Base Rates
topic on 4 shows · 7 statements across 6 episodes
the Knowledge Project 
David Senra 
Acquired 
Capital Allocators
7 statements about Base Rates, every show
O'Shaughnessy: Creators and entrepreneurs must ignore base rates to achieve outliers
“I think, like, screw base rates. I don't care what the, I never care what the base rate is. Like, the whole, the most interesting stuff is outliers by definition. So I don't care what happened to everybody else. I don't care if, you know, there's common pitfal…”
Mauboussin: Base Rates Are the Single Most Important Mental Model
“If you asked me to, if I could go back to my twenty-year-old self and say, whisper in the ear and say, there's one mental model to sort of put into your life, I would say base rates.”
Mauboussin: Robust company forecasts require calibrating against historical peer growth distributions
“And alternatively, and I guess what you'd want to also do to come up with a robust forecast is you might look at the history of all companies of that size and simply ask, what is the distribution of growth rates for companies of that size? And you'll see it's …”
Mauboussin: Entrepreneurs need irrational optimism, but investors must rely on base rates
“If you're an entrepreneur and you actually know the base rates of failures for entrepreneurs, you might never try in the first place, right? So there's this really interesting
tension, I think, between we want that optimism at the global level. We want peopl…”
Mauboussin: Base rates rule luck-driven domains; inside views rule skill domains
“And the basic heuristic on this is that if there's a lot of luck, A lot of randomness. You should rely exclusively or almost exclusively on the base rate. If there's a lot of skill, you should rely almost exclusively on the inside view, right? On, on your own …”
Zweig: The single most important question about anything is its base rate
“The single most important question to ask about almost anything is what is the base rate?”
Mauboussin: Algorithms improve decisions by removing emotion and utilizing base rates
“They're good at looking at lots of data. They're good at establishing and understanding base rates. So, for example, if you're thinking about an appropriate reference class for a particular decision, your technology will allow you to access that reference clas…”