“Radio has no future. Heavier-than-air flying machines are impossible. X-rays will prove to be a hoax.” – Lord Kelvin, 1899
January is boom time for soothsayers, sages and snake oil salespeople everywhere. As we self-flagellate after the Christmas excesses, diets, detoxes and dryathlons abound, in most cases without a shred of medical support.
And in the popular press forecasts and predictions for the year ahead add to the nonsense.
It was the original intention here to write about the history of the predictions business, and have a good old laugh at the stupidity of some otherwise pretty clever people. Inevitably, Buzzfeed is already there, so I’ll leave you to check out for yourself their 26 shockingly bad predictions.
Instead, I thought I might try to understand why exactly we persist in this, frankly, monumental folly.
Predictions sell
Making predictions is a tempting business. It supports self-esteem, for who can make predictions but an expert, and we envisage the adoration of our fellow humans that will follow when our wisdom is demonstrated – or even just by dint of showing our expertise.
They sell well too. It is an uncertain world, and that puritanism is gnawing at our self-worth at this time of year. Forecasts are something to cling to, and make the future seem more navigable. Expertise and control by proxy, if you will.
They are of course, as flawed as the idea of detox itself (don’t you think you’d be pretty close to dead if you were really full of toxins?)
The plight of overconfidence
In the investment world we have learned in the last decade – or at least been taught – of a host of behavioural biases that we labour under. Amongst these, overconfidence is a major one. Studies have shown humans tend to rate their predictions more highly when they have more information (expertise), even though this often does nothing to improve the accuracy of the predictions!
So the question becomes, given the poor record of forecasting is widely understood, do they serve some ancillary purpose instead, aside from supporting our self-esteem?
There are perhaps two types of forecast. There is the quantitative, market type forecasting. The type that says 330m PCs will be sold in 2015. As a point estimate they are doomed to failure but they do help with planning and navigating in an unpredictable world. The numbers can be modified over time, but they offer a stake in the ground, a framework around which a company or an entire industry can plan the near term future, adjusting when necessary.
Vanity predictions
It’s also possible the vanity-type of prediction helps us too. Amara’s Law tells us that we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. Down the line things will change, and the bold futuristic forecasts, whilst almost certainly wrong except by pure luck, might encourage creative thinking about the future. This can be used in business strategy both as a defensive and offensive tool.
Because there is one thing that is certain today, especially in technology, and that is that we are in an unprecedented period of disruption. Look at digital downloads of music, which had only just conquered CD sales before shrinking in the face of streaming services; or Hailo, a disruptive technology platform in its pomp for all of a couple of years before Uber came along causing them, I would guess, untold challenges.
The most accurate prediction about predictions is that they will turn out wrong. But pointless? Not by a long way.