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.

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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.)

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So may I say, this is what I was trying to say: When trying to predict the future, watch for dog poop!

Or perhaps: apparently helpful guides to the future are often dog poop disguised as chocolate, and here’s how to know the difference.

Something like that.

Note that this Greenbang story, below, is damaged by letting the most extreme predictions (the howlers) stand in for the general item. Prediction howler-spotting is sobering, but misses how many people got the future right, or right enough to make excellent decisions, and therefore overly damages the foresight field.

Also, howlers are actually the low-hanging fruit. Being future savvy is ultimately about the more subtle job of correcting weighing apparently very credible and well-founded predictions, some of which are excellent, but others of which are far flimsier than they appear.

There are various other minor problems such as not knowing the difference between the Gartner Hype Cycle and Zeitgeist bias, etc. And I would never call myself, not even in my most self-deprecating moments, a “futurologist.” But anyway, as I said, just a bit of fun:

Greenbang (13th April 2010) by Trish Lorenz & Martin Wright: Prediction is very difficult, especially about the future.” Niels Bohr’s words are a wise warning to reckless forecasters.

“Combining a nuclear reactor with a home boiler is no longer a problem. It would heat and cool the house, provide unlimited hot water and melt the snow from sidewalks and driveways. All that could be done for six years on a single charge of fissionable material costing about $300.” — Robert Ferry, US Institute of Boiler and Radiator Manufacturers, 1955

“Nuclear-powered vacuum cleaners will probably be a reality in ten years.” — Alex Lewyt, President of vacuum cleaner company Lewyt Corp, also 1955

Lewyt and Ferry both stumbled into a risky habit of all amateur futurists: extrapolating from present trends. In this case, they were caught up in the surge of excitement over the rise of nuclear power. They were not alone. In the tech-fuelled optimism of the ’50s, magazines, radio and the infant TV were buzzing with predictions of flying cars and lunar settlements.

They had fallen victim to what later became known as the Gartner Hype Cycle. This maps the enthusiasm and subsequent disillusionment typical in the introduction of new technology — a useful reality check for those caught up in “irrational optimism.”

By contrast, there are those whose feet are too firmly rooted in present realities, and fail to see how innovation can combine with social changes to speed the widespread adoption of new technology.

“The Americans need the telephone, but we do not. We have plenty of messenger boys.” — Sir William Preece, Chief Engineer, Royal Mail, 1878

“The horse is here to stay, but the automobile is only a novelty, a fad.” — President of the Michigan Savings Bank, advising Henry Ford’s lawyer not to invest in Ford Motors, 1903

It is difficult to consider any factor that doesn’t apparently exist at the time of making a prediction, but that’s essentially what looking ahead requires. It wasn’t all that long ago when people were predicting a bright future for teletext and fax machines. Few would have anticipated that both would be made almost obsolete by the internet and email. And yet the weak signals were there for those who chose to hear them. A fax machine, after all, is simply a modem with a rather complex print interface attached. It only evolved as it did because people were unused to reading information solely on screen, and computers were too big to carry around with them. Once laptops took off in the early ’90s, the fax was doomed.

“There is no reason why anyone would want a computer in their home.” — Ken Olson, Chairman, Digital Equipment Corp, 1977

Australian Senator Dr Russell Trood sums it up neatly when he says: ” ‘Nowism’ is a serious occupational hazard for those in the prediction game.”

Today’s futurologists no longer try to predict a single outcome for the future; instead they map a variety of scenarios. For Adam Gordon of Future Savvy, scenario-based thinking gives people “permission to think through alternative outcomes without necessarily predicting them.” Instead of trying to forecast precisely what might happen, he says, “we can ask ‘What if it does?,’ and then explore the outcomes and our responses.” Such thinking characterises much of the strategy adopted by forward-looking governments on tackling climate change.

James Goodman, head of Futures at Forum for the Future, agrees: “People think it’s the output that’s important, but actually it’s the process.” And, he adds, “All future planning has uncertainty at its heart.”

Or as Martin Raymond, Strategy and Insight Director at The Future Laboratory, says, “We always try to spot the dog
poop in our forecast.”

Greenbang Editor’s note: This was a guest article by Trish Lorenz and Martin Wright at Forum for the Future. This piece originally appeared in Green Futures, which is published by Forum for the Future and is the leading magazine on environmental solutions and sustainable futures. Its aim is to demonstrate that a sustainable future is both practical and desirable — and can be profitable, too.

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

But what happens is … Thanksgiving. Or Christmas

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

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

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

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

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

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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.

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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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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.”

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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.

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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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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.’”

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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.

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Guinness' view of the pub of 2259. Image credit: Chris Bainbridge

The Guinness Pub-of-the-Future is a St. Patrick’s day (March 17) promotion. Nothing wrong with a little bit of fantasy foresight. But what they come up is so “20th-century-futurism” it’s hilarious. Among various reports on the project – for example in the Telegraph – the following features are foreseen:

- robotic doorman, greets you by name
- cash obsolete; orders via RFID; payments deducted automatically
- your product tailored to you on the spot
- touch-sensitive tables, send your order straight to the bar
- socializing via virtual / hologram technology
- a running tally of the number of units consumed.

Yawn. Even on it’s own terms (minimal constraints of realism) this is a totally derivative piece of foresight. These “innovations” are the staples of an infotech view of the future, and they have all been thought and spoken of countless times. Also many of the elements and services cited are already here, or not more than a decade away. What we have is the current pub assumptions + digital steriods, while the year 2259 will be, truly, another world.

The limits to growth
But all this leads us to more interesting industry foresight problem. Will there be pubs in even a generation, never mind 250 years? What the Telegraph dryly observes at the bottom of its report is that 39 pubs are closing every week Why? A number of driving forces are coming together:

First is strict drink-driving limits, which makes “the local” literally local or nothing. Second, pubs in the UK have traditionally been a refuge from housing that was poor and/or underheated. Unprecedented waves of affluence (credit-crunch notwithstanding) have led to widespread housing “do-ups.” It’s now a valid option for most people to spend their leisure time at home and entertain at home.

Then there’s the where’s-my-friend trend. You’re likely to go down the pub if your friends are there, but not if they are where most people’s friends are: on Facebook.

The social-legislative clock
Fourth, no matter how you dress it up, pubs are retail outlets. So, like all retail they are under the cosh in a Wal-mart / Tesco world. The price gap between store and pub has become too great for most consumers to cross with good conscience.

Which brings us to the current price-floor legislation bid. Alcohol is a huge social cost in terms of health care and violence. Drink costs the NHS £3bn a year, and the total price of alcohol to the taxpayer is estimated at five times that. Eventually these costs will become unjustifiable so, like smoking before it, the social-legislative clock is ticking for booze. As the 2-martini lunch has become the 2-seltzer lunch, the trend to social stigmatization is clear, and legislators will follow (not with Prohibition, but with a much more subtle community-endorsed squeeze).

Like the good politician he is, Gordon Brown won’t let his party get ahead of the trend. But the trend is clear and it bodes ill for pubs.

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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.

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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.

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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.

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In many ways, focusing on whether “this” or “that” is predicted, or not predicted, is to put the cart before the horse. The horse is the adequacy of our approach to anticipating outcomes and the quality of our foresight as a whole. When this is good, the cart – not missing important changes – will follow.

Credit: http://www.lewrockwell.com/blog

In this, it’s important to realize that many did predict the financial crisis (as many predicted 9/11 in various ways). Sticking with the financial crunch for now: it has generally been portrayed it as a “why-didn’t-anyone-see-it-coming” event. It wasn’t. Hats off to The Times for their October 12 piece: “10 People Who Predicted the Financial Meltdown”. Allowing for a fairly loose definition of “predicted,” the article shows that among those who foresaw the crunch were: Vince Cable, deputy leader of the Liberal Democrats (2003); US congressman Ron Paul (2003); Stephen Roach, senior executive at Morgan Stanley (2004); Christopher Wood – chief strategist of a broking firm in the Asia-Pacific Market (2005); and Nouriel Roubini, economics professor at NYU (2006)… and there were many others.

A different problem

So this reframes the problem entirely. It’s not that the predictions were not there. It was that not enough people believed them and, particularly, important decision-makers didn’t believe them or didn’t have the institutional capacity to respond. So there are two halves to the problem: the ability to see the full spectrum of what may happen, including unexpected outcomes; and the ability to act on what we see. Quality in foresight work – the raison d’etre of Future Savvy – makes it possible to see more outcomes more clearly, and to act with more confidence in choosing what to prepare for. (In the real world we can’t prepare for every outcome.)

There was a good letter published in the FT from eminent futurist Peter Schwartz on December 2, which describes this very well. It shows predictions for what they are (one-horse scenarios), and how decision-makers are typically bound into inaction or wrong action not only by working on the basis of a wrong prediction, but by the predictive mindset itself. This mindset – the habit or culture of picking “one right answer” in the face of a complex situation with many competing outcomes, prematurely closes alternatives and leaves us open to surprise. As Schwartz says, as scenario planners have always said (and he was one of the people who defined the field in the first place), a compelling set of alternative future scenarios encourages decision-makers to recognize unlikely and unpopular outcomes, along with expected outcomes, and therefore to be able to respond earlier and more effectively whatever happens.

Scenarios also contribute to the “act” side of the problem. In a well-done set for the banking industry, a financial-meltdown scenario would at least have been in play, institutionalizing the consideration of less unlikely, less popular outcomes in company and government forums, forcing serious consideration of necessary strategies and contingencies, and therein creating the ability to act early and effectively without having predicted the crisis.

The letter is well worth quoting in full:

Sir, The real question regarding the financial crisis is not, as the Queen asked: “Why did nobody see this coming?” In fact, any number of thoughtful people in academia, politics and business had been compiling the data and sounding warnings for several years.
The question we should be asking is: “Why didn’t decision-makers believe that a global financial meltdown was increasingly likely and then act on that belief?” Or, to put it another way: “What would it take to make decision-makers both believe and act?”

The problem is that decision-makers believe that they are forced to pick one right answer: the most likely scenario. Their approach to decision-making does not afford them the opportunity to consider apparently low probability but highly consequential scenarios. The answer, therefore, to the “believe” half of the question is a decision-making process that considers several scenarios: compelling stories about alternative futures that incorporate the analysis of “outliers” and describe three or four plausible paths forward.
Good scenarios force decision-makers to challenge their own assumptions and reconsider what is possible. As a result, they can take seriously those scenarios that seemed less likely at first, but whose plausibility increases over time.

The second part of the question – “What would it take to act?” – is much harder to address. Suppose that Ben Bernanke or Hank Paulson had come to believe a year or two ago that the house of cards was about to collapse and trigger cascading, global failures. What would they have done, given the realities of the complex interconnected systems at the heart of the problem? Perhaps if they had good scenarios with appropriate indicators to start with, they could have rehearsed different strategies and contingencies. Importantly, these decision-makers could have used these scenarios to persuade others on all sides of the issue also to recognise the complexity of the impending crisis in a more timely way. It’s never easy to convince everyone around you that the game they have been playing to their great benefit is about to change. But with a shared recognition of the magnitude of the risks and the ways they might unfold, they could have acted far earlier to prevent some of the dire consequences that have occurred, let alone what is to come.

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This is the item:

There’s nothing new about this of course – the product has been around for a while, and ways to take vinyl and digitize it have been offered since the CD became the music industry standard in the mid-1980s. What’s interesting is that it is still being offered in 2008, more than 20 years after the technology transition. And still being bought, despite a sticker price of gpb 299 (nearly $600. In fact, this is the special newspaper-tie-in deal price.) The producers and marketers have, no doubt, done their homework: there are still enough people out there with vinyl records to justify a product and a campaign, including big newspaper spots that don’t come cheap.

What does this tell us about the future, and about predictions? It illustrates a key principle in thinking circumspectly and more accurately about the future. Legacy investments and legacy situations are a reality. They often represent a significant slice of daily practice or market share, well beyond the time when things have, officially, moved on. For all practical purposes, in any future the past continues to exist for a long time.

A slow and measured exit
This is common sense. But often missed by breathless techo-forecasters whose eyes are fixed on the next new thing. The implication of many forecasts is, when a new technology emerges into the market (which often takes longer than expected) that is also when previous solutions fall away. Not so. Yes, sometimes a new product is clearly advantageous, and adoption is rapid and pervasive. But when there are real investments in prior systems and technologies, these typically work their way out of people’s lives slowly, often over generations. The transition takes longer than we think it will.

While they are still part of the picture, legacy systems work against change (“This is working fine for me, why should I shift?” or “I’ve invested heavily in this, I can’t afford to shift”). On the other hand, as evidenced by the LP2CD in 2008, opportunities in the legacy system, or in facilitating a transition to the new system, may exist and be significatn long after everyone’s attention has moved on.

There are legacies in all kinds of products and services. A case that is currently pertinent, as discussed in Future Savvy, is the existence of deep legacies in the automobile industry and gasoline-petroleum supply chain. Both petroleum supply constraints and carbon emissions worries are driving hybrid engines, new fuels, and renewable forms of energy (technology is not the obstacle here) but the reality is that we are all deeply invested in a legacy petroleum-automobile system, from the well to the refinery to the factory to the forecourt. Even when new / alternative energies are proven, reliable, and equal in price and performance, the legacy will continue to exist, and it will erode gradually, as companies or consumers slowly renew their investment over time. Of course regulatory or social pressure can accelerate the incremental process, but nothing can make it vanish.

This means, in this example, there’s no possibility of a sudden change in individual land-based transport solutions. Whatever comes along will have to emerge into and live side-by-side with past systems and infrastructure for a very long time.

Legacy as luxury
Here’s another principle of legacy systems surviving into the future. There are many examples where a surpassed technology remains in existence, but moves into a niche or luxury market. The car replaced the bicycle and the horse, but both continue to enjoy massive popularity. In the developed world, more bicycles are sold than ever in history, but these are primarily for exercise or leisure. Horses, once widely distributed through society as instruments of work, are still part of a very active industry, but this industry is about leisure and/or gambling. Similarly, electricity replaced candles as our primary means of illumination, but candles are everywhere – associated with mood and romance rather than functionality. Ball-point pens squeezed the fountain pen off the table, but that merely freed the fountain pen to become an icon of status and refinement.

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The forecast is the recently published academic research paper: Chinn & Frankel (2008), “The Euro May Over the Next 15 Years Surpass the Dollar as Leading International Currency,” Faculty Research Working Paper RWP08-016 (Cambridge, MA: Harvard University, John F. Kennedy School of Government) available here. Frankel is a Professor of Economics at the Kennedy School.

The critique, “Forecasting the Euro’s Future,” by Benjamin Cohen, is here

The argument of the Chinn & Frankel paper, which is also summarized here is that the euro may surpass the dollar as the leading international reserve currency as early as 2025. The authors use econometrically-estimated determinants of the shares of major currencies in the reserve holdings of the world’s central banks. Significant factors include: size of the home country, rate of return, and liquidity in the relevant home financial center (as measured by the turnover in its foreign exchange market). The analysis predicts a narrowing in the gap between the dollar and euro over the period 1999-2007, and forecasts this trend to continue.

Cohen has technical issues with the forecasts, saying, “the analysis addresses just one specific function of the two rival monies – their use in central bank reserves – ignoring all the many other roles that international currencies play. But the essence of his critique is deeper. He says, “By concentrating purely on economic factors, (the forecast) ignores the politics involved, which in practice could prove to be far more decisive… key considerations include both the quality of governance in a currency’s home economy and the nature of relationships between countries. Is the issuer of a currency capable of assuring effective political stability at home? Can it project power abroad? Does it enjoy strong inter-governmental ties – perhaps a traditional patron-client linkage or a formal military alliance? Though it is by no means easy to operationalise many of these factors for purposes of empirical analysis, it is hard to deny their importance (for an accurate forecast.)”

Cohen’s agenda is not merely to tackle possible shortcomings of Chinn & Frankel’s study, but to critique economic forecasters far-and-wide that analyze the technical data, while ignoring political (or social) factors that are hugely influential on outcomes, yet harder or impossible to quantify, and which are therefore conveniently ignored.

Coming to grips with politics
Says Cohen: “Chinn and Frankel are not alone in this shortcoming, of course. Many economists, perhaps even most, have a hard time coming to grips with the intricacies of politics, which can seem so messy and indeterminate when compared with the pristine parsimony of formal economics. When it comes to the analysis of public policy, few even bother to try to address political factors systematically.

“The result, though, is sadly predictable. By ignoring the role of politics, economists often get it wrong. How many trade specialists were prepared for the recent breakdown of the Doha trade talks, despite the obvious gains to be had on all sides from a new round of liberalisation? How many can explain the unprecedented accumulation of reserves in China or other East Asian countries, the widespread distrust of multinational corporations or the failure of the international community to do a better job at combating global warming? Politics is clearly critical to all these questions, and more… (Yet) conveniently, Chinn and Frankel set all these considerations aside in order to build a parsimonious model that they can use for forecasting purposes. Only three independent variables are highlighted in their regressions: country size (relative income), foreign-exchange turnover (representing the depth of competing financial markets), and trend exchange-rate changes (representing the rate of return on currency balances).”

Cohen offers potential political and ideological blockers to the particular forecast: “Japan, for instance, has long relied on a formal security umbrella provided by the United States to protect it against external threats; and the same, less formally, is true for Saudi Arabia and other Gulf states as well. Can we really imagine any of these nations, all very large dollar holders, casually jeopardising their ties to Washington for the sake of a few basis points of return on their reserves?”

To be fair to Frankel, the nature of his analysis is consistently political – see his blog at http://content.ksg.harvard.edu/blog/jeff_frankels_weblog/
One can’t imagine that Frankel or Chinn would dispute that politics will strongly influence the accuracy of their forecast. (What they clearly imply in their data-centered model is that the economic data is backed up by political shifts towards Europe, or at least there is nothing in the political realm that would counter their technical analysis.)

Yet the problem remains that these contextual factors are not built into the model. The technical stuff is quantifiable and gets forecasted quantitatively. The rest is a kind of political/social/ideology soup that we flounder in, and the best we can apparently say is “it’s going in the same direction” or “ceteris paribus”.

International Political Economy
Going with Cohen, one may well ask: what is the value of the forecast that ignores the context, or separates it in this way? Surely very little. As impressive as the economics or the modeling is, the results are are circumscribed by the larger questions that are not in the model, and that affect everything.

As an alternative, Cohen offers International Political Economy (IPE), which explicitly combines political analysis with economic theory, saying, “part of what IPE offers is a critique policy choices as ‘rational calculus by unitary actors responding to well-defined structural constraints and incentives – in effect, an approach akin to the analysis of atomistic firms in a setting of perfect competition.’” IPE suggests three levels of political analysis: the systemic level (macro-international politics); the domestic level, revealing competition of domestic interest groups and institutions; and the cognitive level, ideas that legitimate governmental policy making. If one is not thinking at all three levels of politics, any prediction will surely fail.

Whether IPE succeeds in mitigating the shortcomings of technical analysis or not, one can only say amen to the principle – and that, additionally, there’s surely even more to factor in. Beyond politics, there are issues of technology change, changes in culture, values, ideologies and perceptions that shape the future. Truth is, we don’t know how to quantify all this – and it’s certainly not tractable to quantitative measures for anything but the short term. Using the technical analysis to predict the euro’s status vs. the dollar in 2025 must return a result which (while even possibly correct) is one we cannot rely on.

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So far so good. Tracking technology change is an important stage in scanning the external environment and anticipating sources or change and/or disruption. But no technology ever changed itself. History is littered with fabulous mind-bending, world-changing technologies that didn’t make it out of the lab. In fact, technologies only change because humans or human institutions want them to change AND (two separate hurdles here) they allow them to change.

Most people, most of the time, want technologies to change because they change for the better, improving products and services and/or making them cheaper. Companies want new technologies because improvements offer new sales options and (sometimes) industry competitive advantage, among other things. Societies express the desire for technology to go forward by stimulating and facilitating change in many ways (for example through government or industry funding of R&D or protecting intellectual property or making capital markets more transparent.)

Technology filtered by human choice
Once a technology breakthrough emerges, that’s hardly the end of the story. In fact it is still very much the beginning. New technologies of any importance are subject to public scrutiny and choices. Individually, or as a society, we ask ourselves, is this technology good for us? Debates happen, and power and politics and regulation takes its course, but one way or another technologies that most people like – mobile phone’s for example – will go forward while technologies such as GMOs will stall. Also, in a market economy, technologies are inescapably subject to consumer economics: those that raise user benefit (pass a buyer;s cost-benefit analysis) will be adopted. Those that don’t sit in the lab.

In other words, technology possibility is a matter of science and engineering, and the possibility frontier is expanding all the time, but the road from possibility to actuality is the rocky road of human ideas, preferences, and choices. Technology change means technology adoption, that is, it is a form of social change.

Why is this distinction important? Because one of the main reasons forecast fail is they see the technology possibility frontier as the future, underestimating the forces of social triage. There are two sites that I love that illustrate this wonderfully. Check out Paleo-Future (A Look into the Future that Never Was) and Modern Mechanics (Yesterday’s Tomorrow Today). Both are crammed with failed forecasts of this type. This is not to say that we cannot forecast usefully – much more to come on this in this journal – but it does give us pause in viewing many of today’s techno-inspired forecasts which make the same type of error. (Pics credit to the sites mentioned.)

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Decision success always implies congruence between decisions and the world in which those decisions play out. If we decide today to launch a product, buy a house, study for a degree, build a new light rail system, or take any similar decision of significance, the environment of tomorrow will be a key factor in the success or failure of that decision. What we do will be tested by the future conditions that emerge. Where there is a good “fit” between the initiative and the environment it plays out in — “the right product at the right time” — we can expect success. If not, we should expect to fail. Our decisions are only as good as the view of the future they rest on. All opportunities and successes and profits are realized in the future. All threats, failures, and losses are in the future.

In a fast-moving world, we know that the future environment will be different to that of today in big or small ways. New technologies, market shifts, changes in legislation, or evolving social values damage or destroy the traditional good fit we have between ourselves and the world. To achieve “future fit” we therefore use forecasts to position ourselves and our organizations, creating (or renewing) the fit between our initiatives and environment. In some cases we may be strong enough also to influence future events and outcomes for our own future benefit, and forecasts help us do this too.

All enterprises benefit from narrowing down what they must adapt to and plan for – all effort spent preparing for a future that will not emerge is a waste of personal or organizational resources. Good forecasts are a key ingredient in limiting the vagaries of uncertainty, and therein working smarter not harder, avoiding surprises, exploiting new opportunities and plugging weaknesses in fitting in with the future, and where possible influencing the future to suit the organization. This is true not only of business. People and institutions of all types position themselves for success by anticipating and adapting to events, or shaping them. Whether it is an NGO raising money for developing-world children, an urban planner advocating a light rail system, a homeowner deciding to sell a house, or a student making a career choice, identical principles apply — a higher-quality reading of the future operating environment in which these decisions will play out is what separates winners from losers. We should all be vitally concerned with forecasts as we are all effectively betting significant resources on their validity.

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Chapter 1: Recognizing Forecast Intentions, deals with considerations of how forecasts come about, who makes them, and with what intention. Those who research and produce forecasts, those who invest in understanding trends and drivers of change, and those (including the media) who bring the forecasts and their implications to our attention, inevitably have reasons for doing so – to benefit from the knowledge by seizing opportunities or avoiding threats or by affecting outcomes in the world. Understanding a forecast’s “return on investment” gives us an important vantage point in assessing the merits of a forecast.

Chapter 2: The Quality of Information, shows how a forecast communicates information between forecaster and reader subject to the same standards of accuracy, truth-telling, and bias-control by which one would judge any communication. Forecasts can be very different in methods and goals, but all forecasts lay claim to factual truth, particularly truth in the data, and the argument deals with the various ways in which data can be less solid than it looks, even with the best intentions.

Chapter 3: Interpretation and Bias, considers how data – whether good or bad in itself – can be interpreted or misinterpreted in forecasting, that is, the “political” aspects of forecasting. Just as there is no value-free look at history, so too there is no value-free look to the future and asking the right questions allows us be ready to mentally rebalance forecasts that are presented.

Chapter 4: Paradigms and Perception, investigates how predictive statements are exposed to a broader form of interpretive bias that has to do with the forecaster’s mental model or “paradigm,” and the “zeitgeist” (spirit of the times) when the forecast is made. This chapter investigates situations where forecast failure is caused by failure to escape society’s current mental models – which often do not hold through the forecast period.

Chapter 5: The Utility Principle, considers economic and market forces, and the role of consumers, in promoting or resisting the future. Without reigning in creative thinking, some simple economic filters inevitably apply direction or timing realism to futurist flights of fancy.

Chapter 6: Drivers, Blockers, and Trends, consider drivers and blockers of change, and how viewing these dynamics improves forecast assessment. It identifies the roles of Drivers, Enablers, Friction, and Blockers acting on events to cause change or resist it, and problems in dumbly projecting current trends.

Chapter 7: The Limits of Quantitative Analysis, discusses the role of statistical analysis and quantitative modeling in predicting the future – where this is possible and useful and where it is not, and why not.

Chapter 8: The Systems Perspective, investigates “system effects,” which occur whenever different elements or variables that may appear isolated are in fact linked together, such that changes in one element cause changes in others. Anticipating future behavior of any variable hinges on identifying the broader systemic elements influencing it and failing to do this is a big part of what causes forecasts to fail.

Chapter 9: Living with Alternative Futures, investigates non-predictive ways of approaching change – where the tone is more about managing uncertainty than predicting the future. It acknowledges unfathomable complexity of most future questions and provides perspectives that raise chances of success in an inherently unpredictable future.

Chapter 10: Forecast Filtering in Action, illustrates the processes of the book by applying them in case studies to real-world sample forecasts that decision makers in business and policy areas might find themselves interacting with. This demonstrates how real everyday predictive material may be probed and critically evaluated, following the principles developed in previous chapters.

Chapter 11: A Forecast Filtering Checklist, is a cross-cutting checklist which summarizes the principles of the book in one convenient, thematic list.

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