Book Reviews
Knowing What’s Coming
The outcome of our addiction to prediction need not be random
 
Making predictions is our second nature. Open any newspaper or television channel and you will find an endless stream of forecasts—whether the Reserve Bank of India will cut interest rates, whether the Sensex will scale 26,000, whether oil prices will go up, who will win the elections in Uttar Pradesh or will become the American president, the winner of the India-Pakistan match... These are forecasts that concern a lot of people. But we are all forecasters in our own lives too. We are making guesses—that is forecasting—about when we will get married, change jobs, buy a house, calculate whether the retirement corpus will last, etc. Humans are curious to know what is coming and are willing to pay to know it—either small change to roadside card-pulling parrots or big money to gurus—whether they wear robes or sharp suits. 
 
But how good are humans at forecasting? You can only tell conclusively if all such forecasts are actually recorded and verified. Philip Tetlock has done exactly that. His ran a project from 1984 to 2004 which analysed 82,361 predictions made by 284 experts in fields like political science, economics and journalism. He found that about 15% of events that experts claimed to know in advance that had little or no chance of happening did, in fact, happen, while about 27% of the ‘sure things’ didn’t happen. Tetlock concluded that the experts did little better than a ‘dart-throwing chimpanzee’. The details of the project are captured in Tetlock’s book Expert Political Judgment, published in 2005. Tetlock, who teaches at the Wharton School of Business, became the world’s foremost expert about the so-called experts. 
 
However, while the study gave an impression that the average ‘expert’ is “roughly as accurate as a dart-throwing chimp,” the metaphor was subject to misinterpretation. Tetlock’s work was far richer and his findings were subtler than that. Tetlock showed, for instance, that near-term forecasts were far more accurate than those that we supposed would happen after three years. The book Superforecasting (written with Dan Gardner, a Canadian journalist) is a sequel and designed to set the record straight. It is, again, based on studies of actual forecasting; but, this time, not of ‘experts’ that dominate the media.
 
The book is based on a tournament for forecasting, sponsored by America’s intelligence agencies which had a lot of egg on their face following the dreadful invasion of Iraq. The contest ran from 2011 to 2015 and posed 500 near-term geopolitical questions to five teams (“Will India or Brazil become a permanent member of the UN Security Council in the next two years?), including one called Good Judgement Project (GJP) of Tetlock. In all, the tournament gathered one million individual judgements. As the tournament progressed, a small number of forecasters of GJP began to lead the pack. Using only an Internet connection, they consistently beat the other more competent teams, led by top researchers in their fields. In year-1, GJP team beat the official control group by 60%. In year-2, it beat the control group by 78%. It also beat its university-affiliated competitors and even intelligence analysts who had access to classified data. After two years, GJP was doing so much better that the other teams were dropped. The conclusion of the two books, put together: while forecasting is tough, many ordinary people are better at it than the so-called ‘experts’; also, prophecy can be practised and improved.
 
Who were these people who could predict well? You would be amazed to know that the crop of ‘super-forecasters’ included housewives, social services worker, unemployed factory workers and professors of mathematics, a film-maker, a retired official from the US department of agriculture and so on. Do they have anything in common? They had a ‘growth mindset’, as Tetlock puts it. They were focused, open-minded, careful, curious—and, above all—self-critical. They had a willingness to learn from mistakes, self-reflection and humility. The best forecasters were more interested in knowing why they were right or wrong, rather than whether they were right or wrong. Tetlock found “commitment to self-improvement to be strongest predictor of performance.” Unfortunately, these people may not be telegenic, articulate or even confident. So, they are bad for TV which will continue to bombard us with untested, simplistic and wrong predictions from ‘experts’. This book is a must-read for anyone who is just curious about how we can think and guess better.  

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Nifty, Sensex are in the hands of the bulls – Thursday closing report
Dips are being bought eagerly. The market will trend higher as long as it remains above 7,706
 
We had mentioned in Wednesday’ closing report that Nifty, Sensex were in an upmove again and that Nifty would trend up, if it stayed above 7,685. The major indices of the Indian stock markets were trading in a narrow range on Thursday and closed marginally higher than Wednesday’s close. The trends in trading of the major indices on Thursday are given in the table below:
 
 
Caution on the derivatives expiry day, coupled with weak crude oil prices, subdued the Indian equity markets on Thursday. Consequently, the key indices of the Indian equity markets traded flat. Initially, the key indices of the Indian equity markets opened on a flat-to-positive note, in-sync with their Asian peers.  Besides, upcoming US non-farm payrolls data and key domestic macro-economic data deterred investors from chasing prices. In addition, weak crude oil prices due to supply side issues dented sentiments. Rupee too opened flat at 66.36 to a US dollar from its previous close of 66.37-38 to a greenback. Major Asian indices closed with small losses over Wednesday’s close.
 
Japan on Thursday committed an official development assistance (ODA) loan of 242.2 billion Japanese yen (around Rs14,251 crore) to India, the finance ministry said. It added that the latest ODA loan takes the total assistance to 390 billion Japanese yen in FY16, which is the highest amount committed in a year. The assistance loan has been committed for strengthening transmission system project in Madhya Pradesh, Odisha integrated sanitation improvement project, a dedicated freight corridor project, northeast road network connectivity improvement project, and Jharkhand horticulture intensification project. In the last few years, the economic cooperation between India and Japan has strengthened and grown into strategic partnership. 
 
Reliance Defence on Thursday said it is partnering the Ukraine-based state corporation Antonov for dual version transport aircraft for military, para military and commercial use in India that has a potential market size of Rs.35,000 crore in 15 years. The agreement was reached between Reliance Group chairman Anil Ambani and National Security and Defence Council of Ukraine Deputy Secretary Oleg Gladkovskyi on the margins of Defence Expo in Panaji, a company statement said. Reliance Defence and Ukraine's Antonov will jointly address various requirements, including 50-80 seat passenger aircraft in basic configuration, and also in all its variants, for transportation, maritime patrol and other military roles.
 
SBI (State Bank of India) announced a move towards marginal cost of funds based lending rates (MCLR), with effect from 1 April 2016, in line with a Reserve Bank (RBI) policy that called for a shift to the new regime. As per the new mechanism, SBI said its MCLR would range from 8.95% to 9.35% for loans of different tenors, ranging from overnight to three years. In December 2015, the RBI had laid out guidelines for banks to move towards the MCLR, starting April 1. The move was aimed at making transmission of monetary policy quicker and more effective, as banks price their lending rates after taking into account bond/money market rates that may have moved following an interest rate decision. SBI shares closed at Rs194.30, down 1.65% on the BSE.
 
Hindustan Zinc said its board of directors at a meeting held on 30 March 2016, declared a special golden jubilee dividend of Rs24 per share for the financial year ending 31 March 2016. Its shares closed at Rs183.50, up 4.77% on the BSE.
 
The Chinese central bank on Thursday injected liquidity of $15.4 billion into its financial system to boost lending. The People's Bank of China (PBOC) carried out the operation through seven-day reverse repurchase agreements, or repos, at an interest rate of 2.25%, Xinhua news agency reported. The reverse repo was priced to yield 2.25%, unchanged from Wednesday's injection of 60 billion yuan, according to the PBOC. The injection has resulted in a net 40 billion yuan being pumped into the market Thursday, offset by 60 billion yuan in maturing reverse repos. The move follows a week-long rise in money-market rates as maturing reverse repos continued to drain liquidity from the market while commercial lenders hoard cash to meet quarter-end regulatory reserves. In Thursday's interbank market, the benchmark overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one another, climbed by 1.3 basis points to 2.017%, the highest level in a month.  Shibor for two-week loans rose the most, by 5.8 basis points to 2.788%. 
 
The US dollar continued to drop against most major currencies on Wednesday as Chair Janet Yellen said the Federal Reserve planned to raise interest rates carefully. Fed Chair Yellen said on Tuesday the US central bank will move cautiously in light of a weak global economy and stubbornly low inflation, Xinhua reported. "Given the risks to the outlook, I consider it appropriate for the committee to proceed cautiously in adjusting policy," Yellen said in a speech to the Economic Club of New York on Tuesday.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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