Ep18 “Investigating Implausible Theories” with John Ioannidis | Summary and Q&A

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January 19, 2023
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Stanford Graduate School of Business
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Ep18 “Investigating Implausible Theories” with John Ioannidis

TL;DR

Occam's Razor is used to evaluate implausible theories in business decisions, considering factors such as the complexity of the theory, incentives, potential financial gains, and other implications. The scientific method is crucial in determining the truthfulness of theories.

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Questions & Answers

Q: How should business decisions approach investigating implausible theories?

Business decisions should consider factors like Occam's Razor, examining the complexity of the theory, incentives, potential financial gains, and other implications to determine if investing resources in investigating is worthwhile.

Q: What role do incentives play in evaluating implausible theories?

Incentives of those proposing theories are important to consider. If significant financial gain is at stake, there is a higher likelihood of biases and potential fraud. Such theories should be scrutinized more carefully.

Q: How does the scientific method help determine the truthfulness of theories?

The scientific method relies on evidence-based decision making. It requires actively seeking to reject one's beliefs and being open to changing one's mind. This approach helps ensure a more objective evaluation of theories.

Q: What is a potential trade-off when evaluating implausible theories?

The trade-off lies between type one and type two errors. Type one errors involve erroneously rejecting an implausible theory that turns out to be true, while type two errors involve failing to reject a false theory. Balancing these errors is crucial.

Summary & Key Takeaways

  • Occam's Razor is applied to business decisions to determine when it is worth exploring an implausible theory.

  • Most commonly believed theories turn out to be true, while implausible theories have a low probability of being true.

  • The scientific method, based on evidence-based decision making, is the best approach to determine the truth and actively challenge one's beliefs.

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