Four Steps to Integrate Probabilities into Decisions

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Four Steps to Integrate Probabilities into Decisions

Picnic scene and wedding scene side by side with a weather icon
The true yes/no boundary for action is rarely 50%.

Decision makers often want a simple “yes” or “no.” This creates a challenge when you’re in the business of providing probabilities. If you tell them there’s a 76% chance of Event X happening by Date Y, you might get this response: “So that’s a yes!” When you point out the remaining 24% chance it won’t happen, you might get: “So that’s a no?”

Busy leaders need to get straight to action. They often simplify the process by treating anything above 50% as a “yes” and anything below as a “no.” However, it’s rarely the case that the yes/no boundary is 50% in the real world. The true yes/no boundary, which we call the decision threshold, depends on the nature of the decision, the cost, and the stakes involved.

Say there’s a 28% chance of rain. For a casual picnic, you might accept the risk and go anyway. But for an outdoor wedding reception, your threshold for action is probably much lower. You may set up tents just in case.

The decision threshold is fundamentally about cost-benefit analysis: How many false positives are you willing to accept in order to avoid missing a real threat or opportunity?

For example, if you risk losing $100 and the cost of mitigation is $35, it may be worth taking action (mitigating the risk) if the probability of loss exceeds 35%.

The Four-Step Framework

Instead of simply delivering a forecast for the decision maker to interpret, we reverse the process by defining the yes/no boundary first. Here’s our four-step process for decision makers to use forecasts with clear thresholds, leading to better, faster judgments.

1. Identify the core decision. Begin by clearly stating the decision the organization faces. Here are a few examples:

  • Committing to an innovation cycle to mitigate the risk of a future regulatory ban on a key product.
  • Preparing for a possible increase in US tariffs on a critical base metal import.
  • Validating the underlying assumptions of a new investment thesis before allocating capital.

2. Set the decision threshold. The yes/no boundary can only be set by the decision maker. Will they act at 20%? 40%? 60%? By focusing on the cost and stakes, they avoid defaulting to the simple (and often misguided) 50% threshold.

3. Pose the question to the forecasters. Ideally, they should be unaware of the specific decision or the decision maker’s identity. This firewall ensures the probability estimate remains independent and unbiased. But if anonymity can’t be provided, treat the forecasting as a separate process as much as possible. Remember: Forecasts focus on how the world will be while decisions often reflect what we want the world to be.

4. Deliver the actionable forecast. With the yes/no boundary already in place, the decision maker can use the probability estimate immediately to make a call. With this robust framework, decision makers are able to use probabilities effectively to arrive at better decisions faster.

Learn more about FutureFirst and see ahead of the crowd.

When AI Becomes a False Prophet: A Cautionary Tale for Forecasters

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When AI Becomes a False Prophet: A Cautionary Tale for Forecasters

With a nod to Taylor Swift and Travis Kelce, Superforecaster Ryan Adler discusses the gospel according to AI and why forecasters should always verify their sources.

Google’s AI Overview references an AI-generated video to support a false claim.

The promises of artificial intelligence have set up camp in media headlines over the past few years. ChatGPT has become a household name, billions are being spent just to power the equipment to run these programs and models, and the cutting-edge technology is front and center in ongoing tensions between the US and China. It hasn’t left any aspect of human activity untouched, including forecasting.

To be sure, the impacts already felt cannot be understated. We are looking at the front end in what I’m confident will be a seismic shift in society, with large swaths of labor markets around the globe being shaken to their core. That said, we aren’t there yet.

Here’s a recent example of how AI took itself out at the knees regarding a recent forecasting question on Good Judgment Open. In late April 2025, the time came to close a question regarding potential nuptials between Kansas City Chiefs star Travis Kelce and pop superstar Taylor Swift: “Before 19 April 2025, will Travis Kelce and Taylor Swift announce or acknowledge that they are engaged to be married?” (It’s not my favorite subject matter, but we try to maintain a diverse pool of questions.)

As a moderately rabid Chiefs fan myself, I was confident the answer was no, because that would have made headlines across media outlets. However, a key part of the job of running a forecasting platform is being in the habit of double and triple checking. So, I checked with Google. I entered “Are Travis Kelce and…” into the search field, which immediately autofilled to “are travis and taylor engaged?” (The first-name thing with pop culture stars annoys me to no end, but I digress.) To my surprise, Google’s AI preview popped up immediately.

“Yes, according to reports, Travis Kelce and Taylor Swift are engaged.”

“Trust, but verify”

Skeptical, I looked at what the experimental generative AI response was using as a reference to return such a statement. That’s when things got fun.

The first link of the cited material was a YouTube video. Keep in mind that Google, the search engine I used to start my research, owns YouTube. The account that posted the video? DangerousAI. That alone raises more red flags than a May Day parade in Moscow circa 1974. The brief video, dated 24 February 2025, purported to show Travis Kelce announcing that Swift and he “got engaged last week.” However, as the video progressed, the absurdity of Kelce’s putative announcement became perfectly clear.

To sum up, Google’s AI system linked to search was fooled by an AI product posted on another Google platform to give a patently false response.

I don’t highlight this incident as a criticism of Google. However, it should serve as a warning. I’ve seen some GJ Open forecasters take AI responses as gospel. I’m here to tell you that in matters of facts vs fiction, AI is very capable of being a false prophet. This is not to say that AI isn’t an incredibly valuable tool. It certainly is! We are finding more and more uses for it at Good Judgment, but we put it through its paces long before we deem it reliable for a particular role. As the Russian proverb instructs, “Trust, but verify.” (No, President Reagan didn’t say it first.) When it comes to AI and everything else you see online, my suggestion is that you just verify.

Do you have what it takes to be a Superforecaster? Find out on GJ Open!

* Ryan Adler is a Superforecaster, GJ managing director, and leader of Good Judgment’s question team

Sneak Peek: How FutureFirst Superforecast Alerts Keep You Ahead

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Sneak Peek: How FutureFirst™ Superforecast Alerts Keep You Ahead

 

Subscribers to FutureFirst™, Good Judgment’s exclusive forecasting and monitoring service, enjoy 24/7 access to expert-driven insights on key economic, geopolitical, and market-moving questions. Superforecast Alerts, included with the service, provide timely updates when:

  • A high-profile question is added to the platform.
  • The aggregate forecast shifts significantly, signaling a meaningful change in Superforecasters’ expectations.

Related questions are grouped into clusters to offer broader analytical context. See our discussion on the relevance-rigor trade-off for more details.

These alerts give clients timely, usable insights provided by Good Judgment’s elite Superforecasters, a diverse global team with a proven track record of accuracy. Here’s an example available to FutureFirst subscribers on 18 January 2025. This alert focused on expected interest rate decisions from the European Central Bank (ECB) and the Bank of England (BoE).

Superforecasting Central Banks

What will be the European Central Bank’s (ECB) most recently announced “Deposit facility” interest rate as of January 30, 2025?
Date Less than 2.50% At least 2.50%, but less than 2.75% At least 2.75%, but less than 3.00% At least 3.00%, but less than 3.25% 3.25% or higher
18 Jan 2025 0% 0% 94% 6% 0%
What will be the Bank of England’s Bank Rate at the close of business on February 6, 2025?
Date Less than 4.25% At least 4.25%, but less than 4.50% At least 4.50%, but less than 4.75% At least 4.75%, but less than 5.00% 5.00% or more
18 Jan 2025 0% 0% 74% 26% 0%

18 Jan 2025 14:57 ET – To kick off 2025, Superforecasters anticipate the following interest rate decisions. They forecast a 94% probability that the European Central Bank will lower its “Deposit facility” interest rate on 30 January 2025. They expect it to fall within a range of 2.75% to less than 3.00%, with only a minimal chance that the rate will remain the same. Economists in a Reuters survey unanimously expect a 25-basis-point reduction, reflecting the ECB’s ongoing easing cycle amid Europe’s sluggish economic growth and moderately increasing inflation rates, such as a recent 2.4% increase in the eurozone. Despite a gradual rise in inflation, policymakers aim to meet a 2% goal by mid-2025, facing pressures from rising services prices and low unemployment. Yet, concerns about energy costs and inflationary pressures in certain eurozone areas could challenge further rate cuts.

Looking ahead to the Bank of England’s meeting on 6 February 2025, Superforecasters see a 74% probability that the Bank Rate will decrease to at least 4.50% but less than 4.75%, with a 26% probability for it to stay the same at a range of at least 4.75% but less than 5.00%. A recent dip in UK inflation to 2.5% has strengthened expectations for a rate cut, as economists see evidence of the restrictive monetary policy’s effectiveness in easing inflation pressures. However, ongoing concerns about inflationary pressures driven by the government’s tax measures and rising gilt yields may complicate the central bank’s easing strategies. Despite these uncertainties, most surveyed economists anticipate a quarter-point cut in the upcoming meeting.

Superforecaster Quotes

  • (European Central Bank): “The ECB is two weeks away from what’s widely expected to be the fifth rate cut of this easing cycle. Despite inflation ticking higher last month, policymakers are confident of meeting their 2% goal in 2025 and remain concerned about Europe’s sluggish economy.”
  • (European Central Bank): “The European Central Bank can ease policy further this year but must find a middle ground that neither induces a recession nor causes an undue delay in curbing inflation, ECB chief economist Philip Lane told an Austrian newspaper.”
  • (European Central Bank): “If interest rates fall too quickly, it will be difficult to bring services inflation under control…But we also don’t want rates to remain too high for too long, because that would weaken the inflation momentum in such a way that the disinflation process would not stop at 2% but inflation could materially fall below target.”
  • (Bank of England): “Inflation numbers better than expected, making another cut more likely.”
  • (Bank of England): “The deceleration in inflation, which still remains above the BoE 2% target, is likely to be taken by MPC members as a sign that the restrictive monetary policy stance is helping to bring inflation closer to the target. As such, it will give MPC members enough evidence to cut rates by 25bps at their next meeting in February.”
  • (Bank of England): “Despite unpredictability around the future policies of US President Elect Donald Trump and their inflationary impact, the economy’s weak momentum might confirm a scenario in which the Bank of England proceeds with faster interest rate cuts in 2025.”

Superforecaster Sources

 

Why FutureFirst?

Superforecast Alerts like this give our clients a decisive advantage by providing early warnings and Superforecasters’ interpretations of emerging trends. Whether you’re monitoring central bank decisions, geopolitical events, or financial markets, FutureFirst keeps you informed, so you can make better decisions sooner.

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