method
Break the question down
The rule
Split a scary question ('will this grow 10 times?') into a few smaller parts you can each check. Like splitting a big bill into items.
Where it flips
But breaking it down gives false comfort if the parts are just guesses dressed as facts. The fix is to anchor each part on a real base rate, not a wish.
Instead of guessing at a scary whole, break it into its parts: sales growth, profit margin, and the price the market is willing to pay. Guess each part, then multiply. The parts show whether an exciting story is even possible in maths.
A worked example
A '10 times' tip breaks into roughly 3x sales, times 1.5x margin, times 2x re-rating, which is about 9x. Now you can test whether each leg is realistic, instead of just feeling the hype. [illustrative]
How to spot it
- ·a big claim with no breakdown
- ·round-number price targets
- ·no check on whether the parts hold together
Philip Tetlock · Superforecasting