Unless you’ve been on another planet, you’ve most certainly heard about the U.S. Presidential election.
As you know, Donald Trump will become the next President of the United States.
The outcome was considered by most to be a stunning upset. Most, including Donald Trump’s campaign staff, were surprised by the results.
Nearly every election forecast had predicted Hillary Clinton. Most probability tables estimated Clinton with a 60%-90% chance of winning in the 24 hours prior to the election.
An overwhelming number of newspaper columnists and journalists predicted a Clinton win.
Then 24 hours later, everything reversed itself.
There are several lessons to be learned from the election.
1) When your forecast is wrong, it means you fundamentally misunderstood something about what you were attempting to predict.
All of my corporate clients forecast their sales. I insist upon it.
From time to time, the forecasted results differ wildly from the actual results. Sometimes sales are dramatically higher than expected. Other times, sales are significantly lower.
Anytime this happens, I immediately state that something is wrong. We fundamentally misunderstood something about our customers, competitors, or our own operations.
This is the case regardless if the error was in our favor (e.g., we sold more than we expected).
In every case, I ask my clients to analyze what happened and why.
It is VITAL to correct the misunderstanding.
The election forecasts were wrong — very, very wrong. This means the analysts and polling companies made an error somewhere. It is important to figure out that error and prevent it from happening again the future.
The same is true in your life and career.
If you forecast an outcome and are way off base, you misunderstood something significant. Go figure it out. Learn from your mistake and don't repeat it.
2) There’s a reason why you do quantitative and qualitative research.
Anytime I’m researching a major decision, I like doing both quantitative and qualitative research. The intuitive story and the mathematical “story” must match for me to feel comfortable with a decision.
When they don’t match, I assume something is wrong and I need to do more homework.
In this case, the quantitative forecasters missed something fundamental. In many quantitative analyses, there is often an element of making qualitative assumptions that serve as the basis for interpreting the quantitative.
In the case of the U.S. Presidential election, a whole lot of people’s qualitative assumptions were way off.
I don’t know if the sampling was done incorrectly or perhaps the weighting, but my speculation was the qualitative work wasn’t done thoroughly enough in this case.
3) Confirmation bias is a killer.
Psychologists have a term to describe the human psyche’s tendency to seek out evidence confirming their own beliefs. The term is known as "confirmation bias."
In this case, most journalists of the major newspaper and news channels had a belief that Donald Trump could not win. They sought out evidence to prove themselves right — and found it.
The result was that most of these news professionals completely misunderstood the news they were reporting and the forces at work behind Trump’s surprise victory.
When I teach the case interview, I stress the importance of developing a hypothesis and testing it.
In hindsight, it would have been better had I said, “developing a hypothesis and attempting to disprove it.”
If you can not disprove your hypothesis, then your hypothesis becomes your conclusion.
The mainstream news media didn’t do this.
They saw a candidate acting outrageously and concluded in advance he couldn’t possibly win. Then they sought out evidence that proved their hypothesis correct.
This is both a perfect example of confirmation bias and the consequences of falling prey to it.
The better way to do it would have been to hypothesize “Trump can’t possibly win,” and then attempt to figure out all the ways he could win.
Which states would he have to win? Which demographics in those states would have to vote for him? Why would or wouldn’t they do so?
Then... combined with lesson #2 above, go out and talk to those voters that could be the margin of victory for Trump and attempt to understand their worldview.
I did not do any of this research myself. I relied on polling forecasts and the reports of journalists. As a result, I was surprised by Trump’s victory as much as anyone.
In the end, the election was a surprise and enormous wake-up call for pretty much everyone involved in the election... including Trump himself.
He predicted two years ago that he would not last in the election past October 2015 (not 2016). He was wrong too.
Whatever you’re attempting to accomplish in life:
1) Make forecasts as one way to test your understanding of the situation you’re studying. If you get your forecast wrong, figure out why.
(This applies to net income, test scores, interview performance, losing weight, dating, sending a human being to the moon, oxygen levels in your blood, and nearly every human endeavor.)
2) Do the quantitative and qualitative research. If they don’t match, be nervous.
3) In life, don’t seek to prove yourself right. Seek to prove yourself wrong. Only if you can’t prove yourself wrong do you conclude that you’re right.