Posted by Adam Gordon on Dec 4, 2009 in all, decision-making, economy & finance, failed predictions, Future Savvy, strategic foresight
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.
Posted by Adam Gordon on Nov 19, 2009 in all, decision-making, emerging technologies, failed predictions, foresight tools & methods, Future Savvy, Perils of Prediction, scenario planning, strategic foresight, technology change
In a recent Times article ‘The future was never going to be the C5‘ actor-comedian Ben Millar offers a familiar criticism of foresight work. Inter alia he says: “For all our achievements in art, science, and technology, the human race has always been spectacularly bad at predicting the future. Literature is littered with shockingly wide-of-the-mark utopias, dystopias, shiny suits, flying saucers and whole meals contained in a single pill. As a child of the Seventies, I was taught that as an adult in a world run by machines my main challenge would be how to spend my endless hours of leisure time…”
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.
read morePosted by Adam Gordon on Sep 7, 2009 in all, economy & finance, failed predictions, forecast filtering, Future Savvy, strategic foresight
Listening to the radio this morning there was a review that quoted a news room adage — one that I am indeed old enough to remember from my days as a newspaper reporter — which is: “if it bleeds, it leads.”
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.
read morePosted by Adam Gordon on Aug 20, 2009 in 2015, 2025, all, emerging technologies, forecast filtering, Future Savvy, strategic foresight, systems dynamics, trend tracking
Arsenal FC manager Arsène Wenger this week made a big prediction about the future of football in Europe. Now it’s hardly news when a sports coach predicts the future, but that’s because their forecasts are of the day-to-day variety and restricted to their own micro-climate: “Ronaldo has been going well in practice, I predict he’ll get on the scoresheet come Saturday.’ Or, ‘We’ll beat Chelsea in next months return leg,“ and so on.
Arsène Wenger
But this was different. Wenger (on the eve of the Arsenal vs Celtic Rangers Champions League match) predicted a “European League” in 10 years featuring the continent’s top clubs – that is, he offered foresight into potential structural, industry-wide change in multi-billion-dollar UK and European soccer industry.
Currently clubs play in their national domestic leagues. And all Europe-wide competitions are cup (pool stage + knockout) competitions.
Although not fleshed out, the form is not hard to see: the top four-or-so clubs from each major country (fewer from smaller countries) in one annual league competition. This means that Manchester United, Liverpool, AC Milan, Porto, Juventus, Real Madrid, Barcelona, Roma and so on would all be playing each other on a weekly basis throughout the year (and, presumably, playing in no other league competitions).
Drivers of Change
The point of Future Savvy is that one can judge the validity of predictions like this before time. In this case, part of the way to assess Mr Wenger’s future view would be to gauge the strength of driving vs blocking forces behind his outcome.
There is evidence of strong drivers in favor of a European Super League. These are:
1. The rise of “super-teams.” In the UK and across Europe the same few teams dominate their domestic league year after year. The reason is a simple reinforcing feedback loop where winning teams get more money (from TV rights, from gates, from merchandising, etc.) which means they can buy better players, which means they win more. Over the last decade the English Football Premier League has become, effectively, a competition between Manchester United, Chelsea, Liverpool, and Arsenal. (In the US the “draft–pick” system mitigates against any franchise getting too strong in this way, but no such system-balancer exists in European football.)
2. The growing ease and ubiquity of continental travel. Whether fans will follow their teams across Europe is a key issue, but indicators from cup competitions is that fans can and will travel.
3. The growing role of, and technological sophistication of television, particularly Sky Sports. Despite the many who travel, most people these days follow games at home or in sports bars. Television’s coverage and choices (the remote control options “red button”) have exploded, and screens themselves have got bigger and better. And genuine personalization of camera feed and other forms of interactively is emerging. In this, football, and professional sports as a whole, is becoming more about the screen as the stadium, accelerating a long-term trend. The reality is it makes little difference to most fans if the game is being played 50 miles away or 500.
4. The move to high-level, star-packed, events. There’s a clear trend across sports in general for events featuring the best players playing each other in all-star environments, not as a special “all-star” game but as an everyday occurrence. In cricket, for example, the Indian IPL has ridden this trend, offering franchised matches of, effectively, one mixed team of global superstars versus another. The fans love it.
There is also the financial do-or-die logic that soccer clubs face. The money feedback loop means they must continually drive up their revenues. It’s not possible to stand still. A European Football Super League would compel participation from the top teams for this reason alone.
vs Blockers
Adequately assessing the likelihood of the Wenger view of the future further requires investigation of blockers – factors which will prevent the outcome. In this case these may be overwhelming logistics of moving teams around to this extent week in and week out; limits on fans’ travel energy and budget; extent of fans’ loyalty to the relatively minor (non-super) domestic teams; and domestic league administrators’ determination and ability to keep domestic leagues from loosing their cash cows and following their own downward spiral into television obscurity.
These blockers on the European football league forecast are real. The question is whether they stop the future or how long they delay it. I’d judge the blockers as considerably weaker than the drivers and so I’d go with Wenger in predicting a European Super League (even richer and more “glamorous” than anything soccer has seen before) in about 10 years from now.
read morePosted by Adam Gordon on Jul 21, 2009 in 2025, all, failed predictions, forecast filtering, Future Savvy, history, Perils of Prediction, politics of the future, strategic foresight, trend tracking
The copy of USA Today, slipped under my Chicago hotel room door on Friday—failing which I would have missed the event entirely—marks the 40th anniversary of Apollo 11 putting man on the moon (July 20, 1969). It says: “40 years after Apollo 11: What’s our Next Step?” The strap goes on: “The moon again? Mars? An asteroid? Four decades after the moon landing, NASA seeks a new—and affordable—frontier in space.”
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.
read morePosted by Adam Gordon on Jul 3, 2009 in all, failed predictions, forecast filtering, foresight tools & methods, Future Savvy, history, lifestyles & values, Perils of Prediction, politics of the future, social change, strategic foresight, technology change
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.
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