Test Your Hypothesis - AI Analysis Prompt
Analyze any company through George Soros's principle of "Test Your Hypothesis." This AI prompt applies this specific investment wisdom to evaluate companies systematically.
Full Prompt
You are an investment analyst trained in George Soros's principle of "Test Your Hypothesis." Your core philosophy: reflexivity theory, macro trading, finding flaws in prevailing wisdom. Your task is to analyze {Company Name} through the specific lens of this principle.
## Context
George Soros teaches: "Start with a hypothesis about market behavior, then test it with a small position. If the market confirms your hypothesis, add to your position. If it contradicts you, cut quickly and reassess."
## Analysis Framework
### 1. Principle Application Assessment
- How does this principle specifically apply to {Company Name}?
- What aspects of the company are most relevant to "Test Your Hypothesis"?
- Rate the company's alignment with this principle: Strong / Moderate / Weak
- What would George Soros focus on first when evaluating this company?
### 2. Quantitative Evidence
- Identify 3-5 key financial metrics most relevant to this principle
- Analyze these metrics over the past 5-10 years for {Company Name}
- Compare with industry peers and historical benchmarks
- Are the numbers improving, stable, or deteriorating?
- What story do the numbers tell through the lens of "Test Your Hypothesis"?
### 3. Qualitative Deep Dive
- Evaluate the non-quantifiable factors George Soros would examine
- Management quality and alignment with this principle
- Industry dynamics and competitive position
- Business model sustainability viewed through this specific lens
- What would George Soros want to know that isn't in the financial statements?
### 4. Risk Assessment Through This Lens
- What risks does this principle specifically highlight for {Company Name}?
- What could go wrong that this principle is designed to protect against?
- Are there warning signs that George Soros would flag?
- Stress-test: How would this company perform under adverse conditions?
- What is the worst-case scenario from this principle's perspective?
### 5. Opportunity Identification
- What opportunities does analyzing through this lens reveal?
- Are there hidden strengths the market may be undervaluing?
- How does this company compare to George Soros's ideal investment?
- What catalysts could unlock value related to this principle?
### 6. Soros Verdict
- Summarize: Does {Company Name} pass the "Test Your Hypothesis" test?
- Rate the investment opportunity: 1-10 from this principle's perspective
- Clear recommendation: Buy / Hold / Avoid (based on this principle alone)
- What conditions would change your assessment?
- One-paragraph summary capturing George Soros's likely assessment
## Output Format
Present your analysis with specific data points in each section. Use George Soros's analytical style: macro reflexivity analysis examining feedback loops between perception and reality. End with a decisive verdict.Basic Questions
How did Soros use small positions to test market hypotheses?
Soros's investment process isn't 'analyze β buy big' but progressive:
π Hypothesis testing steps:
1. Form hypothesis: Judge market direction based on macro analysis
2. Small position test: Enter with affordable small amounts
3. Observe feedback: Does market reaction validate the hypothesis?
4. Confirm and add: Hypothesis validated β gradually increase position
5. Deny and exit: Hypothesis disproven β immediately stop-loss and exit
π‘ Key concepts:
- Not afraid of being wrong: Admit errors quickly, cost is small
- Testing phase losses are 'tuition,' not 'failure'
- Much safer than one-shot big bets
π Hypothesis testing steps:
1. Form hypothesis: Judge market direction based on macro analysis
2. Small position test: Enter with affordable small amounts
3. Observe feedback: Does market reaction validate the hypothesis?
4. Confirm and add: Hypothesis validated β gradually increase position
5. Deny and exit: Hypothesis disproven β immediately stop-loss and exit
π‘ Key concepts:
- Not afraid of being wrong: Admit errors quickly, cost is small
- Testing phase losses are 'tuition,' not 'failure'
- Much safer than one-shot big bets
Usage Tips
Is the AI's 1-10 rating reliable?
β οΈ The rating itself is a hypothesis that needs verification.
The rating's value under 'Test Your Hypothesis':
- A high score represents the AI's 'hypothesis' β this company fits the principle β but that hypothesis still needs market validation
- The score can help you form an initial hypothesis but can't replace actual hypothesis testing
- Comparing score changes across time periods can check whether your hypothesis is being strengthened or undermined
Key limitations:
- AI can't tell you 'when your hypothesis has been falsified by the market' β you need to set those criteria yourself
- Soros would take a small position to test hypotheses first, but AI scoring skips this crucial practical verification step
- AI scoring standards may be inconsistent across periods, making it unreliable for long-term hypothesis tracking
β Right approach: Use the AI score to form an initial hypothesis, then set clear verification conditions and timelines, regularly checking if the hypothesis still holds.
The rating's value under 'Test Your Hypothesis':
- A high score represents the AI's 'hypothesis' β this company fits the principle β but that hypothesis still needs market validation
- The score can help you form an initial hypothesis but can't replace actual hypothesis testing
- Comparing score changes across time periods can check whether your hypothesis is being strengthened or undermined
Key limitations:
- AI can't tell you 'when your hypothesis has been falsified by the market' β you need to set those criteria yourself
- Soros would take a small position to test hypotheses first, but AI scoring skips this crucial practical verification step
- AI scoring standards may be inconsistent across periods, making it unreliable for long-term hypothesis tracking
β Right approach: Use the AI score to form an initial hypothesis, then set clear verification conditions and timelines, regularly checking if the hypothesis still holds.
More Rule Prompts
Explore other investment principles from this master.
Reflexivity Theory
Markets are not efficient; they are reflexive. Participant perceptions and market fundamentals influence each other in a circular feedback loop, creating trends that can become self-reinforcing until they inevitably reverse.
βFind the Flaw
The prevailing wisdom is always wrong. Find the flaw in the prevailing bias and bet against it when conditions change. The bigger the flaw in conventional thinking, the bigger the opportunity.
βBet Big When Right
It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong. When you have conviction, bet big.
βSurvive First
My approach works not by making valid predictions but by allowing me to correct false ones. I am only rich because I know when I am wrong. Play to survive first, then to make money.
β