A few days ago I spoke at the opening dinner of a strategy offsite for a professional firm, on the topic of ‘Thinking About The Future‘. It is a very common style of engagement for me, being briefed to set the broadest possible mental frame for executives before their in-depth discussions on directions for the business. The session went extremely well in provoking some very interesting conversations during the evening, and I gather driving new thinking through the rest of the offsite.
Just before I spoke the executive group had heard from a well-known economist who was giving them economic forecasts for the next 10 years.
As such, in my presentation I explained why forecasts usually have negative value. I spent a long time working in financial markets, and I have seen market and economic forecasts tremendously abused.
The most important point is that almost all forecasts will turn out to be wrong. The future is unpredictable. Giving numerical values to future economic or market data can easily shut down useful thinking about the reality of uncertainty and the range of possibilities that may transpire.
In my first book Developing Knowledge-Based Client Relationships, in the context of distinguishing between what I called “black box recommendations” and “adding value to client decision-making”, I explained how making forecasts strips out almost all the value from the thinking behind them:
One key reason why black-box recommendations generally provide less value than providing the content and process behind them is that they ‘collapse’ the richness of the thinking which went into the recommendations down to a single outcome. An excellent example of this is economic research, in whatever field it is applied.
Economists go through a detailed process of examining all of the issues and uncertainties in looking ahead, however when they collapse all of that thinking into a single set of figures representing their economic forecast and the justification for that most-likely outcome, the richness of the thinking which went into developing them disappears for the client.
While many clients simply want some numbers to unquestioningly stick into their budgets (a dangerous but common approach), economists are inherently limiting the potential value of their work to clients by leaving out the breadth of the analysis behind their views.
While many businesspeople want forecasts, and they do have their role, they usually have negative value in trapping people in a single mode of thinking. Far better to provide people with alternative views – and the thinking behind them – that enable effective responses when the supposedly ‘most likely’ outcome doesn’t happen.
This is part of the reason why I often use scenario planning for more structured consulting engagements to help clients think about and prepare for the future.
However forecasts do have a role.
My most well-known work, with well over 3 million views, is my Newspaper Extinction Timeline, shown below, in which I predicted in which year newspapers will become insignificant in each country around the world (Click on the image for the full-size framework).
While I’ve adjusted my thinking based on new data since then, so far it seems as if I won’t be too far off the mark. However that’s not what matters. It would amaze me if I turned out to be right, despite making my best efforts in those predictions.
The intent of the framework was to provoke a response. The news-on-paper industry has been very poor at facing massive change. I hoped that the specificity of my predictions would provoke some newspaper executives to ask themselves – and think through – “What if he’s right?”
Even if they completely reject my forecasts, hopefully it forces them to think about and explain to themselves or others why I am wrong. This can help clarify their own thinking.
So when used in provocation, predictions can be useful. But in most cases, since specific forecasts will almost certainly be wrong, they have negative value in leading people away from thinking usefully about the future and responding well to the massive uncertainties we face.