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Future Babble: Why predictions are next to worthless and you can do better by Dan Gardner
THROUGHOUT history, people have been trying to foresee the future. This is not only out of curiosity, but because prediction is a necessity of life as well as business.
The ability to predict a coming tsunami could save lives. The ability to predict social or political changes would give a country or a business the opportunity to plan appropriately. The ability to predict the price of a commodity or a share would give an investor or speculator an important advantage.
Business strategy is understood by many as the positioning of the organisation to deal with a particular future. As such, accurate prediction is the foundation on which many build strategies.
Despite our best efforts, mankind’s predictive track record is still poor. This fact is counterintuitive because we are getting better at gathering data, processing it and teasing out the predictive indications.
We certainly have more data at hand than at any other time in history, and we have the computing capacity to process it all.
The opinions of recognised experts across a wide variety of fields have repeatedly been shown to be hopelessly inaccurate.
In 1911 the esteemed British historian G P Gooch believed humankind had reached a point where war between civilised nations “would be as antiquated as the duel”. War was declared not three years later that killed tens of millions of men, and again 21 years after that.
Stanford University biologist Paul Ehrlich wrote The Population Bomb in 1968, explaining how famine and insufficient food production for a rapidly growing world would lead to the deaths of hundreds of millions of people.
Between 1961 and 2000 the world’s population doubled, but the calories of food each person ate increased by 24%.
Philip Tetlock, a psychologist at the University of California’s Haas School of Business, led a multi-year study of 27 450 judgements about future. These were made by 284 experts in fields such as political science, economics and journalism, whose jobs involve giving advice.
Tetlock’s analysis of the results showed that these experts would have been beaten by a “dart-throwing chimpanzee”.
Simply to chronicle the failures of experts would in itself be of little interest and would not make this book worth reading. What make this book so fascinating is author Dan Gardner’s dissection of the reasons why even the smartest and best equipped predict so poorly.
The ancient Greek warrior-poet Archilochus wrote: “The fox knows many things, but the hedgehog knows one big thing.”
The experts most likely to be wrong are those with an ideological position or theoretical construct that they stick to like hedgehogs. The famous historian Arnold Toynbee is one such example Gardner quotes.
Despite his astonishing erudition that made him the equivalent of a walking Wikipedia, his commitment his theory of how civilisations unfold led him to selecting facts or distorting them to fit his theory.
Another cause of our inability to predict is the complexity of the world. In the winter of 1961, MIT meteorologist Edward Lorenz was testing weather forecasting models on what was then an advanced computer.
He programmed the computer to use data that extended to six decimal places and ran the data he had. When he ran the data again, he got a vastly different result. On investigation, he realised that in the second run the computer had rounded the numbers to three decimal places.
This slight change led to dramatically different results. If this slightest of changes occurred in nature, weather forecasting would be close to impossible to predict accurately.
Lorenz came up with a simple image to explain the idea of miniscule changes making a big difference to outcomes. The fluttering of a butterfly’s wings in Brazil could ultimately cause a tornado in Texas, he explained.
The philosopher Karl Popper wrote that the “course of human history is strongly influenced by the growth of human knowledge”. This is a statement of the obvious, but the consequence is not that obvious.
To know how the future will turn out requires that we have the knowledge that is available in the future. If we had the knowledge available in the future now, it would be present and not future knowledge.
In 1923 Adolf Hitler, then a fringe political figure, led a coup attempt in Munich which resulted in a brief gunfight.
Sixteen people were killed and Hitler was injured, but survived. How would world events have been altered if the soldier who took aim at Hitler had spent just little more time on the practice range and so increased his accuracy?
How different would history have been if the soldier had coughed and his bullet’s trajectory had been only very slightly different?
Trivia and accidents routinely push historical and business events in unanticipated directions.
Even stable data such as demographics is subject to this lack of predictability. Iran’s fertility rate in 1975 was a very high 6.4 babies per woman. After the 1979 revolution and the establishment of a theocracy, the state’s family planning system was abolished.
In five years the fertility rate rose to 7. It would be expected to stay high under these circumstances, but by 2006 it was down to 1.9, leaving demographic experts amazed and puzzled.
The argument of this book has far-reaching implications for decisions in business. One of the most important implications is that thinking strategically cannot assume the validity of prediction no matter how expert the predictor.
The impossibility of prediction must be a strategic presupposition.
Readability: Light ---+- Serious
Insights: High -+--- Low
Practical : High ---+- Low
- Fin24
*Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy That Works.
THROUGHOUT history, people have been trying to foresee the future. This is not only out of curiosity, but because prediction is a necessity of life as well as business.
The ability to predict a coming tsunami could save lives. The ability to predict social or political changes would give a country or a business the opportunity to plan appropriately. The ability to predict the price of a commodity or a share would give an investor or speculator an important advantage.
Business strategy is understood by many as the positioning of the organisation to deal with a particular future. As such, accurate prediction is the foundation on which many build strategies.
Despite our best efforts, mankind’s predictive track record is still poor. This fact is counterintuitive because we are getting better at gathering data, processing it and teasing out the predictive indications.
We certainly have more data at hand than at any other time in history, and we have the computing capacity to process it all.
The opinions of recognised experts across a wide variety of fields have repeatedly been shown to be hopelessly inaccurate.
In 1911 the esteemed British historian G P Gooch believed humankind had reached a point where war between civilised nations “would be as antiquated as the duel”. War was declared not three years later that killed tens of millions of men, and again 21 years after that.
Stanford University biologist Paul Ehrlich wrote The Population Bomb in 1968, explaining how famine and insufficient food production for a rapidly growing world would lead to the deaths of hundreds of millions of people.
Between 1961 and 2000 the world’s population doubled, but the calories of food each person ate increased by 24%.
Philip Tetlock, a psychologist at the University of California’s Haas School of Business, led a multi-year study of 27 450 judgements about future. These were made by 284 experts in fields such as political science, economics and journalism, whose jobs involve giving advice.
Tetlock’s analysis of the results showed that these experts would have been beaten by a “dart-throwing chimpanzee”.
Simply to chronicle the failures of experts would in itself be of little interest and would not make this book worth reading. What make this book so fascinating is author Dan Gardner’s dissection of the reasons why even the smartest and best equipped predict so poorly.
The ancient Greek warrior-poet Archilochus wrote: “The fox knows many things, but the hedgehog knows one big thing.”
The experts most likely to be wrong are those with an ideological position or theoretical construct that they stick to like hedgehogs. The famous historian Arnold Toynbee is one such example Gardner quotes.
Despite his astonishing erudition that made him the equivalent of a walking Wikipedia, his commitment his theory of how civilisations unfold led him to selecting facts or distorting them to fit his theory.
Another cause of our inability to predict is the complexity of the world. In the winter of 1961, MIT meteorologist Edward Lorenz was testing weather forecasting models on what was then an advanced computer.
He programmed the computer to use data that extended to six decimal places and ran the data he had. When he ran the data again, he got a vastly different result. On investigation, he realised that in the second run the computer had rounded the numbers to three decimal places.
This slight change led to dramatically different results. If this slightest of changes occurred in nature, weather forecasting would be close to impossible to predict accurately.
Lorenz came up with a simple image to explain the idea of miniscule changes making a big difference to outcomes. The fluttering of a butterfly’s wings in Brazil could ultimately cause a tornado in Texas, he explained.
The philosopher Karl Popper wrote that the “course of human history is strongly influenced by the growth of human knowledge”. This is a statement of the obvious, but the consequence is not that obvious.
To know how the future will turn out requires that we have the knowledge that is available in the future. If we had the knowledge available in the future now, it would be present and not future knowledge.
In 1923 Adolf Hitler, then a fringe political figure, led a coup attempt in Munich which resulted in a brief gunfight.
Sixteen people were killed and Hitler was injured, but survived. How would world events have been altered if the soldier who took aim at Hitler had spent just little more time on the practice range and so increased his accuracy?
How different would history have been if the soldier had coughed and his bullet’s trajectory had been only very slightly different?
Trivia and accidents routinely push historical and business events in unanticipated directions.
Even stable data such as demographics is subject to this lack of predictability. Iran’s fertility rate in 1975 was a very high 6.4 babies per woman. After the 1979 revolution and the establishment of a theocracy, the state’s family planning system was abolished.
In five years the fertility rate rose to 7. It would be expected to stay high under these circumstances, but by 2006 it was down to 1.9, leaving demographic experts amazed and puzzled.
The argument of this book has far-reaching implications for decisions in business. One of the most important implications is that thinking strategically cannot assume the validity of prediction no matter how expert the predictor.
The impossibility of prediction must be a strategic presupposition.
Readability: Light ---+- Serious
Insights: High -+--- Low
Practical : High ---+- Low
- Fin24
*Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy That Works.
