Predictions

"a lot of people would rather have utterly meaningless predictions than no predictions at all." - Steve Gibson (The future and its enemies).

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Isn’t it strange that the same people who laugh at fortune tellers take economists seriously? (The Rotarian,July 2000). Famous MIT economist and 1970 Nobel laureate Paul A. Samuelson called this fact to our attention in an article in Newsweek, September 19, 1996: “Wall Street indexes predicted nine out of the last five recessions.”

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The fact is that no forecasters or experts, not even the best-equipped or the best-informed experts, including the CIA and the big international media networks, predicted any of the great events of recent history, including the fall of the Berlin Wall, the fall of the Shah and the subsequent surge of the Islamic Revolution in Iran, the Asian economic crisis in the 1990s, the terrorist attacks on the New York World Trade Towers and the Pentagon in September 2001, or the Asian tsunami in December 2004.

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Just for the fun of it, and to avoid the feeling that we exaggerate, here are three experiments that anyone can make:

1. Dig out some old copies of business or finance magazines or newspapers, read their forecasts for the period that has elapsed, and compare with what really happened. In some exceptional cases, you may find that the difference between prediction and reality was small. There is nothing to say that guesses about the future have to come out wrong. Guesses can go either way. Chances are, however, that you will have a good laugh at the comparison.

2. Go back to your own company files of a couple of years ago and review some of the planning or forecasting documents that the management team discussed and perhaps acted on. Check how much of the forecasts came close to the real outcome!

3. Find a newspaper page showing the development of stock prices over a day, a month, or a longer period. They register what really happened, so they are safe. Now take a marker or a pen and try to establish a point, or a few points, for each of the curves and decide when you would have felt comfortable to go in and make a forecast!

(Credit: Performance-Based Reporting: New Management Tools for Unpredictable Times by Hans V. A. Johnsson and Per Erik Kihlstedt )

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Predictions can anchor us (thoughts, framing).