If you’re looking for a definitive list of trends to keep an eye on I’m sorry to disappoint, but this is not it.
Each year I read any number of reports and articles that attempt to cast some light on the future – most of it directional, some of it fairly precise. Irrespective, most of it’s not very good. I inevitably find myself wondering more about the thought process of the writer, and less about the forward-looking outlook.
A few years back I found myself in an impromptu debate with the CEO of my firm when I presented some systems, software and services market forecasts partly based on some work done by IDC. He was of the opinion that IDCwas a rear view mirror research company, and lacked any credible capacity to predict unexpected occurrences in the industry, e.g. like a disruptive innovation. I agreed, but stated that as they captured the conventional thinking of the herd, their outlook at least had the value of presenting the wisdom of the crowd (albeit, an edited wisdom).
He did not agree one bit, as evidenced by the pulsating vein I could see on his forehead from my position at the podium 30 feet away. He planted an enormous stake in the ground at my feet, and as I looked around the room at my colleagues a few minutes later (it was not a swift execution) I could almost visualize a few of them roasting marshmallows on the open flame that had ignited. The point graciously conceded, I continued with my presentation, allowing the smoke to clear.
There’s a lot to be said for being forward-looking. It’s hard to move forward in business unless you have some expectation or opinion about the future. But acting on someone’s view of the future is akin to acting on a stock tip: it’s risky. I liked how Warren Buffet responded to an undergraduate at a large presentation he gave when he was asked how he forecasts macroeconomic effects. Buffet’s response: I don’t – it’s simply not knowable.
To me, forward-looking views come in three varieties, each with its own pluses and minuses:
- Trends are directional tendencies. They look out years into the future. They offer a high degree of wiggle room as there is no attempt to be quantitatively precise with regard to speed or extent. They’re not always easy to spot, and those who make a practice of picking them do not bat 1,000 (John Naisbitt’s wildly popular bestselling Megatrends largely hit the mark, but not entirely).
- Forecasts are estimates of future conditions. They’re typically based on quantitative models, and usually confined to short term outlooks (from days for weather, to several quarters for economic variables like GDP). I’ve observed that people like forecasts because they are concrete and specific. And therein lies the problem: they are only as valid as the models on which they are based. Those models are imperfect in that they invariably rely on assumptions that are a placeholder for knowing. Remember: the vast majority of economists and Wall Street prognosticators, all equipped with exquisite forward-looking models, missed the 2007 financial crisis entirely.
- Predictions are a statement of what will happen. They require little in the way of time or expertise to make, and they don’t rely on complex models. Predictors are notoriously wrong. Just look at the annual track record of investment picks – you’re still better off closing your eyes and buying an index than you are buying the majority of mutual funds within the investment category. And Nostradamus? His celebration aside, try understanding his predictions as they were originally written – as quatrains – and compare these to their interpretations. If ever there was a leap of faith, it is these.
My advice: read everything you can find on the trends in the business(es) that you and invest in or follow. Recognize that the value of forecasting lies in stating a possible future – not a guaranteed one. When it comes to predictions you will suffer no harm if you regard them as entertainment, enjoyed in the company of others over a glass of good wine.
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