Iatrogenics of Forecasting
Forecasting can cause harm (iatrogenics) by increasing risk-taking even when the forecast is known to be random. This concept warns against the hubris of forecasters and the dangers of relying on predictions.
THE IDEA
Iatrogenics of Forecasting
Forecasting is not neutral; it can be downright injurious to risk-takers, similar to giving snake oil medicine or bleeding (as in the story of George Washington). Evidence shows that providing someone with a random numerical forecast increases their risk-taking, even if the person knows the projections are random. This is an example of iatrogenics—harm caused by an intervention. The natural response should be avoidance of iatrogenics from forecasting, analogous to childproofing against forecaster hubris.
When to use it
A financial advisor warns clients that market forecasts are often random, helping them avoid overconfident trading.
A policy maker evaluates the potential harm of predictive models before implementing them in public health.
A business leader questions the value of quarterly earnings forecasts and focuses on long-term robustness.
A researcher designs studies to measure the iatrogenic effects of providing probabilistic predictions in high-stakes environments.
FROM THEORY TO EVERYDAY LIFE
In practice
Random Forecast Increases Risk
A trader receives a random number as a market forecast. Even knowing it is random, the trader becomes more willing to take larger bets, increasing potential losses. The forecast itself causes harm: an iatrogenic effect.
Medical Snake Oil
A patient is given a treatment with no proven efficacy but with known side effects. The treatment causes harm, analogous to a bad forecast leading to risky decisions.
A MOMENT TO REFLECT
Put it to work.
Can you recall a time when a forecast (even one you knew was unreliable) influenced your risk-taking behavior?
What steps can you take to 'childproof' your decisions against the iatrogenic effects of forecasts?
How does the concept of iatrogenics apply to other areas like medical advice or financial planning?
CONTINUE THE CONVERSATION
Source texts
- Antifragile (Nassim Nicholas Taleb)