Bayes and Base Rates 2.0: How History Can Guide Our Assessment of the Future

Mai 13, 2026

Bayes and Base Rates 2.0: How History Can Guide Our Assessment of the Future

Consilient Observer

Bayes and Base Rates 2.0: How History Can Guide Our Assessment of the Future

Mai 13, 2026

This is a follow up to our recent report, “Bayes and Base Rates,” which argued that to anticipate what is going to happen, it is useful to start with base rates as a prior probability distribution and to update your view based on new information.
That report sparked interest and some questions that we address, including how to handle inflation, the appropriate reference class, and groundbreaking technologies.
Comparing the projected sales growth rates of a couple of companies, including OpenAI, to base rates revealed that these forecasts are highly improbable in the context of history.
Base rates are dynamic distributions, and nothing in past results says OpenAI's projected rates of growth are unachievable.
Factors working in favor of OpenAI are rapid adoption of the product, high one-year sales growth, and the fact that intangible-intensive businesses have proven they can grow fast.
On the other hand, there have been numerous disruptive innovations since 1950, and most of the all-time leaders in sales growth have done so through M&A rather than organically.

PDF herunterladen

Counterpoint Global’s culture fosters collaboration, creativity, continued development, and differentiated thinking.

Ähnliche Einblicke

Consilient Observer

Competitive Advantage Period

14-Apr-2026

In this report, Consilient Research focuses on the “how long” of value creation: how long a firm can sustain ROIC above its cost of capital.

Consilient Observer

Bayes and Base Rates

10-Feb-2026

Heavy AI spending is driving rosy revenue forecasts, but Consilient Research urges investors to apply base rates, which imply low odds of meeting them.

Consilient Observer

Who Is On the Other Side? A Framework for Understanding Market (In)Efficiency

21-Jän-2026

We explain the factors that determine market efficiency and offer a taxonomy of the sources of inefficiency. Markets cannot be fully efficient because there is a cost to gather information and reflect it in prices. We encourage active investors to ask and answer the question, “Who is on the other side?” The key is participating where there is differential skill and you are among the most skilled. We categorize inefficiencies into four areas: behavioral, analytical, informational, and technical.

IMPORTANT INFORMATION

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively the Firm”), and may not be reflected in all the strategies and products that the Firm offers.

This material is for the benefit of persons whom the Firm reasonably believes it is permitted to communicate to and should not be forwarded to any other person without the consent of the Firm. It is not addressed to any other person and may not be used by them for any purpose whatsoever. It is the responsibility of every person reading this material to fully observe the laws of any relevant country, including obtaining any governmental or other consent which may be required or observing any other formality which needs to be observed in that country.

This material is a general communication, which is not impartial, is for informational and educational purposes only, not a recommendation to purchase or sell specific securities, or to adopt any particular investment strategy. Information does not address financial objectives, situation or specific needs of individual investors.

Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal.

Prior to making any investment decision, investors should carefully review the strategy’s relevant offering document. For the complete content and important disclosures, refer to the article pdf.