Why prediction is difficult, especially about the future

 

Kenneth Arrow, the recipient of a Nobel Prize for economics in the 1970s, once spoke about the response he and colleagues received during WW2 when they demonstrated that the military’s long-term weather forecasts were no good. The response he received was that: “The commanding general is well aware that the forecasts are no good. However, he needs them for planning purposes.”

Putting aside the fact that we have got much better at weather forecasting of late – in the UK, 7-day weather forecasts are as reliable as 3-day forecasts were back in 1981 – this is a good quote because it highlights two critical issues. The first is to do with how much of the distant horizon you can see and the second is whether or not anyone will listen to you.

I would like to outlining two reasons why forecasting goes wrong and suggest a few simple remedies.

In my opinion, the 1st reason that so many forecasts about the future end up in the dustbin is that we extrapolate from recent experience. Most futures are thus contemporary futures, which tell us more about what’s happening now than what’s likely to happen next.

Why do we do this? It’s almost impossible not to. This is partly because we tend to prioritise new information, partly because of Group Think – where a desire for cohesion or harmony out-ranks alternative ideas or viewpoints – and partly because of confirmation bias – the fact that once we’ve made our minds up about something our subconscious filters out anything that challenges this viewpoint.

The gravitational pull of the present is therefore strong, but we can still achieve escape velocity, firstly by recognising what we are doing with regard to our thinking and secondly by considering our hidden histories.

What I mean by hidden histories is that we must recognise that each of us sees the world in a slightly different way due to personal experience, but also that a bright yellow marker pen should be applied to the fact that how an individual – or even an entire country – will act in the future is partly driven by what’s happened to them in the past. For example, for me Russia is driven by loss of empire, so I’m fairly confident that at some point a strong leader will attempt to recreate Russia’s old sphere of influence.

The 2nd reason that I think we get the future so wrong is due to another form of straight-line thinking. We live in a highly complex world, but our instinct is to simplify things. All of the systems that we interact with, or inhabit, are highly complex and contain feedback loops. Unless we recognise this interdependence and these counter-forces any linear forecast is doomed to fail.

For example, many people are concerned about Peak Oil. But for me, how much oil we have left depends on the price of oil. The higher the price, the more oil we’ll have, because a higher price creates more incentive to find and extract more oil. Peak Oil is also blind to substitution effects and behavioural change driven by regulation or pricing.

But that’s not the reason why I’m relaxed about Peak Oil. The main reason I’m relaxed is that all predictions contain at least one assumption about behaviour or events. In the case of Peak Oil, the assumption is we’ll need oil in the future. But maybe we won’t.

It is a long forgotten fact, but at one point we in Britain were deeply concerned about Peak Wood. It was once the dominant fuel and a key building material and it was becoming expensive due to rapid urbanisation and the destruction of forests for agriculture.But this came to an end in 1712 when the invention of high-pressure steam allowed the use of mechanical pumps to remove water from deep coalmines – an invention that ultimately led to the Industrial Revolution and, as an unexpected by-product, the economic and cultural demise of China according to some commentators.

So how can we offset our inclination to indulge in linear forecasting?

The trick here, I believe, is always to walk your straight-line thinking through a fairground hall of curvy mirrors. The best way, in one sense, to imagine the future is to ignore – or at the very least question – what is commonly expected to happen. And the best way to do this is to take conventional wisdom and invert or distort it.

As for whom or what gets listened to about the future, the answer appears to be that we believe people that look confident and seem to know what they are talking about – and this generally means experts in suits that use the word “Will” a lot and elude to a professional qualification or affiliation. In contrast, we tend to ignore the ideas of independent individuals that look a bit messy, appear unsure of themselves and use really confusing words like “Might” or “Could.”

As to what gets listened to, I’m afraid that we generally see and hear whatever it is that we want to see and hear, which generally means good news and a comforting extension of the status quo.

This brings me to my final point, which is that a ‘What?’ is often quite easy to foresee. It’s the ‘Where’, the ‘When?’ and most importantly of all the ‘So what? – especially the human reaction to unfolding ideas and events – that’s so difficult to get right.

But that doesn’t mean we shouldn’t try.

Top Travel Trends

Trend 1: Ubiquitous connectivity
In the future everyone’s life will be carried around with them in the palm of the hand, on their wrist or in other wearable devices. Access to information will define social status and identity and personal technology will be an ever-present companion – at home and on holiday. Wearable computing will be the norm – Google’s recent purchase of smart watch manufacturer WIMM Labs is a first step to making this mainstream.

Even more than today people will be “always on”, with technology providing a “sixth sense”, allowing us to operate as virtual beings. Our mobile communication devices (which will not look like anything like the phones of today nor will be made of the same materials) will be used to communicate, to inform ourselves in real time about the world around us, to document the minutiae of our lives and to manage our finances. More than today, a high speed, totally personalised media and sensory rich experience. Ultimately, it is likely that micro-technology will be embedded inside us, with the human body becoming a future computer interface.

Trend 2: Personalisation
In the future, the personalisation of everything will be the norm.
The more of our data we willingly share online with organisations, the more they will be able to tailor their services to our needs – whether they are needs we are consciously aware of or not. The availability of 3D printing, allied to higher level personal computing, will allow us to be designers, creators and curators of our possessions and our surroundings. From mass production, to mass customisation, to micro-personalisation, we will be able to express our individuality in every facet of our lives and this will include our holidays.

Trend 3: Flexibility
As technology allows our lives to become more spontaneous and less pre-planned, the more we will demand flexibility in every aspect of our lives – starting with the fundamentals. For example, our careers will be increasingly “portfolio” as Charles Handy first predicted in his book, “The Empty Raincoat”, with rapidly changing skills allowing greater independence and the ability to move job, industry and location, more frequently and easily. We may have returned to being a rental economy in our housing as a result of higher prices and the desire for greater mobility. We will see modular cars as the norm, and we’ll increasingly lease them short-term, rather than buy.

As our working hours become more erratic, possibly with the expansion of “zero hours”, (already used by one in four companies according to the FT in August 2013) into middle class life, we will become more short-termist in our planning and this will include holidays. We will expect to be able to change our minds up to the last minute, combine disparate destinations, alter the names on our bookings and design, barter and bargain for deals. The challenge for companies will be to not just respond, but embed flexibility into every aspect of their offer.

Trend 4: Premiumisation
As we aspire to express our individuality, we can anticipate a future where premiumisation exists in every market. Having been told for years “you’re worth it”, we will come to believe it. Ubiquitous information accessibility will give us the tools to research and demand constant product and service improvements. Companies will have to be more transparent in every aspect of their offers and we will pick and choose the modular make–up of our lives. In our holidays we will want the option to upgrade everything. Exclusivity will be sought at every stage of the process. We will not just pay for quality, but also for scarcity and rareness. Time, space and solitude will be aspirational as we live in a more crowded and pressured world.

Trend 5: (Re)connection
As family structures change, working lives become more fragmented, children mature earlier and spend more of their waking hours online, people are already increasingly concerned about the amount of true quality time they spend together. We eat together less as families; the traditional interaction around the TV has been diminished by more of us watching different programmes on second and third screens, even if we’re in the same room. Research by Ofcom in 2012 showed that more people text family members daily than talk to them face to face. Travel will, as never before, offer an antidote to this for many. A rare opportunity for real, rather than virtual, connection with friends, family and ourselves. An oasis of peace in our lives.

Trend 6: Discovery
While sea, sun and sand will be the main essential ingredient for the majority of holidays, a growing number of us will in addition have a desire for more significant experiences. We may want to discover unfamiliar countries, get a fleeting feeling of being an insider and part of a different type of community. Different levels of adventure will be part of the mix of future holidays. For families in particular, exploration will have to be safe and provided by trusted providers. We may be looking to expand our mental horizons, absorb culture and learning. Agri-tourism and eco-tourism are just a couple of examples. Increasingly we will want to return from our holidays as different people – more experienced and more rounded.

Trend 7: Simplification
If we think we are subject to information overload now, the sheer volume of digital material we will be exposed to in 2025 will have the potential to boggle our minds. As an antidote to this, services that will make our lives easier, that know or can anticipate our preferences and take the burden of decision making from us will be prized. Brands that we can trust to know us better than we know ourselves, that act as avatars and filters, will be rewarded with loyalty and bonding. We will often seek out experiences that are pared down to their bare essentials as an antidote to complexity. – a new cult of minimalism. In holidays, access to peace will be as precious to some as access to premium services. We may be prepared to pay to be deprived of technology, just to have a few hours away from screens in techno – free retreats. Escape will be rare, hard to find and either extremely primitive and cheap, or extremely cushioned and expensive.

Trend 8:  Sustainability
Only joking. Despite millions being poured into everything from towel re-use schemes to airline miles offsets, most customers, it seems, really couldn’t care less.

The World in 2050

Towards the end of October I am hosting a dinner on board HMS President in London to discuss some of the emergent themes and issues likely to be a feature of the world (and, by association, the UK) in the year 2050 or thereabouts. If anyone would like to attend there are a couple of places available. I am especially interested in finding a curious and creative psychologist and anyone with an interest in the future of insurance, pharmaceuticals or religion. There is no charge to attend.

Messaging

I seem to remember that sometime ago the futurologist Ian Pearson talked about people being able to leave ‘sticky messages’ in very specific locations for other people to pick up when they passed through the same exact location. Here’s an underwater version (unused image from a project that I was recently involved with).