Whilst the article is meant for anyone and everyone to draw lessons from scientists on how to think, based on the article, it surely does seem to help to think like a scientist in the world of investing. The author presents five steps in which scientists think, we could all use as investors:
“Step 1: Start with an open mind
If you already think you know the answer, how receptive are you going to be to new information?
…Being open-minded also means not holding on to a belief when the evidence changes. This is even harder!
If you’ve argued passionately for something, it can feel like you’re backflipping if you change your mind.
But if the evidence changes and you don’t change your mind, that’s not a good spot to be in.
Step 2: Be sceptical
The counter-balance to having an open mind: scepticism. Prove it. When a big company makes a claim about its new apple sauce, or a government makes a claim about a health policy, we should say: prove it. Want us to wear masks? Prove it. Want us to be vaccinated? Prove it.
Step 3: Accept uncertainty
Accepting you don’t know things isn’t a sign of ignorance – it allows you to make better decisions because you’re taking the uncertainty into account.
Step 4: Assemble your data
Go and do your research. Pull together all the data – stuff that agrees with your argument and stuff that refutes it. Consider everything, rather than fixating on a single point.
Then, for each piece of data, consider the quality of the evidence.
Step 5: Develop a hypothesis
A hypothesis is a theory about the world – a guess.
Ask yourself: Which of my theories best explains the data I have gathered? Start with the most likely explanation, and then test it. If you can prove it wrong, move on to the next most likely.
Good hypotheses are “falsifiable”. There’s no point, scientists say, in having a theory about the world that can’t be proven false”
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