The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.” Paul Saffo
Paul Saffo is speaking at a Churchill Club Breakfast on Tue Aug 28 7:30am to 9am at Fenwick ( 801 California Street, Mountain View, CA 94041) on “Forecasting the Future to Make Better Decisions in the Present.” Register here.
I blogged about Paul Saffo in January “Ready Fire Steer,” he is a firm believer in Peter Drucker’s maxim that the best way to forecast the future is to carefully look for events that have already occurred but whose full effects have not been felt. His talk appears to be based on an excellent article “Six Rules for Effective Forecasting” that ran in the July-August 2007 Harvard Business Review. To motivate you to set your alarm clock a little early in two weeks, here is a high level summary of article’s description of the rules:
- Define a Cone of Uncertainty. The art of defining the cone’s edge lies in carefully distinguishing between the highly improbable and the wildly impossible. Outliers–variously, wild cards or surprises–are what define this edge. A good boundary is one made up of elements lying on the ragged edge of plausibility. They are outcomes that might conceivably happen but make one uncomfortable even to contemplate.
- Look for the S Curve. Change rarely unfolds in a straight line. The most important developments typically follow the S-curve shape of a power law: Change starts slowly and incrementally, putters along quietly, and then suddenly explode, eventually tapering off. S curves are fractal: very large, broadly defined curves are composed of small, precisely defined and linked S curves. For a forecaster, the discovery of an emergent S curve should lead you to suspect a larger, more important curve lurking in the background.
- Embrace the Things That Don’t Fit. The early part of the S curve before it explodes with indicators that subtly hint at things to come. The best way for forecasters to spot an emerging S curve is to become attuned to things that don’t fit, things people can’t classify or will even reject. We tend to ignore indicators that don’t fit into
familiar boxes but anything that is truly new won’t fit into a category that already exists. Indicators frequently look like failures, so if you want to look for the thing that’s going to come whistling in out of nowhere in a few years and change your business, look for interesting failures–smart ideas that seem to have gone nowhere.
- Hold Strong Opinions Weakly. In forecasting a lot of weak but interlocking information is vastly more trustworthy than a point or two of strong information. Traditional research is based on collecting strong information, but once researchers have gone through the long process of developing a beautiful hypothesis, they tend to ignore any contradictory or disconfirming evidence until it becomes overwhelming, causing a paradigm shift. Thomas Kuhn documented this nonlinear process in The Structure of Scientific Revolutions. Forecast often and be the first one to prove yourself wrong by discovering new data that overturns your old forecast.
- Look Back Twice as Far as You Look Forward. Marshall McLuhan once observed that too often people steer their way into the future while staring into the rear view mirror because the past is so much more comforting than the present. McLuhan was right, but used properly, our historical rear view mirror is an extraordinarily powerful forecasting tool. The texture of past events can be used to connect the dots of present indicators and thus reliably map the future’s trajectory–provided one looks back far enough.
- Know When to Make a Forecast. It can be a liability for forecasters to confuse novelty for change. Even in periods of rapid transformation, much remains constant. Consider the 1990s dot-com bubble: underneath the many new things happening were fundamentally unchanging consumer desires and–to the sorrow of many a start-up–unchanging laws of economics. By focusing on the novelties, many forecasters overlooked that consumers were using their new broadband links to buy very traditional items like books and engage in old human activities like gossip, entertainment, and networking.
Any one of these rules deserves it’s own post (not a bad idea for a series), but I will hold off until I have had a chance to hear the talk. The Churchill breakfast events are typically more intimate (for those of us able to get up that early) than their dinners and give you a real chance to meet and assess the speaker. Register here.
Trackback from your site.