Future Savvy: Quality in Foresight

Paul Saffo is always good value, and doesn’t shy from polemic. In this talk at the Foresight Institute 2010 conference, Saffo, emeritus and alumnus of the the foresight industry for over 20 years has a full swipe at ‘futurists’ who participate in ‘future-entertainment’ or profess to ’see into the future;’ but calls for the broad infusion of foresight into public debate, including the restitution of the Congressional Office of Technology Assessment (OTA) scrapped by Newt Gingrich in 1995.
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“Profiles of the Future” at the Foresight Institute 2010 conference

Says Saffo: “Futurists today are talking to the wrong people, don’t have good methods (for the most part,) and are still doing the kinds of silly things we did (or they did) when futurism got started…We should have an instant prohibition on anyone who writes an article titled: ‘Top 10 Trends to Watch’… We’ve got to get rid of this ‘future entertainment’ stuff and ‘top-10 trends’ stuff, and get serious.”

Part of the raison d’etre of Future Savvy, of course, is to demythologize exactly this kind of self-promoting infotainment foresight, and give real-world managers a way to see through it. Thinking long-term is too important to allow it to be tainted by snake-oil salesmen. Saffo admits he’s ranting on this topic (as I do too.) In a less ranting mode, he would probably admit there are also many high-quality thinkers doing exemplary foresight work. Certainly he’s all in favor of thinking long-term, and doing it better.

Saffo’s solution? “Move foresight to the masses; make policy conversations cool; engage powerful myopics (short-term thinkers on Wall Street and other financial institutions); engage politicians (incl. via the OTA). But he doesn’t say how, and of course therein lies the rub.

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Tags: Foresight Institute, futurist, OTA, policy, Saffo, technology assessment, Wall Street

The BBC has released a blueprint for its future, summarized in a 64-page ‘Director-General’s Report which can be downloaded here. The gist is the corporation plans to back off from many of its more commercial offerings, particularly closing digital radio stations such as 6Music and the Asian Network, and pruning its online presence. The money saved will go to funding more original content and shoring up the quality of the offerings not pruned.
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The BBC futures document is a careful and thoughtful piece of work, making bold foresight-oriented moves: saying, essentially, what are we here for? To provide quality media in the public interest. So what do we need to do/make/change to achieve it, that is, to deliver on our core mission, in the years ahead?
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To this end, the blueprint talks about “setting new boundaries:
• Recognising the lead role that commercial radio plays in serving popular music to 30-50 year-old audiences, through the proposed closure of 6 Music and the refocusing of Radio 1 and Radio 2
• Recognising the lead role that Channel 4 and other broadcasters can play in addressing the gap in public service television for younger teenagers, through the closure of targeted teen propositions
• Reducing spending on programmes from abroad by 20%, from £100m today to £80m in 2013, capping it thereafter at this level of 2.5p in every licence fee pound
• Setting a limit on what the BBC can spend on sports rights at an average of 9p in every licence fee pound
• Leaving room for local newspapers and others to develop in a digital world by keeping the BBC’s current pattern of local services, and not launching new services in England at any more local a level than today
• Focusing original content on BBC Online on the (five) content priorities only, and excluding whole categories of online activity such as web search, communications and non-content related social networking.”

Further in the document it talks about “a set of web-native activities that the BBC itself will not undertake, including:
• The BBC’s search activity will be limited to its own website and associated external links; it will not do general web search for all-web content
• It will not run its own general communications services such as email, webmail or instant messaging
• It will not create stand-alone social networking sites, with any social propositions on the BBC site only there to aid engagement with BBC content. The BBC will also ensure that its social activity works with external social networks
• There will be no specialist content for a specialist audience, such as business-critical information in specialist fields, legal, financial (including trading tools) or other professional content.”
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From the beeb’s perspective, it makes perfect sense. It can’t be the best at everything to everyone. That just means it will be working at the limits of its reach in many areas, against focused competitors, which dilutes its brand, and of course spending public money on commercial services already relatively well catered to.

The politics of engagement

It’s business strategy 101, and if it were a business that would be that. But the BBC is a multi-stakeholder public service body, and therein lies the rub. Everyone has a say in its future. And different stakeholders have different ideas of what is ‘in the public interest’: many think commercial radio etc., is in their interest, so protest is mounting, particularly among younger users under banners that read ‘BBC turns it’ back on a generation’ and so on. Twitter is humming.

Good multi-stakeholder future work requires engagement and consultation, and the BBC is offering a consultative process — from now until May 25 — see the page at https://consultations.external.bbc.co.uk

The future? Let’s not mince words that are usually minced. The future is political. That is part of the reason prediction is done so poorly — people miss the fact or extent of contention over outcomes, even ones you would think are in everyone’s interest (mitigating climate change, for example.)

When there are many interested parties with different interests, and therefore contending claims on the future — different visions of the ‘ideal’ future — the flavor of the future (in total or in compromise) will belong to the interest with the stronger hand. So depending on the power of the stakeholders soon-to-be-unhappy, the BBC will be forced to bend or not. But in the hardball world of multistakeholder change, chances are the Director General has set his stall out a bit further than he need to, and will be able to ‘compromise’ to a position that is more or less the plan. Good futuring all round.

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Tags: BBC, beeb, consultation, ideal future, politics, radio, stakeholders, strategy

Charlie Munger, Vice-Chairman of Berkshire Hathaway Corporation, the diversified investment firm chaired by Warren Buffett, has a piece titled: ‘Basically, it’s Over‘ in Slate this week.

Charles Munger

First, let me say, what I like about investors (and managers and entrepreneurs) with long-term track records of success, is it means — it must mean, by definition — they have a high quality view of the future. Not only a high-quality view, but a high quality view that renews itself. There is no doubt that Berkshire Hathaway has consistently over time had a better view of the future than most expert forecasters, policy pundits, and futurists. The record is clear.

Anyway, Munger this week offers a parable about Basicland, a C18 Pacific island colonized by Europeans where: “Property rights were greatly respected and strongly enforced. The banking system was simple… Almost no debt was used to purchase or carry securities or other investments, including real estate and tangible personal property…  Speculation in Basicland’s security and commodity markets was always rigorously discouraged and remained small…

“(But) as their affluence and leisure time grew, Basicland’s citizens more and more whiled away their time in the excitement of casino gambling… Many of the gamblers were highly talented engineers attracted partly by casino poker but mostly by bets available in the bucket shop systems, with the bets now called “financial derivatives.”

And so it goes on, telling the history of America and the route to the Credit Crunch, and potential for new misery going forward, via this parable. He uses the parable as parables have always been used, to say something in ‘make-believe-land’ that cannot be said (or will not be heard) in reality. The folly of Basicland’s citizens and government is much easier to acknowledge than our own. Scenarios of the future are similar in function, similarly allowing mental and institutional ‘permission’ to think the unthinkable and ’say the unsayable.

The worst investor in America

Munger wouldn’t be the first to say: “Change yer ways or ye be doomed.” Isaiah and many before and since have said that. Nor would he be the first old white guy to espouse traditional ways of doing things. We factor that in. But he does look to basics and basics are important in having a high-quality view of the future. They signal the limits of the excess and reversion-to-the-mean imperatives.

I remember in the 1990s, when I was living in Washington DC, and Warren Buffet was “the worst investor in America” for missing out on the dot.com boom and Nasdaq bonanza. He just stuck to his guns saying, time after time, ‘there are no fundamentals behind these valuations (aka, this is just a casino) and fundamentals will prevail, which of course they did.

Now the brains at Berkshire Hathaway are saying that forums where risk, debt, currencies, etc., are up for speculation are ‘casinos,’ and their players therefore gamblers (rather than, as they would have it, ‘investors), and that they produce little fundamental value and fundamentals will prevail.

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Tags: Berkshire Hathaway, Buffet, debt, dot.com boom, Munger

Two running business stories with foresight importance this week, both I realize brought to me by smartbrief.com (Smartbrief on Leadership) which I find a very credible news aggregation service. The first is a WSJ piece ‘How Lean Manufacturing Can Backfire.’

Toyota President Akio Toyoda, Feb 11, 2010. Pic: AP

Lean manufacturing creates efficiencies and shaves production costs by creating just-in-time — no inventory — systems, using common parts and designs across product lines, and generally squeezing materials, processes, and (inevitably) quality controls. This may or may not include pressing suppliers to lower prices, and therefore squeeze their own materials, processes, and quality controls. ‘Lean’ has been very much a core process and operations mantra for about two decades. To misquote a favorite saying, manufacturing companies have been adamant: ‘one can never be too rich or too lean.’

But now Toyota has had a slew of embarrassing recalls — the 2010 Highlander; 2008 – 2010 Sequoia SUVs; and 2009 – 2010 RAV4’s due to gas pedal problems. It has just recalled 437,000 Prius and other hybrid vehicles worldwide to fix brake problems. In 2009 it recalled Corolla, Camry, Vios and Yaris sedans due to faulty electric window-control systems.

The point of the WSJ piece is to implicate lean manufacturing in this. (It’s unclear whether it’s too much lean or too little quality control, but they are clearly connected.) Now, lean as an idea is not going to go away. Nobody is suddenly going to advocate ‘bloat manufacturing,’ but looking at the damage in reputation and bottom line that Toyota has soaked up, the company and others like it will obviously looking across their lines and saying to themselves ‘a bit of redundancy (fat, if you like) in the system will be cheaper than this.’ Thus the pendulum swings back from lean extreme to somewhere a bit more durable. A happy medium.

Maharaj Mac

In the other story, the Times reports how McDonalds is seeing benefits from localization of it’s menu, for example, offering the McItaly in Italy, the (non-beef) Maharaja Mac in India, the McLobster in Canada and the Ebi Filit-O (shrimp burger) in Japan. The pendulum effect here is that McDo became the mega-corporation it is based on global standardization and a ‘one-menu’ mantra from Cleveland to Taipei. It wasn’t just one menu, but each item had to be produced from the same stock, and in the same way. McDo fries were identical everywhere, that was the guarantee (and they were always called ‘fries’ no matter what locals called them.)

It is now become common cause among the global food companies (notably Starbucks and KFC) to work local options into their offering. One may think this is merely ‘think global, act local.’ The point is, it is an about-turn indeed from the ‘think American, act global’ that went before. What works best is in fact a happy medium.

What does this have to do with better future-thinking? Expect a recall sooner or later on forecasts that don’t see change resolving itself around a happy medium.

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Tags: forecasts, future, globalization, lean manufacturing, localization, pendulum swing, WSJ

I’ve been flying across the world recently, which has given me a few quiet moments to read a real bona fide book, and the one I have been busy with is Peter Bernstein’s Against the Gods: the Remarkable Story of Risk (Wiley, 1996). It’s aclaimed all over the place, particularly in risk management circles, but I’d never quite got to it.

Anyway, this is in the intro (p5), and I found it a perfect encapsulation of a core problem in foresight thinking — quantitative vs qualitative methods — well worth retyping out to have on hand for reflection. Here goes:

“The story that I have to tell is marked all the way through by a persistent tension between those who assert that the best decisions are based on quantification and numbers, determined by the patterns of the past, and those who base their decisions on more subjective degrees of belief about the uncertain future This is a controversy that has never been resolved.
The issue boils down to one’s view about the extent to which the past determines the future. We cannot quantify the future, because it is an unknown, but we have learned how to use numbers to scrutinize what happened in the past. But to what degree should we rely on the patterns of the past to tell us what the future will be like? Which matters more when facing a risk, the facts as we see them or our subjective belief in what lies hidden in the void of time? Is risk management a science or an art? Can we even tell for certain precisely where the dividing line between the two approaches lies?
It is one thing to set up a mathematical model that appears to explain everything. But when we face the struggle of daily life, of constant trial and error, the ambiguity of the facts as well as the power of the human heartbeat can obliterate the model in short order.”

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Tags: numbers, past, quantitative forecast, quantitative modeling, risk

To misquote Ecclesiastes (Kohelet): ‘For everything there is a season and a time for everything under the sun… a time to think about tomorrow, and a time to think about today.’

Those of you who know this blog know that I try to keep it updated every 7-10 days with real content I have personally written. But this last week I have held back my posts. In the wake of the truly humbling loss of life and human calamity we have seen, somehow no futures posting seemed quite right.

In a foresight community we are, I think, rightly vociferous in getting decision makers to see the benefits of taking a long-term view, despite the systemic short-termism of incentive cycles (annual reports, political elections, and – dare I say it – banking bonuses) that most organizations and human systems use as basis of reward. But at times like this, similar to post-Katrina, post-the 2004 tsunami, and previous epic-scale natural and human disasters, we should not bury our heads in the sand of tomorrow. For now it is the present that counts: focusing on what matters to save lives and give food, shelter, and a modicum of respect to those with shattered lives.

The ’social’ side of disasters

When the dust does finally settle, and there is time to draw some lessons, there are two future-anticipating principles that apply strongly in the Haiti disaster. The first is that fragile systems are always more likely to have ‘a collapse in their future.’ I’ve been reading Flirting with Disaster by Marc Gerstein, and one of its points (not new, but well described) is the role that human organization plays in facilitating or magnifying a ‘natural’ disaster. Yes, an earthquake can’t be controlled, or even forecast, but what its actual total impact is (the future we should have anticipated) has significantly to do with the efficacy of human organization, including preparedness, robustness, early-warning, and mitigation systems. Where these are in place and working well we should expect a different future.

Put another way: since man has had any say over his domain there have been no purely ‘natural’ disasters, and there will not be any in the future. Every future disaster will likewise be the product of natural forces meeting social organization.

Opportunity jolts

The second principle is that change often happens by jolts, that is, via the application of a sudden and overwhelming force rather than via gradualism. Particularly, a shock from the outside can ‘free up’ a situation and be the catalysing event that sets off wider and ultimately fundamental change. This is (best case interpretation) what the toppling of Saddam was about. Freeing the system. ‘Black Swan –ing’ the system, perhaps.

It the case of Haiti we have, by all accounts, a nation mired in poverty and corruption. What it is going to get from the events of the last week and the weeks to come, is like a punch in the jaw followed by a lot of world attention, solace, and aid. Add them together and it could be a system-busting event, a real opportunity to break out of existing governance cultures and existing global relations. History suggests Haiti won’t grasp the opportunity, but the window will be open for a while, and good foresight would keep this potential upside scenario in mind and even work to facilitate it.

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Tags: corruption, disasters, governance, history, organizations, systems

One of the principles of anticipating the future correctly, separating out what will happen from what we think-hope-fear will happen, is to consciously factor in the principle that fundamental human needs don’t disappear. They are bundled, interpreted, and served one way in the present, and this may change in a new era as technologies advance and relationships and associations change. But needs are forever. And often the future goes ‘backwards’ to old, archetypal models that served needs before.

Witness the uptake of ‘feudal’ protection in a competitive, recessionary marketplace, where Wal-Mart is offering rental space insde a new Chicago store to neighborhood businesses. Apparently tenants already include a dog groomer and a fried chicken outlet, and Wal-Mart is going to be inviting in barbers, manicurists, and other local small businesses.

Regional general manager Rolando Rodriguez told the NY Times: “We want the same resurgence of the community…”.

It’s not all about community of course. Wal-Mart is seeking counter-PR to endemic criticism (and evidence) that their megastores kill mom-and-pop shops on which many local jobs and services depend, and is hoping the gambit will revive its six-year stalled bid for the city’s approval of proposed Chicago stores.

Anyway, as one observer, Marissa Johnson, said of the new arrangement: “It’s like sharecropping.”

Yes, this is the return of a feudal model. The lord owns the land and the small guy works his patch, offering a regular tribute. And small guys will jump at it because — in the absence of fundamental challenge to an iniquitous system — having the protection of a lord is better than not having it.

Another need that’s not going away, merely being reinterpreted (ironically back to pre-feudal organization) is our need to mark the darkest night of the year with ritual. Yule is the pagan winter solstice rite centered on a December 21 dusk-to-dawn vigil. It was absorbed into Christmas and not widely practiced for centuries. But now, as reported in the big UK media Christmas pregame show, there’s been a great surge in Yule festivities and attendance. By how much depends on who is quoted but nobody is denying the trend — which more or less mirrors the decline in formal Christian Christmas (secular, gift-giving, tree decorating Christmas is alive and well.)

The need is a constant. The rituals will change, often mining the past.

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Tags: Chicago, feudalism, NY Times, paganism, regionalism, ritual, technology, Wal-Mart

I have a fond little memory from one of the early multi-candidate debates in the last US election campaign. It was on prime-time TV: there were still about a dozen or so candidates in the running, including Obama and Hillary Clinton, each was standing behind a podium, and as the topic of climate change came up they were asked en masse: “So, who didn’t fly here today in a private plane, raise your hand?” The delegates all sheepishly kept their hands down but one – I forget which – raised his. “I came in yesterday,” he explained. (laughter)

So to the Copenhagen climate change summit, and all the luminaries and dignitaries and celebrities landing at København airport, many of them in private jets.

http://www.cph.dk/CPH/DK/MAIN

This tells us something about the future, and what it says is: ‘needs must.’ What are they going to do, row a boat to Copenhagen? Scale that up and you have the real, actual future. People will fly. In fact the entire new global middle class of billions will fly. And they will heat their homes. And they will eat meat, and so on. And any even remotely democratic system that tries to take away this will be out on its ear.

But we will of course move to cleaner, renewable, sustainable systems. How fast this happens depends essentially on money, which in turn depends on political will, which in turn depends on public concern. Money is required to fund new energy technology research, and — the core issue of Copenhagen this week — it is needed to buy off industrializing countries.

There’s no doubt that climate change (manmade or not) is real, and a real danger. But when scientists and academics are worried about it that means little in terms of changes to human practices. When the public gets concerned — as they now are — we get the possibility of fundamental change. This is true of the future generally, not just climate and the environment.

Between the public sentiment and the money lies political will. Essentially the political will of post-industrial economies on the one side, who find it politically easy, relatively, to pay the price of emissions constraints vs. that of developing economies which will be choked economically and therefore politically by those constraints.

Inequality

Correlating degrees warming with ecological and therefore social upheaval is important. But to think that is what the argument is about is to miss the point. The point is global inequality and its future, and how developing economies are not going to allow emissions constraints to further entrench it.

The future goes always to the most powerful side. That’s what power is for: determining the future. The sides are both strong in this dispute, so this battle will not be won or lost in Copenhagen this week. We are still in its early stages. The effects of climate change are incremental (unlike, say, nuclear holocaust) meaning there is plenty of room for postponement even if the planet can’t and won’t ultimately take it. And those who would occupy the moral high ground have burned public and private jet fuel to be there to do it, and will no doubt indulge in a bit of Smørrebrød and Frikadeller too. Needs must.

So expect the political clock to remain stuck as it has been for a while now, at ‘5 minutes to midnight,’ while the issue smolders slowly without definitive resolution — until technology advances get human energy, finally, off fossil fuels and the problem works its way out of environmental and human systems.

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Tags: energy, environment, globalization, industrialization, middle class, renewables, sustainability

Economists make a handy, if mildly irreverent, distinction between “freshwater” and “saltwater” economics. Freshwater refers to economic theory that rests on the efficient markets hypothesis — a belief in the efficiency and rationality of free markets. It is associated with Milton Friedman and the University of Chicago school. It was the thinking behind Thatcher and Reaganomics and still more-or-less holds sway today, or it did up until the credit crunch.

Keynesian or saltwater economics by contrast holds that free markets often behave irrationally and inefficiently, and therefore need corrective policy from government. Saltwater economists say people and institutions often behave in ways contrary to the general good, or in ways that can bring markets (on which they depend) to their knees. Sound familiar?

Anyway, a recent Knowledge@Wharton article comments: “Like a natural science, freshwater economics lends itself to complex, often elegant mathematical modeling. The freshwater view is that consumers, offered an array of choices, will select the one that is best for them — a straightforward assertion that can be neatly expressed in mathematical formulae.

“In contrast, many assertions made in behavioral economics are more challenging to express mathematically. ‘Behavioralists’ argue that consumers don’t always act in their own interests, especially when they fail to understand the choices on offer or succumb to irrational impulses involving those choices… but such impulses are inherently vague and difficult to define.”

Cognitive bias

In other words mathematically modeling the economic future is possible if humans and the markets they create are rational, but far less possible if we act irrationally.

Now, as elaborated in Future Savvy, the fact that humans make irrational choices due to many cognitive biases and heuristics  is indisputable, not least since the work of  Tversky and Kahneman. Biases and heuristics such as “anchoring,” “recency effect,” “personal validation fallacy,” “herd mentality,” and so on, in which people make irrational choices, are well documented.

That’s why mathematical projections of economic behavior are unreliable. The economy may be counted in numbers, but it is still a human system, with associated inefficiency and irrationality. Blow this little debate in economic forecasting up large, and you have the essential problem with quantitative forecasting of any type. It assumes, erroneously, a freshwater view of humanity.

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Tags: behavioralist, cognitive bias, freshwater economics, Keynes, Milton Friedman, quantitative forecast, Reaganomics, saltwater economics, Thatcher

We owe a debt to Nassim Taleb for memorably encapsulating the demerits of predicting by extrapolating trends as “The Turkey Problem,” and now seems the moment to reiterate it:

Imagine you are a turkey. Every day someone comes to feed you. Every day you get bigger. Your portion sizes get bigger too, brought by a nice man at regular intervals. You extrapolate the trend and you confidently predict a bigger you, with more to eat. Regularly too.

But what happens is … Thanksgiving. Or Christmas

Taleb, N., The Fourth Quadrant: a Map of the Limits of Statistics, Edge Foundation, September 2008

The hard reality for those who predict the future by extrapolating trends (and those gullible enough to believe them) is that even if our turkey had excellent data points (carefully observed and accurately recorded in, for example, a time series analysis) and, moreover, even if our turkey was a mathematically sophisticated — not merely simply projecting trends, but applying all the latest modeling techniques, from moving averages to compound regression — he is still going to be wrong about the future. Dead wrong.

All the data analysis in the world, all the fancy computer software, all the consulting time paid for, and he is still a dead duck.

Ouch. The lesson: there may be (or, vexingly, may not be) something outside the trend, a framing condition, which where it does exist is invisible within the trend projector’s mental model. The only way to get a view of the future that is “robust to Thanksgiving” is (a) to question assumed framing conditions, for example through properly done scenarios, and (b) to hold a view of the future which assumes fundamental ‘game-changing’ surprises can and will occur.

If, as they say, “the trend is your friend” it is assuredly only your fair-weather friend.

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Tags: mental models, modeling, paradigms, predictions, quantitative analysis, trend extrapolation