it help ?
what you know and what you don’t know.
The larger the range, the less information or the lower the quality of the information informing your estimate, and the more you need to learn.
Communicating the size of the range also signals to others that you need their knowledge and perspective to narrow the range.
How do you determine if your upper and lower bounds are reasonable ?
Use the shock test : Would you be really shocked if the correct answer was outside that boundary?
Your goal should be to have approximately 90% of your estimates capture the objectively true value.
What other habit you should develop of asking yourself ?
“What information could I find out that would tell me that my estimate or my belief is wrong?”
