Falsifiable claim

A statement specific enough that some future fact could show it to be wrong.

Example

'Earnings grow at least 20% a year for three years' can be checked in three years. 'A great business' cannot be checked at all.

Important

A claim does not become falsifiable by being detailed, confident or well argued. The test is whether you can name the specific fact that would prove it wrong - and a sentence with no such fact can never teach you anything, however much of the page it occupies.

Related terms

  • Investment thesis — A written statement of what you believe about an investment, at what price it is worth owning, and what specific observation would tell you that you were wrong.
  • Disconfirming evidence — Information that would make your thesis wrong - facts you would have to explain away rather than cite.
  • Decision journal — A written record of why a decision was made, written at the time it was made, and never edited afterwards.

Lessons that explain it

  • Sort what you know from what you assume from what nobody can know yet — Before deciding, separate verified evidence, assumptions that could be tested, and genuine unknowns. The decision is about whether the unknowns are acceptable at this price. (10 min)
  • A memo is a thinking tool before it is a selling document — Two versions of the same memo can describe the same deal and do opposite jobs - one is written to get to yes, the other is written to find out whether yes is correct. (9 min)
  • The memo is worth more at the two-year review than on the day you wrote it — A memo's real value is not in getting a deal approved. It is in being specific enough, on the day it was written, that reading it again later tells you something you could not otherwise have known. (10 min)
  • A thesis is a belief that can be wrong. A preference cannot. — Most people who say they have an investment thesis have a preference - a list of things they like the sound of. The difference is whether anything could show it to be mistaken. (10 min)
  • If nothing could prove you wrong, you have not said anything — A thesis becomes useful at the moment it names what would refute it. This is how to write that line so it is checkable rather than rhetorical. (12 min)
  • The annual hour that decides whether you learn anything — A thesis that is never reviewed is a belief you happen to have held for years. The review is where a written thesis converts into judgement, and it has to separate what you got right from what merely worked. (11 min)

All 578 terms in the Investing glossary