The other day I was rewatching a film I like called "Moneyball"...
It's a great film based on the true story of Billy Beane's attempt to assemble a competitive baseball team.
The set is 2002 and the Oakland Oaks are struggling to compete with their small budget.
They've lost their best players and stumbled at the finish line their last season.
Billy knows that they can't beat the bigger teams if they play their game so he begins looking for an alternative solution.
By an accident, he stumbles across an out of place guy for a baseball team called Peter Brand.
Peter was an economist with a belief that numbers could revolutionize the world of baseball.
After a brief interaction and some self-study on the subject, Billy takes a leap of faithIn many people's eyes, Billy and Peter created a team of misfits.
People were quite literally laughing at them thinking they had lost their minds...
Their season didn't begin well, they had plenty of losses and were in the bottom section of the league...
But like a gift from above things started going their way.
They won game after game.
Until they had won more games in a row than anyone else for over a hundred years.
And at last they won the championship.
I'm not sharing this story with you simply because I like the movie and think you should watch it...
I'm doing it because there is a great lesson to be learned.
There was a flaw in the industry.
Scouts found interesting people based on their opinions and belief.
This is a problem because...
People are not good at predicting future outcomes.
It doesn't matter if it's you and me or some professional scout.
We're just not good at it.
This is especially true infrequently moving markets.
The stock market, housing or sports industry.
Just listen to what Warren Buffet says about the stock market...
"A number of smart people are involved in running hedge funds. But to a great extent, their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund."
Hedge funds are funds with handpicked investments by industry professionals.
Index funds are funds that mimic the market or a segment of the market.
Studies prove that only about 5% of people are able to beat the market.
Despite that, over $625 billion are managed in hedge funds...
Unfortunately, the same thing is happing in the majority of every single industry out there.
Therefore it is detrimental that you identify these people and run as far away from them as possible.
You want to find people who hypothesize rather than guess.
That is really the only way we can come close to realistic predictions.
Of course, this also applies to your own thinking...
So Let's Not Gamble With Your Business.
Here are 5 steps you can take to avoid bad predictions today.
1. Research, back up your claims and beliefs with research.
2. Hypothesize, base your predictions on research and data only.
3. Follow the data, numbers don't lie, people do.
4. Reflect, take some time to think about the results.
5. Repeat, just keep repeating these steps over and over again.
That's it really!
But before I go, please consider the following questions...
What will the cost of inaction be if you do not implement this today?
How much of your valuable time will you waste on bad predictions?
How much will those mistakes cost you?
