Mansueto Library: robots and underground storage vaults

The University of Chicago’s new Joe and Rika Mansueto Library is, it seems, a caricature of futurism. Under a vast glass dome sits an 8,000 sq-ft reading room, complete with flat screens, a circulation desk, ergonomic furniture, and … no books.

Turns out the books, all 3.5 million of them, are packed efficiently – by size – into 2 x 4 x 1.5 ft metal bins stored in vaults below ground. If you need one, you go tap-tap at your keyboard, which sends enormous rolling robots to fetch the right bin and crank it up to the circulation desk, allegedly in less than 5 minutes.

A number of things are interesting here, the first being that this “library-of-the-future” is about paper books at all. In a Google-digitize-the-planet world where Amazon says that more than half of its books sales are for the Kindle, the University of Chicago’s $81m bet on “dead-tree” storage and retrieval is quite a bet.

It is a good bet. Hype aside, it will be still many generations before “paperless” is any kind of on-the-ground reality, as paperless office evangelists have found out. Imbedded human habits and systems just don’t move that fast.

But systems do. Ingrained human preference for tactile objects doesn’t mean that storing, finding, and retrieving of the objects can’t be improved overnight, which is the essence of what is going on here. The automated search-and-retrieval system creates efficiencies as all automation does – by dumping human beings out of the process. Specifically, it copies advanced manufacturing systems such as those used in automobile assembly plants, which effects just-in-time finding and retrieving of components this way.

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The first industry foresight principle at work here is this: where the same problem applies, a solution that creates value in one industry will turn up to create value in another, even if apparently unrelated. Innovation doesn’t respect sector or management thought silos. Ergo, leaders who are able to comprehend challenges at a systemic level and look across industry boundaries for solutions that already exist elsewhere, find the future before competitors do.

Second, although the book definitely survives in the University of Chicago’s forward view of the library, note that the solution is not simply head-in-the-sand “nothing changes.” What changes, they are arguing, is the system aroundthe book, the storage, finding, and shlepping thereof. Moreover, the new system is a radical departure. It turns the status quo upside down, to make the physical book a relatively minor element of the online system, not the other way around.

Finally, the solution on offer is one more piece of evidence that inexorable advances in single-purpose (non-human-like) robotics and sensors are quietly yet absolutely changing the world around us. If we drop the Frankenstein image, and see robots for what they really are in our time, that is, sensors + wheels + software, many imminent changes in industry and society come quickly into focus.

As the 24-hour news caravan moves on from Cairo to Libya in search of the next news fix, I’m reminded how poorly the media caravanserai thinks about the future: in this case, what real changes (if any) the fall of Mubarak may cause in Egypt, or in the political and business environment in the Middle East, or the world at large, going forward.

That a 30-year despot was toppled by people-power is without doubt a good outcome story for those with broadly democratic and civil-liberties biases. But the breathless pundits have been quick to call the Tahrir Square events “the ‘Berlin Wall’ of the Arab world.”

Is it? The Tahrir Square revolt tells us there is economic hardship and rumbling social discontent in Egypt, and that the populace is emboldened, but it doesn’t tell us much about the future.

Yes Egypt is the bellweather of the region. And yes, it has gone through a cataclysmic moment. But the future is all about momentum. Can we expect momentum? Is there reason to anticipate follow through? Can we expect the “fast-forward” button from now, or is it going to be the pause button that defines outcomes?

The fall of the Berlin Wall fall was symbolic: the symbol of Eastern bloc demise – a crack in the national prison that held back human aspiration. But it was also more than a symbol. In reality, on the ground, the political will that sustained the Wall was gone by 1989. Tricky as it was, and still is, the then West German government had a stake in and a will towards reintegrating the East. The situation went into fast-forward mode.

Egyptian protesters have dislodged a few boulders, and shaken a few certainties. But what is the political will in Egypt and among its Western allies going forward? That’s what will tell us about the future.

Head chopped off

The army is in charge, but the army is more closely allied with the ruling elite than the common protesters. The elite has had its head chopped off, but it can easily grow a new one. The issue it will highlight – as we have already seen – is stability, raising the specter of (a) chaos or (b) Islamists, or both, to stoke the military and cow the population.

Genuine chaos is in fact a high likelihood. Whenever the glue of power melts, and power (over the future) is up for grabs, agencies and interests will contend for it, seeking to win absolutely while the chips are in the aire, or to be in the best pre-pax position when they fall. A merry-go-round of tottering regimes, interspersed by chaos, or even a Lebanon-style multifaceted civil war between army, ruling elite, Islamists, warlords, students, etc., is surely a more-than-possible scenario.

The deeper story, as many have pointed out, is the economic, infrastructural, and civil weakness that defines Egypt, whoever takes over. It has a young and growing population, a stalled economy with chronic high unemployment, inequitable wealth distribution, poor local and regional governance, and corruption.

This is why it should not be believed that any party or interest can deliver a new future. Without considerable change at the grassroots, democratic fanfare, would be just that — fanfare.

So if the political will in Egypt is both fractured and hamstrung, what about outside interested parties and the West?

Friendly dictator

What will be future-defining is whether the US and its allies drop the “friendly dictator” policy — propping up corrupt despots because they are externally benign (and better than the Islamic alternative.) If they keep this up, the outcome for Egypt and the region is a fractured “pause” situation, no matter what blather about democracy, elections, human rights, new constitutions, makes the airwaves, from Hillary Clinton down.

But if, by some albeit unlikely turn of events, the external political towards Egypt was reshaped to transcend self-interest and neglect; and starts to support quiet, consistent, financial and non-financial development of the mechanisms and institutions of civil governance, backed by education and micro-loan economic stimulus – then the future is on the move and business managers should start realigning their thinking towards stable long-term growth for the region.

But, making one of the classic mistakes of technology-driven futures thinking, Clarke lets his technological imagination blur basic insight into human nature and social service/product adoption. Specifically, he goes on to say that because of communications technology advances, “the city of 2000 may not even exist at all. The traditional role of the city as meeting place for a man will cease to make any sense.”
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Note the gender paradigm blinkers. But anyway – the end of cities? Fat chance. One of the defining issues of the early 21st century is urban growth and the emergence of  10+ million-population mega-cities. And across the world, a higher proportion of the human population live in cities than at any point in history (and that proportion has just crossed 50% making humans for the first time a primarily urban species.) Hello? Arthur?

Urban concentrations 2007. Source: The Guardian

Why the miscue? First Clarke makes the classic error of holding key variables still while running technology forward. The key variable here is population growth. The number of people on the planet has doubled, at least, since 1964.

But that population could all be comfortably telecommuting from rural idylls, so there is another problem. Clarke fails to factor in social and economic pressures which sometimes run counter to technology advancement or, as in this case, merely absorb technology shift with no change. No matter how good communications get, nothing in the information-communications revolution has changed the age-old social truth that proximity matters. It matters to community welfare. It matters to social opportunities. It matters to  career advancement, and so on. It mattered in the past. It will matter in the future. That’s why people are in jam-packed into into Los Angeles and São Paulo and Johannesburg and Seoul, etc., but not Tahiti.
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As Stoyko’s is head-and-shoulders the most insightful and thorough assessments of the book itself, and the book in context, I’m reposting it here, with thanks. There are also fabulous graphics added, such as these (see more below):

“My search led to Adam Gordon’s Future Savvy. Like Posner, Gordon challenges Taleb’s blanket dismissal of forecasting. Gordon does not deny the existence of Black Swan events. And his book is a giant compendium of all of the things that usually go wrong with predictions. Moreover, Gordon offers a sceptical discussion of the subject that chastises simple-minded futurists, tech enthusiasts, and various other prophets of doom and boom. The difference between Taleb and Gordon is that Gordon doesn’t dismiss out-of-hand the usefulness of structured thinking about the future. Many important decisions require us to speculate about what the future might hold. Gordon wants us to be savvy in the way we anticipate the future instead of flying by the seats of our pants, so to speak.

“To set the stage, Gordon talks about how the forecasting industry is rife with problems. There are no standards, no accepted methods, no standard terminology. There are no penalties for failure given that people tend to forget forecasts by the time they can be proven wrong. And when dealing with the forecasts offered by pundits, stakeholders, and activists, Gordon reminds us, “we are knee deep in predictive wishful thinking, scare-mongering, or blatant self-promotion.” (p. 5) Buyer beware.

“Then there are the data problems. Forecasters use data from the past to project trends into the future. They rely heavily on data gathered for other purposes, not gathered for the task at hand. Availability is patchy. The data comes from multiple sources and is created using different methods. Important statistical caveats get lost. The context of the original studies gets forgotten. Variables are often defined loosely … and change over time … and are measured differently in different places. Data gathering methods often change over time in ways that exaggerate or obscure a trend. Sensationalist “newsy” data often commands the most attention. Some things are inherently difficult or impossible to measure accurately. All sorts of assumptions get embedded in data projected into the future. Furthermore, Gordon talks about the ways in which numbers can be finessed in an underhanded way. He advocates “number scepticism”, warning: “But no matter how scientific the data appears, choices have been exercised at every point about what to observe, what to count, how to measure it, and how to report it. … But numbers are not bedrock. There is no bedrock.” (p. 59)

“As an aside, statisticians have a snide nickname for analysts who mix’n’match statistics from a hodgepodge of sources to create complicated models or story-lines. That nickname is junk-yard dog. Gordon gives the impression that the forecasting business is, by necessity, heavily populated with these collectors.

“The sources of potential error don’t end with data. Our biases cause us to misinterpret and misreport the data.

“Some bias is intentional manipulation. Rascally analysts ignore or downplay countervailing evidence. They give evidence less scrutiny if it confirms the desired result. Emotionally charged language and associations are used. Terms are defined in leading ways. Extreme cases are used to represent the norm. Forecasts that don’t accord with an agenda get ignored, especially if the forecast is sponsored by a powerful interest. Organisational incentives can cause those being scrutinised to fudge the numbers. When forecasts are presented to the media, the most extreme trends get attention and important caveats remain unreported. Gordon is particularly critical of the so-called futurists who use “stretch thinking” and “big-picture thinking” to imagine a world full of only big changes. Many have a technophile bias, or the assumption that technology is the sole motive-force of large-scale societal change. Gordon’s advice is to keep your guard up and be wary of motives.

“Setting aside the thinness of this advice, Gordon has a strange attitude when talking about manipulation. He makes a distinction between forecasts that attempt to be accurate and forecasts that attempt to influence. Employee-prodding managers, partisan policy wonks, and alarmist activists use loaded forecasts to move minds. Humility, qualification, and tentativeness don’t have a place in these circles. There may be a legitimate reason for using leading forecasts, such as communicating the art-of-the-possible or giving someone an ambitious target to strive for. However, leading forecasts without full disclosure are instruments of underhanded manipulation. Gordon is eerily agnostic. His advice and tone of voice suggests that he is oblivious to the ethical problems posed by the manipulative use of forecasts. It’s a strange contrast with Gordon’s advice about being careful and pragmatically sceptical. [Editor's note: Agnostic? Moi? Hardly, but perhaps the chill of my irony was not chilly enough.]

“Back to the sources of error.

“Gordon itemises a number of cognitive biases that are inherent to the way we think. We often miss Black Swan events and abrupt changes in prevailing wisdom (“paradigm shifts”), he argues, because we are always filtering information based on perceived relevance. This “inattentional blindness” causes us to not notice important influences on the future. We also overemphasize recent happenings over older events (the recency effect). We’re susceptible to herd thinking and faddish ideas. A few chance events are often mistakenly interpreted as a trend or other pattern. Gordon places particular emphasis on how our current context frames the way we see and think (situational bias), especially how the prevailing mindset and preoccupations of an era skew the way we think about the future (Zeitgeist bias). For example, nuclear-powered airplanes may have seemed inevitable to someone living in the 1950s, a time preoccupied with thoughts of nuclear technology, suggests Gordon. That notion seems absurd today. To counter this problem, he argues for the need to extract the assumptions underpinning our expectations. Those assumptions need to be questioned and tested. And one good test is to reverse the assumption; that is, consider how the future would be different if the opposite (or very different) assumption were used.

I would add that people habitually rely on lazy assumptions about the future in general. As Howard Segal points out in his book Technological Utopianism in American Culture (2005), late-19th and early-20th-Century intellectuals assumed a technological plateau when describing the future. Even today, we assume our arrival at some destination—a future steady state—instead of a world of on-going change that is unevenly distributed and erratically paced, as exists now.

Gordon invites us to consider the utility people derive from a particular technology before jumping to conclusions about how it will revolutionise everyone’s lives. Tech-happy futurists are too quick to assume broad public acceptance of a new technology while ignoring the trade-offs of adoption. There are costs to be considered. In many cases, the price is too high and existing technologies do a good enough job. Or old technologies have an inertia, such as when users are “locked in” to a particular technology. Or social values change. Or switching creates undue inconvenience and aggravation. Or the technology has uneven appeal across diverse groups in society. Or, or … Gordon reminds us that simple technological domino effects almost never happen. The pace of change is usually slower than anticipated. A variety of factors determine how successful an innovation will be.

That leads us to the dynamics of change. I’m not going to describe each dynamic in detail. Gordon devotes a lot of space to them. Instead, I’ve listed them iconographically in the following diagram. Note that the darker lines signify consequences (and consequences of consequences; a.k.a. second-order and third-order events).

“A trend observed today may not continue onward along a straight-forward path. Trends peter out … change course … hit limits … get caught in reinforcing loops … have side-effects … provoke reactions … et cetera. The same goes for underlying causes. Trends can be particularly difficult to track within the complex systems that govern our lives. Thus, Gordon offers a chapter on system analysis.

“As someone who studies organisations, I’m often seeing policies and strategies change with sadly predictable pendulum swings. Gung-ho leaders push in one direction with gusto only to get a lesson in humility. Their efforts hit limits and opposition. Their assumptions hit reality. Subsequent leaders see wreckage everywhere and push in the opposite direction, looking for balance. Balance alludes them and they go to far. Another pendulum swing begins. Some swings happen from season to season. Others happen over decades. These swings may be predictable, but their exact timing certainly isn’t.

“Gordon rounds out Future Savvy with a utilitarian survival-guide of sorts. His big advice is that “it’s better to be vaguely right than exactly wrong.” Success is being alert to important changes and being prepared to cope, not with having accurate predictions. Narrowing down the things that need to be prepared for is an important practical benefit. In that spirit, Gordon talks about the strengths and weaknesses of using multiple scenarios instead of pat forecasts. He steps the reader through the analysis of some forecasts while looking for weaknesses. A chapter-long battery of questions is offered to guide the analysis. These questions do a good job of summarising the book.

“All told, Future Savvy is an excellent textbook for those who want to discipline the way they think about the future. I disagree with Gordon’s tangents about the inherently subjective nature of truth. I also have a few qualms about his take on scepticism. But these tangents rarely get in the way of his stock-taking exercise. That exercise has led me to be even more suspicious of forecasting, especially forecasts in volatile industries where data is patchy and assumptions are legion. I’d love to know the success rate of high-tech cheer-leaders … er, research firms that peddle forecasting numbers. Gordon dismisses the tracking of forecast failures as “smirk lists”. I’m with Taleb and his tsk tsking. If these numbers are just part of the hype machine and have a dismal track-record, then what good are they? Validation for reckless investment strategies? Fodder for misleading Power­Point slides? Numbers that give a false sense of being in-touch with the market? Tsk tsk.

“That said, Future Savvy has increased my interest in foresight more generally. Gordon’s guide left me wondering how I can better prepare groups of decision-makers to think about the future. How do we get them to see the many changes afoot with greater foresight?”

In 1995, at the height of Microsoft’s power over the economy and the zeitgeist (before Google came into its own, before Apple renewed, etc.) Bill Gates wrote “The Road Ahead,” which was, as one would expect, a broadly techno-optimistic look at the future. Did it see 9/11? No. Iraq War 2? No. The Credit Crunch? No. For a start it only really thinks about digital technology, and that’s going to be a very partial guide to the road ahead, at best.

But, in a recent The Atlantic article, “Bill Gates: More Profit than Prophet,” Tom McNichol evaluates Gates’s foresight on its own terms. As reproduced below, he finds it more “miss” than “hit.”

In general, Gates makes the mistakes outlined in Future Savvy, particularly in predicting the future based on its technological possibility rather than economic or social practicality. He’s short on systemic/feedback thinking and therefore misses side effects and unintended consequences. He also falls into the wishful-thinking bias: mixing up what he and (and Microsoft business) would like the future to be with what it really will be.

This last factor is less a mistake than a classic tool of future advocacy, and Gates would no doubt admit to a bit of this. It is illuminating (and sobering for future predictors) to see how much of the digital future Microsoft had within in its area of control in 1995, which it ceded to others. That lowered Microsoft’s ability to influence the road ahead and therefore weakened Gates’ predictions.

The McNichol analysis (shortened in places):

E-Mail
Prediction: Gates wrote, “Electronic mail and shared screens will eliminate the need for many meetings. … when face-to-face meetings do take place, they will be more efficient because participants will have already exchanged background information by e-mail. … information overload is not unique to the (information) highway, and it needn’t be a problem.”
Verdict: Miss. Gates’s view of e-mail now seems naively Utopian, failing to account for unintended consequences. If anything, e-mail has made workplace meetings more frequent and less efficient. “Didn’t you get that e-mail?” is probably the single most common question posed at meetings, a query that often leads to … another meeting.

The Wallet PC
Prediction: “You’ll be able to carry the wallet PC in your pocket or purse. It will display messages and schedules and also let you read or send electronic mail and faxes, monitor weather and stock reports, play both simple and sophisticated games, browse information if you’re bored, or choose from among thousands of easy-to-call up photos of your kids.”
Verdict: Hit. Gates’s wallet PC is more or less today’s mobile smartphone with voice capability added.

Wireless Networks
Prediction: “The wireless networks of the future will be faster, but unless there is a major breakthrough, wired networks will have a far greater bandwidth. Mobile devices will be able to send and receive messages, but it will be expensive and unusual to use them to receive an individual video stream.”
Verdict: Miss. Today, receiving a wireless video stream is neither expensive nor unusual; in fact, it’s so commonplace that most people don’t give it a second thought. Gates failed to anticipate that wireless would become cheaper and faster, but his chief mistake was a common but flawed assumption among techno-futurists: that new technology is adopted chiefly on the basis of technological superiority rather than social factors.

Social Networking
Prediction: “The (information) highway will not only make it easier to keep up with distant friends, it will also enable us to find new companions. Friendships formed across the network will lead naturally to getting together in person.”
Verdict: Hit and Miss. One of the killer apps of the information highway has turned out to be social networking… But friendships formed online don’t regularly lead to face-to-face meetings. Far more common is the user with 250 Facebook friends, most of whom he rarely, if ever, sees in person.

Online Shopping
Prediction: “Because the information highway will carry video, you’ll often be able to see exactly what you’ve ordered. … you won’t have to wonder whether the flowers you ordered for your mother by telephone were really as stunning as you’d hoped. You’ll be able to watch the florist arrange the bouquet, change your mind if you want, and replace wilting roses with fresh anemones.”
Verdict: Miss. Gates was right that the information highway would carry video, but he completely misread the social and economic factors that would shape its use in online commerce. How on earth would a harried florist find the time to hold a videoconference with every customer who orders flowers for Mother’s Day? What company would absorb the colossal expense of having orders changed at the last second according to customers’ shifting whims? Gates’s vision of online shopping has turned out to be a lot like past predictions about personal jet packs and moving sidewalks: a future that’s technologically possible but socially and economically impractical.

Videoconferencing
Prediction: “Small video devices using cameras attached to personal computers or television sets will allow us to meet readily across the information highway with much higher quality pictures and sound for lower prices.”
Verdict: Hit. What came to be called webcams are standard issue on PCs, or can be purchased from Bill Gates’s favorite company for under $30.

The Internet and the Web
Prediction: Gates’s 286-page book mentions the World Wide Web on only four of its pages, and portrays the Internet as a subset of a much a larger “Information Superhighway.” … Verdict: Miss. Gates’s notion that the Internet would play a supporting role in the information highway of the future, rather than being the highway itself, was out-of-date the day The Road Ahead was published… and he made major revisions to a second edition of The Road Ahead, adding material that highlighted the significance of the Internet. In many ways, Gates’s cloudy crystal ball regarding the Internet amounted to wishful thinking. Gates built Microsoft into a global powerhouse by selling proprietary software that users loaded onto their PCs. He wasn’t likely to warm to the idea that the same functions could be delivered cheaper and faster through a decentralized network that he couldn’t control.

Privacy
Predication: “A decade from now, you may shake your head that there was ever a time when any stranger or wrong number could interrupt you at home with a phone call. … by explicitly indicating allowable interruptions, you will be able to establish your home — or anywhere you choose — as your sanctuary.”
Verdict: Little Hit, Big Miss. It’s true that technology lets you explicitly indicate allowable interruptions — you can use caller ID to dodge unwanted calls or sign up at the National Do Not Call Registry to nix telemarketers. But the notion that technology would pave the way to greater privacy has turned out to be anything but true.

The podcast is up at the Abenteuer Leben site, playable via the buttons on the right hand side.

Alternatively it can be accessed directly at

http://media1.roadkast.com/abenteuerzukunft/DAZ71_120410_6tt6.mp3

(If you don’t speak German, you need to fast forward through the first 3 minutes.)

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.

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.

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.

Yes, Ben. I’m sure you know this has all been said before ad nauseam. But more importantly, 40 years on many lessons have been learned, and it wouldn’t run foul of quality journalism standards to reflect this.

First, let’s be clear: nobody can predict the future. Anyone who says they can is a charlatan. Also, yes, unconscionably dreadful and irresponsible predictions have been made and are continually being made. But there are three problems with the ‘no-flying-car-so-there-we-can’t-predict-the-future’ argument:

(1) The kinds of predictions Millar cites are a product of a particular moment in Western thought and therefore foresight. The 1960s and early 70s were a time of Post-War American emergence, unleashing for a while a techno-futurist predictive rapture, most of which has indeed proved to be rubbish. There are still people, very famous talking-head futurists, promoting techno-rapture for the 21st century (caveat emptor) but as a whole the foresight field has moved on to become much more circumspect about what can be predicted.

Balancing techno-fantasy

Foresight practitioners are these days more likely to balance technology wowee with economic, social, and environmental friction; see systemic (often indirect or counter-intuitive) effects where once only simple cause-and-effect was seen; and create scenarios of key alternative outcomes rather than predict one.

(2) The second thing that is missed in gleefully deriding foresight work, is how many people and institutions get it right, or right enough.  It’s axiomatic that in order to be successful a person or organization must have correctly assessed both key changes and rate of change in their operating environment. To take a famous case, as quoted in Future Savvy, while Nixon’s Vice President Spiro Agnew in 1972 erroneously forecast super-sonic passenger air travel, Herb Kelleher, founder of SouthWest Airlines, foresaw the low-cost air travel industry. Bingo. Billionaire. Similarly, behind every success one can find future thinking that, while sometimes latent, was present and correct.

(3) The purpose of foresight work is misunderstood. We cannot predict the future and it’s pointless to try. We can only assess signals of change, trends, and potential for surprises and reversals, including challenging our all-too-easily calcified mental models, and take this into a process of understanding alternative outcomes and pre-considering best strategic actions. In other words, actively stimulating the investigation and analysis of future conditions in order to create the basis of better decision-making today.

In fact sometimes the ‘strategic conversation’ that results from poor predictions is instructive to managers. As I say to clients: the goal of foresight work is better decisions not better predictions.

Back-street abortionists

The reality is that there is good and bad foresight work. Yes, some futurists are the technical and moral equivalent of back street abortionists. But the good work remains, and quality foresight is a critical advantage to decision-makers. The key thing is to be able to tell good foresight work from bad.

Simplistic trashing of foresight work en bloc ignores the weight of case evidence that people and organizations can improve their management of future uncertainty and/or create a situation where they manage the future better than competitors. Further, it encourages managers to fly blind into changing environments, often resulting in spectacularly poor decisions that deeply and widely punish their dependent stakeholders.

Birk commends Roach for being one of the few to have predicted the Credit Crunch problems, to which Roach demurs in saying he was “too early”. He then furthers his modesty in saying that the “breakage” in the financial system was “in excess of anything I envisioned.”

Self-deprecation in assessing one’s predictive abilities will endear anyone to me. Even Roach, who later in the interview burns this hard-won credibility by laying the blame for the credit crunch at the door of regulators, forgetting how hard financial institutions lobbied regulators for greater freedoms in the 1990s.

But I digress. The predictive issues the interview raises are as follows. Issue one: it’s not enough (as any stock short-seller will confirm) to get the direction of a future change right. One must get the timing right too. Issue two: it’s not enough to anticipate a change. One must be able to judge it’s impact. Getting either timing or impact wrong is effectively to have missed the future.

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Probability

On the latter topic — the problem of impact — Nassim Taleb is unrelenting, and he is right. Analysts routinely mix up probability and impact. They think that because an event has a low probability (‘it would be a 10-sigma event!’) it can be marginalized in the predictive number crunching. Of course, it can’t. The low-probability of a wildcard or black swan event is irrelevant because when it happens it will change the game, and that’s why, in every predictive situation of reasonable complexity and uncertainty, using statistical extrapolations (regressions and so on) to predict, is to dangerously paper over the cracks. It is precisely the cracks that businesses and policy makers need to worry about.

Determining the direction of change is hard enough. Assessing timing or extent of impact — a ‘total future impact index’ — is wickedly difficult. It’s a task not to be underestimated, and to simply extrapolate current trends (= assuming the trend’s timeline and impact stay the same as in the past) is the royal road to underestimating it.

This is the reason foresight for complex, uncertain, changing situations can only be grasped by NOT predicting (quantitatively or otherwise) but by exploring the limit-conditions of the plausible (What would happen if the timing of the change accelerated, or was significantly delayed? What if  the impact was 10x or one tenth of what we expect? And so on.)

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Predictions of the dollar’s demise are as old as the greenback itself of course, but over recent weeks the specter of the dollar heading way way below its trading range — a dollar crunch — has entered the zone of the credible, or, in scenario terms, the ‘cone of plausible uncertainty.’ That means decision-makers with lots at stake are taking it seriously.

Like the British pound, the dollar has been under a cloud due to perceptions of economic fallout from the credit crunch and global recession, but particular questions about the US currency have recently surfaced, driven by reports [Robert Fisk's 'The Demise of the Dollar' story in The Independent (Oct 6)]  that “Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council” (Saudi Arabia, Abu Dhabi, Kuwait and Qatar).

The subtext is far from merely financial. Practically, it would mean that on any day, the real cost of oil to US consumers and businesses would go up or down depending on the strength of the currency. This is something America is not used to. But, more deeeply, dropping dollar-denomination of oil is a direct shot across the bows of Washington’s say over oil affairs, and the hegemony of the dollar as the dominant global reserve currency.

De-dollarizing oil would not in itself push the US currency below its 25-year range. But it is portentous of the clear trend to a genuinely multi-power world, for better or worse, in which the dollar will get no favors. That will push the dollar down, at least while the news and fallout make their way through the financial and real economic systems.

Rumors of de-dollarization have been hotly denied, as further reported here, but as the Independent points out, denials are to be expected, and are always issued in these situations. They mean nothing. Even cub reporters know that.

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Scenario thinking

What’s particularly interesting to me is that a ‘scenario’ of dollar demise has become not only plausible in the mainstream view of the future, but scenario thinking is being used as a way to consider the nature of this outcome, and how best to respond without predicting the outcome either way. As recently as directly pre-credit crunch, the media question would have been: ‘what is the best prediction for the dollar (or the housing market, or credit default swaps?) and that, rather then scoping out the implications of the lesser-likelihood, would have dominated the discussion.

So, what struck me forcefully in the Business Week video interview above, where BW Chief Economist Mike Mandel interviews the news magazine’s Economics Editor Peter Coy (see Coy’s underlying story here), is how the less-likely, non-predicted, but very significant outcome is actively addressed:

Says Coy: “It’s so hard to know what the dollar is going to do. We don’t argue that we know… what we do is we say, ‘it could happen’ and let’s take that possibility seriously, in the same way we should have taken the possibility of falling housing prices seriously…”

This is not formal scenario-building of course. But it is, fundamentally an adoption of the framework, saying in the classic ‘scenarios’ way: “we can’t predict if it will happen or it won’t, but if it does it will have significant impact. So let’s just ask: ‘what if ‘ it does and explore the outcomes and our responses. What will the word look like? What would be the implications, the knock-ons and spinoffs? If it comes to pass, what would be wish we had done today?”

Perhaps failing to predict the credit crunch has dented predictors’ halos enough to cause a mini-zeitgeist-shift towards the only real way to cope with important uncertainty: exploring all outcomes that pass the plausibility and significance test, whether or not we actually believe they will happen.

DJIA since Sept '08

The answer is, broadly, yes. Stocks are shares in the future earnings of a company. They are therefore a “bet” on (er, an “investment” in) the future performance of a company, or many companies. The trading price on any day is the price at which there are as many buyers as sellers for these future returns. Rising prices mean there are more buyers than sellers, that means general expectation of future profits is going up. Investors are putting a higher price on the future.

The market is therefore considered a leading indicator of economic conditions. (By contrast, employment figures are lagging indicators — due frictional forces, not to mention morality, it takes companies a while to downsize in recessions or upscale in booms, so employment levels track economic conditions but with a delay.)

But how valid and dependable is the market as a leading indicator? It is also apparent that markets move up slowly and steadily, but fall in a hurry. So the downward move can hardly be held to be predictive. But the upward move appears to hold some weight as harbinger of better times. How much weight?

What’s particularly important is that the aggregate insight into future returns from shareholding investments — across many investors and many stocks — cancels out individual errors. Any one person may have a dumb idea of the ‘future cash flows’ from one or many companies, and the price of any one company may be unreliable for innumerable reasons, including fraud, but the knowledge and intelligence of hundreds of thousands of people, when aggregated and spread over many thousands of stocks, corrects for all these errors. It becomes robust.

Prediction Markets

This reliability of shared, aggregated insight — the wisdom of crowds — is precisely what makes ‘prediction markets’ such a powerful forecasting tool, as I have mentioned in previous posts. (Prediction markets apply market-like wisdom to create foresight in areas that are not normally ‘tradeable.’) Any one person will, as likely as not, get it wrong, but everyone together, rather astoundingly, get it right.

Ironically, crowd wisdom is much more reliable than the technical forecasting models that investment institutions use to try to determine how business, macroeconomic, interest rate, or other conditions will affect future stock prices. These predictions, based on the assumptions of a handful of model programmers and/or model users, are deeply vulnerable because there is no crowd-wisdom balance. It’s no better than reading tea leaves, only apparently (and unaccountably) more respectable.

Having said all this, it is well known that the ‘crowd,’ aka the ‘herd’ can and do all get it wrong together. This is what happens in price bubbles, or panic market exits, with everyone buying or selling because they are making the same wrong assumptions, or just doing what everyone else appears to be doing. (Most players making the same mistake together is the basic problem when prediction markets fail too.)

However, what is clear is this case is there was a very hard sell-off in the months prior to March 09, following revelations of the gravity of the Credit Crunch, but that this has slide has been arrested and mostly reversed. This says that innumerable smart people with, collectively, billions of dollars at stake, are expecting future profits higher than they did in March. That’s a prediction one can rely on.

I note from a link on the Ian Miles Futures blog that “2025

For full disclosure, I should say I worked in the Coates office in Washington D.C. during the mid-late 1990s (but got there just after the book was done.)

There are deep and ultimately overwhelming problems with the book itself. It sees science-technology as the primary driver of change, when what science is done and what technology is produced is often the product of policy or economic or values / zeitgeist decisions further up the chain. It also has an astoundingly poor conceptual framework (‘Worlds 1, 2, 3′) for dealing with non-US societies and cultures, and their economic and social development: one that would make Tom Friedman (‘World is Flat’) giggle and Hans Rosling surely cry. Truly there are many reasons they have to give this book away for free.

But its importance is elsewhere. It remains remarkable for one thing — the thing that the Coates & Jarratt foresight firm was known for — a willingness to speculate confidently and in detail (and sometimes even stupidly) about future changes. The book is likewise exemplary in its commitment to concrete, interesting, ‘fearless’ long-range speculation, in a world where most analysts waste most of their foresight ink timidly equivocating and covering their back.

Quality, reloaded

Evocative, concrete speculation is important, even if it is wrong. It is commonly misapprehended that the purpose of foresight work is to “predict the future,” (and someone with this perspective is going to pop up in 2025 and say “so, how right or wrong was this book?”) But, nobody can be right. The real value of foresight work is other: to know as much as we can about the present, and the forces and factors changing it, to be able to preconceive the full range of possible future outcomes that pertain, in order to make decisions today towards an outcome we prefer. (Who “we” are and what “we” prefer — social welfare; shareholder value maximization; environmental sustainability, etc., — will vary hugely among interest groups of course.)

This preconception (of a range of scenarios, if you like) is what allows truly effective discussions and debates to take place in considering alternatives, and therefore promotes better decision-making regardless of whether the scenarios ultimately turn out to have been, in themselves, ‘right’ or ‘wrong.’ High-quality scenarios are to be preferred of course, but quality is in the ability to stimulate and provoke management attention to the right areas in a timely manner, not in having been right in prediction. As Coates used to say (and I echo this to my Industry Foresight students): “You don’t have to be right, you just have to be interesting.”

That is: disaster, mayhem, and death goes to the top of the page and towards the front of the newspaper.**

“If it bleeds, it leads” can be interpreted more or less narrowly. Mostly it means, literally, that accidents, explosions, injuries, and deaths will take page priority in the news over “talking stories” about politics and government and society. Disasters sell more newspapers than policy debates. But more generally it means bad news is more arresting and interesting, and will get more attention (and, again, sell more newspapers or gather more listeners and viewers) than good news, therefore it takes priority.

Now, if you were a ‘forecasting pundit’ or a think tank, or investment institution with an interest in getting media attention for yourself, which route would you choose in garnering media exposure? Good news or bad news?

Bad news. Of course. Russian Professor Igor Panarin gets an insane amount of publicity because his book claims that the United States could collapse soon (in two months time, I believe.) Ditto asset manager, Egon von Greyerz, who bangs on, for example saying: “America is hemorrhaging financially and economically. Other countries now realize they hold ‘worthless’ US dollars” in a piece called: The Dark Years Are Here. And just in case you think these are all gloomy foreigners, consider how Bronx boy, Gerald Celente, has dominated media coverage in the credit-crunch era predicting doom-and-gloom in every way, including riots and revolution on U.S. streeets within in the Obama-presidency term. For example http://www.youtube.com/watch?v=46MEqEgdLTg

These are just three that I single out just to make the point, but they are not different from many hundreds that trawl for media attention by predicting, essentially … “bleeding.” In fact, the real future will have good and bad in balance, just like the past. One of the lessons of Future Savvy is: if a prediction bleeds, it probably shouldn’t lead your thinking.

** In fact, the task of deciding what story to lead page one (or any other page) with, and what other stories to run, in what order, and at what length, is one of the more intellectually demanding tasks around, and one that quality journalist take seriously. So, “if it bleeds, it leads” is, in part, cynical journalist-ese for saying that the popular audience doesn’t have the time, patience, or interest in the deeper issues.

I’m thinking about this as I see the Guardian today featuring a story about how “Poundland” has doubled it’s profits. Poundland is a copy-cat of the venerable US institution, the “dollar store,” where everything cost the same price, in this case £1.

Pic: Andrew Fox, The Guardian, August 4, 2009

The merchandising of these stores is not unsubtle. There are definite too-good-to-be-true loss leaders, but these more than offset by the many items that cost pennies wholesale. Fair enough. And recently reported doubling of profits is because more people are buying at these stores (downshifting) due to recessionarly squeeze and/or because of the current “sense of thrift” in the zeitgeist which makes pennywatching more “the done thing.”

But neither merchandising, nor consumer psychology is our primary concern here. From a foresight point of view, the point is that forecasts of 2010 that were around around a decade or two ago didn’t quite get around to saying anything about Poundstretcher leading a healthy economic life. It’s as unsexy as anything, compared to “peak oil” or advancing “singularity,” or nano-babble, and so on into the glorious future – or its polar alternative: crash & burn, soup kitchens, urban warlords rampaging, and so on.

But here we are coming to the end of the decade and a basic retailing gimmick for the squeezed middle-class consumer is well trafficked and very much part of the future. Yes, it’s success correlates with tougher times, but economic cycles will be with us repeatedly through the rest of the century and beyond.

This doesn’t mean there won’t be breakthroughs in technology or in consumer behavior. In fact, looking at the picture, one surely would not have got a pound for any amount of plain bottled water in a retail environment 20 years ago. Things do change. They just change slowly, or unevenly, against the gritty reality of savvy agregate choices made by a wary (global and growing) middle class.

The failed “our-future-in-space prediction” cluster is useful because it is the poster child for bad predicting, nothing less than foresight idiocy in its purest form, worth mentioning only because it helps us to see smaller and more subtle future-thinking mistakes we make routinely.

This is what I said in Future Savvy (Chapter 5):

“The forecasts that surrounded the future of space travel and exploration are perhaps the most high-profile and comprehensively poor set of forecasts ever made, and therefore provide a good vantage point to consider what can go wrong in forecasting. From the 1950s, space was a huge topic of interest. All significant earthbound exploration challenges had been overcome, technology was moving rapidly, and what lay ahead, unconquered, was space. The need to explore it was deeply in the zeitgeist.
“At the same time, the Cold War created the specific situation where beating the Soviets in prestige projects was an important priority, important enough to divert massive resources to it. J.F. Kennedy’s rousing (future-influencing) 1961 prediction of putting a man on the moon by the end of the decade motivated and galvanized the United States, and the resulting Gemini and Apollo programs made this not only a human achievement but a successful prediction. As a result, analysts of all stripes were quick to project the trend and predict a moon base, lunar communities by 2000, followed soon by trips to Mars and beyond, and on to the limits of space. . . .
“The last man to set foot on the moon was in 1973. The Space Shuttle tried to maintain forward momentum under the guise of scientific research, not without disaster, and an almost inconsequential international space station has been built. To this day there are many who cry into their soup over the lack of space exploration and conquest. So what happened? The groundswell of prediction was wrong because it failed to see that putting a few U.S. men into orbit did not add enough value to enough peoples’ lives to justify the expense—particularly in the economically uncertain 1970s. In the end, the majority of consumers voted with their wallets to postpone, if not entirely eviscerate, human space exploration.”

One could go into great detail, but simply put, the intertwined elements resulting in this poor view of the future were:

1. Failure to recognize user utility and the choice consumers make in determining the future. That is, for most people the cost of any space venturing is not worth the benefit (i.e. what benefit?) The fact that we “can do it” is hardly relevant. The real futures question is always: do most people want it? In the 1960s space was “worth it” (particularly in that the goal was clear and bounded) because spending billions on a prestige project made sense at a time of (a) absolute US economic prosperity and (b) ideological dispute with the USSR.

2. Projecting trends without considering the strength of underlying drivers. Space exploration was, apparently, on-the-up in the 1950s and 60s. But trends are only as good as the drivers that support them. When the drivers go away (lack of public support due to cost/benefit issues) the trend stops. In fact, there is no real, dependable, trend to space exploration. There was a blip in the 1960s when conditions temporarily favored a national prestige extravaganza. There wasn’t a trend before, and there hasn’t been any since.

3. Forecasting mired in the conditions or spirit of the present, the zeitgeist. Space was important in the golden-era 50s and 60s; and particularly in that it was arena of competition with the Soviets. But it’s always a mistake to assume the framing conditions of the present will exist in the future, and in this case 40 years later, they most certainly don’t.

Don’t hold your breath

What of 40 years time? It is quite likely that “space flip” flights into orbit will be safe and cheap enough to commercialized in the next decade. Unmanned probes (again safe and relatively cheap) will continue, and popular access to their images and experiences will be greatly enhanced. But that’s all that will happen until such time as costs and other conditions of possibility change fundamentally, which implies a completely new form of space travel, of energy, of materials, and of human resilience and longevity. Not in this century.

Wired Science ran a July 20 article “40 Years After Apollo 11, NASA Maps Out the Future,” which puts the best possible spin on  this unmanned-probe future. It is careful to end without crushing the feelings of space junkies, saying: “Any American landing on Mars through the Constellation program would come some time after 2030.” It won’t happen, and here’s another secret: if anyone is going to land anywhere it will be a Chinese person. China still has prestige projects ahead of it, and human space exploration could be one of them.

Samuel, L., Future: A Recent History, University of Texas Press, 2009

I recently received a copy of Future: A Recent History to review. True confession: what hit me first on picking up the book was (a) “wow, the title Future is not already taken!? And (b) what a fabulous job the University of Texas Press has done producing this book. It is beautifully designed, with an understated Art Deco motif, and carefully laid out with enough text on the page, on delightfully solid paper stock.
It may seem odd to go on about text on the page, but it’s much easier to read like an adult, in paragraphs. So many books, particularly business books, these days appear produced at 14-point, double spacing, like pre-school readers. Makes you wonder…

Anyway, author Larry Samuel’s project is to investigate the history of views of the future from 1920 to the present. (The book has an acknowledged US-centric focus, partially defended by the notion that future-mindedness is “a principle strand in America’s DNA.”) He organizes the book chronologically into six periods between then and now, and shows, with interesting examples, how each period had its own views of the future, and how the views shifted from period to period.

In tracing the history of “tommorowism,” in this way, Future is on a similar track to the classic book in this field: I.F. Clarke’s The Pattern of Expectation 1644-2001 (Jonathan Cape, 1979). It ultimately makes similar points, although Samuel’s argument is obviously drawn from more recent examples. As Samuel puts it: “A look back on how people looked forward reveals that while it possesses certain common themes … the future is not a fixed idea but a highly variable on that reflects the values of those who are imagining it.”

Happily I can say this chimes exactly with the argument of Future Savvy, particularly Chapter 4 “Zeitgeist & Perception,” where I argued how heavily the nature of the present and its topical issues frames how the future is seen (what is forecast, what is aspired to or feared, what counts as a valid method for thinking ahead, and so on). Which means the framing conditions of the present  should be carefully analyzed in assessing the validity of any future view.

Historiography

Historiography – investigating the meta-conditions surrounding what is recorded and how it is interpreted by historians – what counts as “history” and for whom –  is a well-understood part of doing good history. Unfortunately, there is no equivalent standard “futuriography” in the foresight field, despite it being absolutely fundamental to understanding the value of our own predictions as, similarly, highly determined by the epistemic configurations of their production. It is here that Samuel very competently fills a much needed gap.

The practical implication of this, which Future does not get into – it’s not that kind of book – is that to make better predictions (or make valid assessments of others’ predictions) we need to ask stiff questions as to how much of what we foresee is determined by the perspectives of today, and expect the answer to be “very much.” Understanding the limitations and biases of our own perspective is the sine-qua-non of a robust view of what tomorrow will actually bring.

They have a bit of the fashionable “SunTzu Art of War” feel to them, and some of the quotes may be apocryphal. But no matter. What’s really interesting in this very savvy list is how customer-focused the lessons are. As said in Future Savvy, and one can’t say it too many times, what customers (users, the public) want and the cost-benefit tradeoffs they will make is a MUCH more reliable guide to the future than any techno-fantasy.

The wisdoms also reflect a foresight industry insider truism and paradox: you seldom get to the future by asking the customer directly (e.g. in a focus group) what they would like to have. You have to leap for the customer (and use focus groups only to refine new offerings.)

The list:

“1. St Augustine said that it is a blessing from God that we can’t predict the future. If we predict prosperity, we will become complacent. If we predict evil, we will lose the ability to discriminate.

2 Sharp President Haruo Tsuji: ‘You cannot find out what the consumer wants only by doing market research. You need to pull the ideas out of your brain. Manufacturers of the future should not simply respond to market demands, they must create market demands.’

3. Konosuke Matsushita said: ‘Don’t try to fit your business to a forecast. Fit it to the needs of your customers.’

4. Toshiba President Sugiichio Watari: ‘Money doesn’t come falling into the headquarters of Toshiba. If you want money you need to go to the customers.’

5. President Yoshio Tateishi of Omron: ‘Learn from your customers. If you learn from internal resources you will become self-satisfied. If you learn from your competitors you will fall far behind.’

6. Professor Yoshiya Teramoto of Meiji Gakuin University: ‘When companies start a big market research project, it is one sign of the ‘big company’ disease.’

7. Tsuyoshi Kawanishi: ‘The way to predict the weather is to look at the sky. And, every once in a while, you can make your prediction by simply thinking.’

8. President Haruo Tsuji of Sharp says: ‘Don’t be a spider, be a honey bee.’

9. Takeshi Kaneda, a management critic, says: ‘After elaborate research to find out what the consumer wants, Ford produced the Edsel. It was a complete failure. Ford mistook what the customer wanted for what they would really buy. They ignored their insight and relied on consensus. Japanese tend to emphasize harmony and consensus. But insight and decisiveness can be more important.’

10. Someone says: ‘Figures do not lie. But liars often use figures.’”

Book reviews by SAMI fellows and associates
“Future Savvy” by Adam Gordon (American Management Association, 2009)

“Forecasts and predictions are ubiquitous. We are bombarded with views of the future on a plethora of subjects from myriad sources, with a diverse set of motivations and self-interests. Adam Gordon seeks to provide a practical users guide to the assessment and interpretation of all things about the future, with special emphasis on the cautions and ‘health warnings’ that need to be applied, so as not to be misled by forecasts. However, the author is careful not to veer towards over-cynical dismissal of all future projections; rather, he seeks to provide guidance to the reader on how to apply the necessary caveats, and in the author’s words “profit from change”.

The book covers a very broad field, from the basic issues of the misuse of data and statistics, covering the quality and validity of data as well as their misinterpretation, through technology forecasting, trend and horizon scanning to quantitative modelling and scenarios. The one theme common to all these activities is the need to be alert to bias, whether it be a deliberate motive to influence behaviour through a dire prediction; or a bias inherent in futurologists needing to see rapid and pervasive change in all areas of society – if it exists or not – and evangelising it.

The track record of much futurology is mixed. Well-known examples are quoted: television did not lead to the end of the cinema industry. Nor has space exploration led to people taking foreign holidays on other planets – yet! Bias may also lie in the beholder. The ‘Zeitgeist’ tendency, whereby we are all influenced by contemporary perceptions, affects not only how “experts” and professionals see the world, but also how the audience receives the views of the future – often with unprepared minds. The internal “official future” of an organisation can pose a real blind spot to its progress.

The weaknesses of much quantitative modelling are highlighted, with such forecasts only being as good as the assumptions on which they are based, but which are often not overtly stated. In contrast to the conceptual and practical errors inherent in much futures output, the role and advantages of scenario planning are emphasised as a tool for challenging assumptions and developing alternative futures: “It’s better to be vaguely right than precisely wrong”.

The penultimate chapter takes examples of relatively recent forecasts from a range of organisations, whose subjects range from US agricultural production to UK dementia sufferers. These are subjected to a form of ‘retro wind-tunnelling’ to illustrate the deficiencies in their construction and how they would have benefited from the application of methodologies described earlier in the book. The final chapter provides a summary checklist, or framework, to apply in evaluating forecasts and future predictions.

Adam Gordon has written a shrewd and perceptive book that deserves a wide readership, especially among managers in both the private and public sectors, as well as the familiar ‘general reader’. Those wishing a more detailed technical guide to the various forecasting and futurist methodologies will need to consult other standard works. Professionals in the fields of management and strategy consulting and scenario practitioners might well be familiar with many of the points made in the book. However, those with some savvy might do well to recommend the book to their clients.

Michael Owen, 20 April 2009

It was in this spirit that I picked up the UK launch issue (aka May 2009) of Wired. Actually it’s not the first launch. Wired was in the UK ten years ago, but Condé Nast withdrew it in the dot.com crash. In the US at the time, I remember when Wired, the poster child of the Silicon Valley / Nasdaq bonanza, was almost as thick as a phone book each month. But those days were soon over.

Anyway, who could resist an offering that was about to tell me about my “Life in the future. “Fake Meat, Robots and Electro-Sex: the World is About to Change.” On the cover are, I kid you not, flying cars!

Now, I wouldn’t take this stuff seriously for a moment, if everyone else promised not to. But they don’t. So here we go. In the “What’s Next?” cover story 46 experts make 99 predictions about the next 40 years, and none of them will happen, or not in the time frame expressed.

Oh, moon settlement?

I shrink from sharing the list. Meal replacement patches, check. Moon settlement, check. The male pill, check. Every techno-fantasy of the jockish sci-fi world, check. Well, let’s stop on the male pill for a moment. Can we not do it? Sure we can do it – today. What’s stopping it is not technology. It is attitudes (machismo, essentially). So Wired experts are telling us that this will go away in a decade. Puh-leez.

I hardly need mention there’s no method given behind any of these expert forecasts.

Don’t you think Wired should be asking themselves why, in 2009, they are producing 186 pages of dead tree and carting it around the country in carbon-emitting trucks? Technology-vision may lead you to a view of the future. But it’s unreliable. The future is determined by what consumers are ready for. Well, that’s one of the 20-or-so key forecast filtering principles of Future Savvy.

Perhaps we should look at the cover story for what it is really about – which is selling magazines. Because, there’s no doubt that tech is changing, and many new capabilities are coming on stream, and this is very, very fascinating to imagine uses for. And this fascination is what Wired packages and sells. Don’t bet any money on the predictions though, certainly not their timeline.

But sturdy in some areas

Aside from the predicting lark, it’s a good magazine of its kind. The features are well-conceived, well-written, for example, one about how the BBC iPlayer business was built; a feature on sea salvage; a profile of PayPal founder Elon Musk; the David X Li formula and how it mis-calculated risk, and so on. Great stuff. Actually quite a sturdy business-oriented-view of techno-change, if you can get past the boys-with-toys riff of the magazine as a whole.

So, actually, much to like. Just, please, don’t think a lad’s mag is going to tell you anything coherent about the future.

One doesn’t start reading a “Brief History of” book in a series that includes A Brief History of the Birth of the Nazis and A Brief History of British Kings & Queens, without a certain trepidation. But, in fact, A Brief History of the Future is well-considered and well-written summing up of the characters and concerns that have shaped and continue to shape the future studies field.

Strathern, is a British journalist-turned-futurist, based in Vienna. One of the key attributes she brings is a journalist’s (and sub-editor’s) critical “don’t-bullshit-me” faculties, which is welcome in a field that is often short on common sense.

The book is hardly brief (at 300 pages) so there’s no sense that it’s a potted history. And it’s not compromised by what one – alas – expects of this kind of setup: pandering to all characters in positive or equal terms. In fact a key value of the book is its clear-headed and plucky judgment of who the key figures are (and who are not) and what their contributions have each been (vs what they might have thought they were). It is also unusually even-handed in balancing US and European inputs.

The book follows the obvious structure, starting with the oracles of Ancient Greece, Plato, moving through Leonardo de Vinci, and Thomas Malthus and so on through to the 19th century (Jules Verne, Karl Marx, etc.) and on to the present. In this Strathern argues for and operates with a wide definition of futures work – including in the dreamers, social reformers, and sci-fi writers in addition the more formal analysts and planners.

20th Century Weltanschauung
The book really hits its straps in the 20th century – in discussions of Aldous Huxley, H.G. Wells, George Orwell, Arthur C. Clarke, Herman Kahn, Buckminster Fuller, Alvin Toffler, Isaac Asimov, Margaret Mead and many lesser known figures. What is most interesting here is how the links between foresight approaches and the evolving broader existential and political “weltanschauung” of the century is knitted together, inserting “futurology” into the 20th century world of ideas at each point.

Although the book deals with institutions of foresight pretty well, the one angle I missed was the development of foresight education over the past 40 years. Part or full university degrees in foresight methods are an important part of the evolution of the field. Much has been learned in the debates over what and how and where to teach it. Ironically, the book – as intelligent a summary of the “future studies” field as you will find – would be an ideal text for an introductory course in such a curriculum.

The mood is justly sombre at the World Economic Forum’s Davos meeting this year, as grim-faced world leaders mull over the dismal state of the global economy and how to fix it. This is in marked contrast to recent years, when the top executives were warmly congratulating themselves on the general state of things.

In one sense this is perfectly understandable. The crisis is upon us and leaders should be directly and practically involved in tackling it. On another level it’s profoundly disturbing, because world leaders and senior managers should be doing more than merely responding to situations. When crises occur, crisis management becomes part of a leader’s job, but their real job is thinking ahead effectively to avoid crises and, on the positive side, develop opportunities.

Put another way: the heads of a companies or countries – Davos-level people – are tasked far beyond effective daily management. They are tasked, fundamentally, with negotiating the VUCA (volatile, uncertain, complex, ambiguous) world on behalf of the rest of us. If not them, then who?

This requires foresight and vision. In this sense, many who are at Davos this week are responsible for the current crisis. They failed to foresee it, in fact they generally endorsed the growth of complex financial instruments, the shadow banking system, and private equity growth –- much of which bypassed SEC or equivalent regulation, and which is now seen to be the root cause of the meltdown.

In fact much of the “new finance” system was thought to spread and therefore actually lower risk. Turns out that was a poor view of the future. In fact the present situation as a whole is the result of key decision-makers operating on a poor view of future. As a group, their mental model was not open to bad outcomes, or even just alternative outcomes to what was commonly expected.

Could we have thunk it?

Their response might be: “nobody can predict the future!” “Easy to say after the event!” This is true. But it’s common knowledge that there were those who foresaw the mess — The Times identified at least 10. As Davos attendees might now be forced to agree, some forecasts are clearly better than others.

This is where executive leaders can learn from the foresight field and particularly the history of failed predictions. Everyone relies on predictions for their guide to the future – nobody can be an expert in every field. And there’s never a shortage of them – they are frequently published in the media, offered by consultancies and think tanks, and are a key part of Davos.

While getting a prediction is easy, the key leadership skill is to be able to tell a good one from a bad one: that’s what turns a forecast into a strategic resource. That is what leads to better decisions, better plans, and better actions.

Can one do that? Can one critically assess a particular or consensus-held view of the future, to identify its strengths and weaknesses? Absolutely yes. Among the tests one can run on a prediction are:

•    assessing motivation – who is speaking and what their agenda might be, particularly if they have an interest in maintaining a current system or shaping the emergence of a new one
•    determining whether the tools used are appropriate to the level and type of uncertainty faced. High-uncertainty situations and long-term views require different approaches to standard modeling
•    questioning consensus mental-models and forcing consideration of alternative outcomes. All foresight is swayed by “zeitgeist” – spirit of the times – and good forecasts swim against this tide.

These are just a few among the many forecast tests one can run, as detailed in Future Savvy.  But even if Davos attendees had been applying just these three in previous years, their foresight would have been greatly improved. It won’t help with this crisis, but it might forestall the next.

* This article, authored by Adam Gordon, was first edited and published by Bnet.co.uk

Microsoft - Computer Electronics Show 2009

Product prototype communication is a close cousin of scenario building. Typically the company creates their product or service in action, in the future, being used by happy customers, their “preferred future” scenario. Prototype communication doesn’t typically build in alternative scenarios, the litmus test of strategy-based scenario work. It’s more a kite-flying exercise, designed to put out a future-oriented message to stakeholders and the public, garner broad feedback, and (if you’re powerful like Microsoft) put up “this-is-the-future-of-the-industry” markers.

Nevertheless, with the caveat that they are one among many plausible outcomes, product showcase scenarios can be an eye-opening guide to what’s actually possible and what the future will be like.

A newly released Microsoft “Future of Computing” video, showcased at CES 2009 in Las Vegas in the past few days, is an example. The 10-minute piece, presented by Janet Galore, Program Manger: Strategic Prototyping, takes us through a scenario of interactive education in the future (when, exactly, is not said but the implication is it’s not too far off) showing how participants would find, use, and share information across devices and across platforms.

What we see is a tablet PC that can communicate seamlessly with other electronics and interact with Web info on the fly. Okay nothing new there. What’s interesting is how it’s all held together by surface computing, a smart desk with a screen, which allows information to be viewed in the process of collaboration, sharing, and filing.  In some futurist fantasies it is thought that communication is ideally invisible (my phone e-handshakes your phone without me doing anything, etc.) But actually humans mostly seem to prefer to see what’s happening, and to have the choice to interact with what is happening while it’s happening – not least so they know what machines have done and don’t have to pull their hair out before they find their precious work buried four subdirectories into the Temp folder… sheesh. But I digress.

The scenario focuses on organizing and sharing multiple inputs, therein making a pretty clear statement about the future: what will be really valuable is not access to information anywhere, anytime (an assumed, table-stakes factor), but a way to share and collaborate with the information in an productive way. It refreshingly assumes that whiz-bang graphics – they are there too – are the easy stuff, but that collaboration and teamwork are the hard things to get right, and the truly valuable service given the chaos of billions of voices and trillions of data objects that pertain in any human-work future.

The other real strength of the prototype and related scenario is its close attention to natural (or, at least, strongly socialized, conventional, classic) human ways of doing things, which are slow to change, and therefore will change slowly. The smart desk is something one can really see oneself sitting around, because this is what we already do. Also this future of computing envisages no stylus, no mouse, no magic wand to master. Rather, we move digital stuff around the desk with our hands. We point to it and we shift it. That is, digital capability accommodates and interlaces with Stone Age human and organizational patterns. That’s why this view of the future is persuasive.

This punditry is widely read, and sometimes published in respectable places. Some of it is just year-end fun, and nothing wrong with that. But there is also a failed-forecast “nyah-nyah” that is corrosive to the foresight field in general, which demands answers. So at the risk of giving the 20/20 hindsight artists undue oxygen of attention, here are a few thoughts:

Consider Foreign Policy’s “10 Worst Predictions for 2008.” (Dec, 2008). Highlights include:

“If [Hillary Clinton] gets a race against John Edwards and Barack Obama, she’s going to be the nominee. Gore is the only threat to her, then. … Barack Obama is not going to beat Hillary Clinton in a single Democratic primary. I’ll predict that right now.” —William Kristol, Fox News Sunday, Dec. 17, 2006

“Should I be worried about Bear Stearns in terms of liquidity and get my money out of there?’ No! No! No! Bear Stearns is fine! Do not take your money out … —Jim Cramer, responding to a viewer’s e-mail on CNBC’s Mad Money, March 11, 2008 [Bear Stearns was sold to J.P. Morgan Chase at about a 90% discount to it market capitalization at the time of the forecast]

“The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.” —Arjun Murti, Goldman Sachs oil analyst, in a May 5, 2008, report [Oil was then around $130 a barrel. By late December it was below $40.]

Or this one from Business Week’s list of 10 (December 24, 2008)

“Existing-Home Sales to Trend Up in 2008″ —Headline of a National Association of Realtors press release, Dec. 9, 2007 [On Dec. 23, 2008, the group said November sales were running at an annual rate of 4.5 million—down 11% from a year earlier—in the worst housing slump since the Depression.]

The Future Savvy question is: how should we think about predictions like this? And how should we think about failed-forecast spotting?

1. Failed-forecast spotting is not remotely “scientific”
This should be obvious, but somehow never is. Purposefully extracting the failed forecasts from the total set of forecasts says nothing about the quality of the set in general. Many did predict Obama; did predict the downturn, etc.

2. Failed-forecast spotting raises a healthy skepticism, but runs to nihilism
Despite not passing any credible test of knowledge, at least failed-forecast spotting stokes apprehension about forecasts and the wisdom of experts. At base this is healthy. Prediction is hard, and it is mostly done poorly. And experts often transgress the boundaries of their expertise. (Typically, in this instance, they know a lot about their field, but often don’t know more than the next Joe about the future of their field, often because their expertise is wedded to existing practices and assumptions.)
Prediction skepticism is fine. What happens, however, is that tempts a “nobody can predict anything” nihilism. This is its own failing because many predictions are in fact excellent, producing good foresight, which is a key strategic and competitive advantage.

3. Often the short term future is harder to see.
This is the trickiest insight of the lot. As everyone knows, it’s impossible to accurately predict the future (which is not the same as usefully predict the future, see arguments in other posts). The world is just too complex, too chaotic. But there’s a wrinkle. It should be that the further we look into the future the harder it is to see. The world will change more – there is more time for unpredictable things to happen. The short-term future (one year, say) is closer to us, it should be more like today and we should be able to anticipate it better.

In fact, short-term foresight is the most impossible task: a casino game. In the longer term (10-20 years, say) strong trends can be relied on to have had their impact. For example, the move away from fossil fuels, or effective nanotechnology engineering, or simple domestic robotics, can be reliably forecast. But while the sweep of these and other similar evolutions are reliable over time, the short-term picture will suffer lags or reversals that follow no pattern at all. (It’s no accident that is this is just like the stock market. In the long term the market will go up, in the short term it can go anywhere.) Also short-term predictive failure is compounded by the fact that the standard to which it is held is higher – we expect specifics: dates, places, numbers, players, winners – that are not demanded of a long-term view. In other words, near-term predictions are all about “point forecasts,” and there’s nothing more impossible than a point forecast unless you believe in tea leaves and crystal balls.

The take away: short-term point forecasts really are a mugs game and the skeptics are right. Medium-long forecasts, when well done, are worthy of our strategic and competitive attention.