Peter Day makes deceptively simple sounding programmes on business for Radio 4 and the World Service.  His latest World Service programme is an interview with a Silicon Valley based forecaster, Paul Saffo.  The interview is in turn based on a an article Saffo wrote for the Harvard Business Review a few months ago, Six Rules for Effective Forecasting.  The six rules are:

  • Rule 1: Define a Cone of Uncertainty
  • Rule 2: 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 explodes, eventually tapering off and even dropping back down… The art of forecasting is to identify an S-curve pattern as it begins to emerge, well ahead of the inflection point. The tricky part of S curves is that they inevitably invite us to focus on the inflection point, that dramatic moment of takeoff when fortunes are made and revolutions launched. But the wise forecaster will look to the left of the curve in hopes of identifying the inflection point’s inevitable precursors
  • Rule 3: Embrace the Things That Don’t Fit
    • The entire portion of the S curve to the left of the inflection point
      is paved with indicators—subtle pointers that when aggregated become powerful hints of 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. Because of our dislike of uncertainty and our reoccupation with the present, we tend to ignore indicators that don’t fit into familiar boxes. But by definition anything that is truly new won’t fit into a category that already exists.
  • Rule 4: Hold Strong Opinions Weakly
  • Rule 5: Look Back Twice as Far as You Look Forward
    • Our historical rearview 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… When you look back for parallels, always look back at least twice as far as you are looking forward. Search for similar patterns, keeping in mind that history—especially recent history—rarely repeats itself directly. And don’t be afraid to keep looking further back if the double interval is not enough to trigger your forecaster’s informed intuition.
  • Rule 6: Know When Not to Make a Forecast
    • It is a liability for forecasters to have too strong a proclivity to see change, for the simple fact is that even in periods of dramatic, rapid transformation, there are vastly more elements that do not change than new things that emerge.

The interview is worth listening to and the article is worth reading.  But you probably can’t do either, or at least not for very long.  You can listen to the interview  – but most BBC programmes only stay around for a week or so or until the next one replaces it.  You can also read the HBR article – but only if you are a subscriber.  I can put extracts from the paper – but only up to 500 words.  Some say that information wants to be free – but we then have to judge whether that counts as an aspiration or a forecast.  End of digression, with a few telling lines from the interview:

Come to a conclusion as quickly as you can, and look for information that proves your conclusion wrong.  So come to a good forecast by successive approximations of bad forecasts.

Q:  So strong opinions held weakly is quite an important thing.  But I can’t see many corporations listening to you when you say that.  They don’t know how to hold strong opinions weakly, do they?

A:  No, and the real problem with corporations is that doing that is generally bad for one’s career.

As a forecaster, my job is not to predict what will happen.  My job is to describe what could happen.  The difference is subtle, but enormously important.

Today’s oddities are tomorrow’s mainstream – and especially the oddities that people dismiss.

When it comes to the future, we are all equally expert and we are all equally ignorant.