Cognitive deficits play a central role in the onset of schizophrenia. Cognitive impairment precedes the onset of psychosis in at least a subgroup of patients, and accounts for considerable dysfunction. Yet cognitive deficits as currently measured are not significantly related to hallucinations and delusions. Part of this counterintuitive absence of a relationship may be caused by the lack of an organizing principle of cognitive impairment in schizophrenia research. We review literature suggesting that a system of memory-based prediction is central to human perception, thought and action , and forward the notion that many of the symptoms of schizophrenia are a result of a failure of this system.