Consilient Observer
Bayes and Base Rates: How History Can Guide Our Assessment of the Future
Large investments in artificial intelligence (AI) aim to meet anticipated demand, which has led some firms to give rosy forecasts. To assess them, investors may apply Bayes’ Theorem by starting with an initial belief and updating it. Base rates are a useful prior. The base rates for U.S. companies suggest OpenAI and Oracle Cloud have low odds of meeting their sales projections, even if the diffusion of AI signals major demand. A database of big projects shows few are done on time and budget.
