Economists, the late Paul Samuelson once quipped, predicted nine out of the last five recessions. Yet they failed to warn about the big one: the Crash of 2008. Unbowed, they keep at it. Last year, they predicted interest rates would go up. They went down instead. They predicted oil prices would rebound: they sunk to below $35 a barrel instead.
And what about those media prognosticators, how well did they do? U Penn researchers checked up on the predictions of pundits like CNBC’s Jim Cramer, New York Times’ columnist Thomas Friedman, Wall Street Journal columnist Peggy Noonan and many others and concluded they had the accuracy of “dart throwing chimpanzees.” And don’t get me started on futurists who boast about trends they accurately predicted but fail to mention the many they missed.
Although prediction algorithms might be about to change the forecasting game (see below), for now at least, prediction is still more art than science. For leaders, the need to make prediction-based decisions has never been greater. Missing market shifts and misreading important trends can be career-limiting. Blackberry’s co-CEOs misread the iPhone, dismissing it as a niche product. Kodak invented the digital camera but stood by as it unraveled the company’s business model. Radio Shack ignored consumer trends that rendered it irrelevant. Some cable companies dismiss the “cord-cutting” trend that is beginning to roil their industry.
As a futurist and innovation coach, I don’t try to predict trends so much as to alert my clients to changes that could spell opportunity, if action is taken. I’m convinced we all need to become better trend-watchers to avoid being blindsided. Communications technologies make it easy than ever to connect to the wider world, yet tempting to drown in information overload. It’s easy to misread the signals of change because there are simply so many of them.
Here’s the good news: with a bit of focused attention, you can build skills in this area such that they become a strength rather than a vulnerability. Not only will it lead to better responsive moves, but at times, your improved capability at spotting trends will enable and empower you to pounce on emerging opportunities. Here are five strategies to guide you in this important arena:
- Audit your information diet. Start by doing a simple assessment of the various information sources – periodicals, books, reports, newspapers, email newsletters, etc. that you’re accessing. Think of this as your “information diet.” Just as when we diet, we carefully monitor our caloric intake, become more aware of your “information intake.” For the next week, monitor how much time are you spending on trivial items like Donald Trump’s latest outburst, versus how much you’re taking in that’s substantive, deeply researched and well written. Ask other leaders in your network what they’re reading, and share articles of interest. Suggestion: Make it a point to subscribe to publications rather than only grazing the web. Let them build up– the important analysis and survey results that keep you abreast.
- Develop new antenna. It’s been said that “leaders are readers” and I’m continually amazed at how well informed the innovative leaders I meet each year are on a broad range of topics. I first noticed this trait when interviewing 50 leading innovators back in the mid-80s. I’d go out to interview them and they’d start interviewing me! They are, as I noted in Winning the Innovation Game, like vacuum cleaners sucking in the latest trends. They avail themselves to opposing points of view and alternate perspectives. They ingest a wide-ranging number of surveys and reports. But they also get out there to see for themselves, to experience, to press the flesh. They travel extensively and actively question customers, suppliers, industry luminaries, and experts. They are alert to change at all times and notice small details that might easily be overlooked. Suggestion: Do more aggressive “front line observational” research, and ask questions wherever you go.
- Use social media as an early warning system. The field of prediction is ripe for reinvention, and that’s exactly what’s going on these days behind the scenes. According to the Wall Street Journal, predicting the future is about to become “embarrassingly easy,” as prediction algorithms– the fruits of the big data revolution– become so widespread that conventional forecasting methods come off as oh so 20th century. Dataminr is a six year old startup that applies advanced analytics to the entire Twitter “fire hose” to detect events likely to move the market. Already, 75 financial clients, including big investment banks and hedge funds, are subscribers. More and more companies are paying attention to Twitter, and to potential wisdom of the crowd forecasting techniques that are possible from this data set. “It’s pretty hard to come up with industries that would be happy knowing later, less and not everything,” said Ted Bailey, Dataminr’s CEO. According to Fortune, Dataminr revealed preliminary reports of Volkswagen’s emissions scandal three days before its stock price plummeted 30 percent. The Twitterverse erupted 45 minutes before the Associated Press tweeted about the Paris attacks. Question: how can you and your organization tap social media as an adjunct to your early warning system?
- Recalibrate your forecasting skills. University of Pennsylvania professor Philip Tetlock wants to know what makes some people better than others at seeing into the future. With funding from DARPA, Tetlock and his team have been hosting forecasting tournaments in order to identify what separates good forecasters from the rest. In these competitions, thousands of everyman prognosticators volunteer to answer roughly 500 questions on various national security topics, from the probably movement of Syrian refugees to the near term stability or instability of the Eurozone. In his book Superforecasting: The Art and Science of Prediction, co-authored by Peter Scoblic, Tetlock reports that the tournaments identified a small group of people who generated forecasts that, when averaged, beat the crowd by well over 50 percent in each of the tournament’s four years. How did they do it and whence are their powers? Turns out these adept forecasters buried among us are: philosophically cautious and humble, comfortable with numbers but not always math whizzes; pragmatic and capable of considering diverse points of view, and open minded. They are intellectually curious and enjoy puzzles and mental challenges. Key takeaways: if people feel they will be held accountable for their views they tend to avoid cognitive pitfalls such as overconfidence and a common failure to update beliefs in response to new evidence. Lesson: with effort, we can all improve our forecasting abilities. Tetlock’s research suggests basing forecasts on facts and logic, and being alert to personal bias and guessing. His research stresses the need to think in terms of probabilities and recognize that everything is uncertain except history.
- Take action on trends. Although Blackberry’s co-CEOs watched Apple announce the iPhone in 2007, they dismissed it as a niche product. They didn’t consider it again for another six months, losing valuable time. Even a cursory look at disrupted companies shows that their leaders were vaguely aware of the threat to their business model. They waited too long, then mounted halfhearted responses to the threat. It’s natural human tendency to want to delay action till others have gone ahead and paved the way. But the advantage that comes to those that spot trends early is that we take early action. We alter our processes, we change our business model. We diversify. We enter new markets, whether adjacent or in new territories.
If you’re an executive or manager, it’s easy to want to delegate trend-watching. It’s easy to think we have more time than we do to mount a response. In response to an ever-increasing degree of technological, social and economic change, I invite you to redouble your trend-watching capabilities and prepare for the VUCA world (volatility, uncertainty, complexity and ambiguity). In 2016, it’s going to be vital to pay attention to how we pay attention.