Rules of Forecasting

Reflecting on his 25 years as a forecaster, Paul Saffo pointed out that a forecaster’s job is not to predict outcomes, but to map the “cone of uncertainty” on a subject. Where are the edges of what might happen? (Uncertainty is cone-shaped because it expands as you project further into the future— next decade has more surprises in store than next week.)

Rule: Wild cards sensitize us to surprise, and they push the edges of the cone out further. You can call weird imaginings a wild card and not be ridiculed. Science fiction is brilliant at this, and often predictive, because it plants idea bombs in teenagers which they make real 15 years later.

Rule: Change is never linear. Our expectations are linear, but new technologies come in “S” curves, so we routinely overestimate short-term change and underestimate long-term change. “Never mistake a clear view for a short distance.”

“Inflection points are tiptoeing past us all the time.” He saw one at the DARPA Grand Challenge race for robot cars in the Mojave Desert in 2004 and 2005. In 2004 no cars finished the race, and only four got off the starting line. In 2005, all 23 cars started and five finished.

Rule: Look for indicators- things that don’t fit. At the same time the robot cars were triumphing in the desert, 108 human-driven cars piled into one another in the fog on a nearby freeway. A survey of owners of Roomba robot vacuum cleaners showed that 2/3 of owners give the machine a personal name, and 1/3 take it with them on vacations.

Rule: Look back twice as far. Every decade lately there’s a new technology that sets the landscape. In the 1980s, microprocessors made a processing decade that culminated in personal computers. In the 1990s it was the laser that made for communication bandwidth and an access decade culminating in the World Wide Web. In the 2000s cheap sensors are making an interaction decade culminating in a robot takeoff. The Web will soon be made largely of machines communicating with each other.

Rule: Cherish failure. Preferably other people’s. We fail our way into the future. Silicon Valley is brilliant at this. Since new technologies take 20 years to have an overnight success, for an easy win look for a field that has been failing for 20 years and build on that.

Rule: Be indifferent. Don’t confuse the desired with the likely. Christian end-time enthusiasts have been wrong for 2,000 years.

Rule: Assume you are wrong. And forecast often.

Rule: Embrace uncertainty.

Saffo ended with a photo he took of a jar by the cash register in a coffee shop in San Francisco. The handwritten note on the jar read, “If you fear change, leave it in here.”

PS… You can find different rules and a more strait-laced presentation by Saffo in his recent Harvard Business Review article, “Six Rules for Effective Forecasting,” here.

Share This ▼

Denise Caruso wrote a nice article on a possible trend in longer term giving in last week New York Times. It dove tails well into the Katherine Fulton’s seminar on the “New Philanthropy” (with Larry Brilliant and Richard Rockefeller). It seems to be part of a multi-decade pendulum of sorts in the trends of non-profit giving. Long-term vs project based support goes in and out of fashion. I suspect it has to do with how well the government is funding issues people care about, and what scandals have occurred in recent public memory around non-profits mis-managing funds.

“The reason the nonprofit sector exists at all is because it can fund and invest in social issues that the for-profit market can’t touch because they can’t be measured,”… said Paul Shoemaker. “The nonprofit ‘market’ is not designed to be efficient in that way. Yet we’re applying the same efficiency metrics to both sectors.”

As a consequence, when foundations switched to project-based accounting, they forced grantees to sacrifice long-term effectiveness for short-term efficiency, Ms. Enright said. Nonprofits could no longer afford to focus on important strategic activities like advocacy or working for social change, which require “deep resources and the ability to change tactics overnight if the situation demands it,” she said.

Based on its data, the Center for Effective Philanthropy concluded that the present situation was limiting the effectiveness of those charitable dollars. After surveying nearly 20,000 grantees of 163 foundations and interviewing 79 foundation chief executives and 26 leaders of nonprofits, it recommended that to maximize the impact on grant recipients, foundations “should make larger, longer-term operating grants” of unrestricted funds that can be used to support the organization and its overall mission, not just specific projects or programs.

Their findings echo the experiences of a handful of foundations at the vanguard of the movement to provide more operating support to charities over the last 10 years. They include the William and Flora Hewlett Foundation, the Edna McConnell Clark Foundation, the Philadelphia Foundation, the Whitman Institute and organizations like Social Venture Partners.

Share This ▼

Wired’s Blog has a nifty piece on the two millennia old Demascus steel process replete with quotes from a Nobel laureate and Neal Stephenson:

Damascus swords — sharp enough to slice a falling piece of silk in half, strong enough to split stones without dulling — owe their legendary qualities to carbon nanotubes, says chemist and Nobel laureate Robert Curl.

The blades used so-called wootz steel, smelted with a technique developed 2000 years ago in India, where craftsmen added wood and other organic debris to their furnaces. The resulting carbon-laced steel, hard but flexible, was soon celebrated across the ancient world.

Share This ▼

…by Bill Gates.

Image from the International CES website

Perhaps the central feature of the Long Now’s Long Bets project is accountability — tracking the fortunes of predictive statements and the arguments made in support of them. In a mediasphere with an attention span as short as ours, pundits, CEOs and other “thought leaders” can get away with a great deal of overconfidence and sloppiness in their future-oriented rhetoric.

Which is why it’s encouraging to see, from time to time, reporters digging into the archives in an effort to evaluate a habitual predictor’s track record. (An earlier example blogged here.)

For instance, this Times Online (UK) article published yesterday, 7 January 02008 (”Bill Gates’s hits and misses at seeing future”):

Bill Gates last night described the home of the future where all the power of the home computer will be available in every room on touchscreens embedded in the furniture.

The vision was one of his annual predictions of future trends in technology at the launch of the 2008 Consumer Electronics Show (CES), which opens today in Las Vegas.

But don’t plan on rushing out to buy the hardware any time soon - the co-founder of Microsoft has been wrong as often as he has been right in his forecasts and in the company products he has touted. Some of the moments he might like to forget include:

1995 Mr Gates launches Microsoft Bob, an attempt to out-Apple Apple with a desktop that looked like a house, and software represented as cartoon characters, such as Java the caffeine-crazed dragon. Gates called it a way to make “the computing experience better”, but the product bombed as it needed twice as much memory as the average PC had back then, so didn’t work on most people’s computers.

2001 He predicts - correctly - that by 2010 there will be a PC in 75 per cent of US homes. But he also said that the most popular form of computer would be the tablet, a handheld device which the user writes on with a stylus. Last year tablets accounted for just 1.2 per cent of all PC sales.

2002 Still fascinated with mobile technology, Mr Gates tells CES that Mira, a wireless monitor for the user to carry about, allowing them to access the internet and music files anywhere in the house, meant that “entertainment will never be the same”. It didn’t catch on because it wasn’t compatible with the home version of Windows XP, couldn’t show video, and cost more than $1,000 a go. It was abandoned in 2004.

2002 The Microsoft boss predicts that Smart Personal Objects Technology (Spot), in which pens, watches, coffee-makers and other everyday items are internet-enabled to allow them to relay information such as weather forecasts and sports scores, would be part of the computing revolution. So far it hasn’t been, though it is beginning to show promise for navigation devices.

2004 Mr Gates tells the World Economic Forum that spam will be “solved” by 2006. Er hem.

In his defence, he has also used CES to launch the XBox in 2001, which is Microsoft’s most successful piece of hardware, and correctly predicted that networked mobile technology would become massively more important.

One thing this points up, I suggest, is that in a sense all business decisions are based on predictions, or can themselves be seen as “bets” — something of value staked on an uncertain outcome. And we need not confine our view to business. Every decision we make is a step into the unknown; a wager made, with whatever quality or degree of forethought, that the ground will hold, or (looking further out) that where we eventually end up will have been worth the trip. (more…)

Share This ▼

Stills from Feed (blog) at Stash (DVD Magazine) online.

Herewith, an elegant “long short” featuring the formation of an island from scratch, from the stirring of an underwater volcano to lush tropical paradise in less than sixty seconds. Okay, so it’s a beer ad — we’ll rip off long shorts wherever we find ‘em.

Click the image above to go to the video.

Share This ▼