Two days ago I attended the Churchill Club breakfast presentation featuring Paul Saffo. It was a very insightful and thought provoking talk that revolved around his Harvard Business Review article “Six Rules for Effective Forecasting.” From his talk I took away three points
- You can’t predict the future!
- I don’t care if it succeeds or fails. What does it mean?
- It takes 20 years to become an overnight success…
You can’t predict the future!
In the talk, Saffo explained that you will never have 100% of the information. The best you can do is collect as much data as quickly as possible and then systematically prove yourself wrong until you are left with enough information to make an educated decision. Paul recommends that one should use his six rules as a tool to help make good forecasts.
In our experience in working with startups, small teams face this challenge everyday. Since resources are limited, the ability to collect and analyze data effectively in a short period of time, is a necessity for founding teams. There will always be uncertainty in every decision, but if you wait until you have all of the data it is usually too late and you missed the opportunity.
I don’t care if it succeeds or fails. What does it mean?
There are a thousand and one great ideas, cool inventions, and incredible breakthroughs. Saffo does not care about whether or not it works, but what are the indicators that are driving the thought process. Saffo actually brought in a prototype for a $99 laptop. His point was it didn’t matter whether the particular implementation succeeded or failed, it was an indicator that meant the industry will develop a low cost product that will end up in the 80% of households that don’t currently own a PC.
It takes 20 years to become an overnight success…
Saffo states, 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 explodes, eventually tapering off and even dropping back down.
Saffo’s example: the Internet. It was almost 20 years old in 1988, the year that it began its dramatic run-up to the 1990’s dot-com eruption. So having identified the origins and shape of the left-hand side of the S curve, you are always safer betting that events will unfold slowly than concluding that a sudden shift is in the wind.