Posts Tagged ‘predictions’

It’s that time again, when all the predictions and forecasts of gloom and doom—or better times ahead—come at us. In the interest of jumping on that gravy train, I make only one prediction for 2017:

There will be predictions, and most of them will be wrong.

A few will be somewhat right, usually something self-evident and not particularly informative: “The stock market will fluctuate.” Well, thanks for that…

Some will be a bit off the mark, but most will be completely wrong; a few will be wildly off the mark. This will lead many media commentators to lament in June that such and such never could have been predicted.

There are fields where there are reasonably accurate predictions, but they tend to be in the sciences. This is because predictions in physics, chemistry, meteorology, etc. are based on empirically-based, quantitative models, and they are put through a process of peer review to ascertain their effectiveness.

The question, then, is what predictions outside of pure sciences can be trusted. Not many, but there are still some precious metals in the pile of slag. You must make your own assessments as these forecasts come out and judge how much credence to lend them. Here are my six simple rules for evaluating the credibility of predictions and the prognosticators making them.

Rule 1—Consider the source (Expertise Rule). Do they have genuine expertise in the subject matter? Are they disinterested parties or participants in the predicted process? In other words, do they have a stake in the outcome? Psychology and common sense dictate that interested parties are seldom as objective as they claim.

Rule 2—Identify the theory or model underlying the prediction (Model Rule). Do they generate predictions based on an explicit explanatory model? Or, do they just seem to wing it, based on intuition and past results?

Rule 3—Determine how the model was developed and tested (Cherry-Picking Rule). Was the explanatory model created through purely statistical legerdemain? In other words, did they analyze a bucket load of data and then look for patterns, or did they instead develop a theoretical model and then see how the data conformed to their predictions. The first approach is called cherry picking; it’s like shooting at the wall and then drawing a target around the closest bunch of bullet-holes. The second approach is the only truly valid one.

Rule 4—Look at the data (Secret Knowledge Rule). Do they provide their inputs and data, or otherwise reveal what and how empirical information was used in formulating their predictions? If they don’t, then how can their models be validated and tested?

Rule 5—Consider the timeframe (Horizon Rule). Some predictions turn out reasonably accurate as to amplitude or outcome. They just never specify WHEN they will come to fruition. I predict that the Dow will hit 25,000… eventually. Makes a big difference.

Rule 6—Compare past predictions to actual results (Performance Rule). This one is self-evident, but the usual case is that past predictions are quickly forgotten in the rush to generate and consume new ones.

You’ll notice that none of these rules gives you an exact answer. That’s because there rarely IS an exact answer, except in tightly constrained situations. Business, finance, economics, politics, sports, and military strategy are all highly complex and somewhat chaotic. Beware the prognosticators who claim inerrant accuracy and foresight.

We may not know precisely what will happen in the future, but we can be better prepared.

That’s why we all need the readiness principles and prudential approaches that I write, educate, and consult on.

Here are some of my other thoughts on these matters:

What Goes Up: The S-Curve and its Many Applications

Trend or Bandwagon?

Beware the Prognosticators

Let’s Have Some Perspective

Stop Predicting, Start Experimenting

Surprised by the Normal

Remember Richard’s Business Readiness Process in 2017!
  1. Ensure vigilance through situational awareness.
  2. Do preliminary assessment of tasks and time.
  3. Activate organization or team.
  4. Conduct reconnaissance.
  5. Do detailed situational estimate.
  6. Conduct wargame and decide on optimal course(s) of action.
  7. Perform risk management and contingency planning.
  8. Communicate plan and issue direction.
  9. Build organizational robustness.
  10. Ensure operational continuity.
  11. Lead and control execution.
  12. Assess performance.

Call me if you would like a 90-minute Business Readiness Briefing in early 2017!

My name is Richard Martin and I’m an expert on applying readiness principles to position companies and leaders to grow and thrive by shaping and exploiting change and opportunity, instead of just passively succumbing to uncertainty and risk.

© 2017 Alcera Consulting Inc. This article may be used for non-commercial use with proper attribution.