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Six Rules for Effective Forecasting
Paul Saffo, Harvard Business Review
The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.
People at cocktail parties are always asking me for stock tips, and then they want to know how my predictions have turned out. Their requests reveal the common but fundamentally erroneous perception that forecasters make predictions. We don’t, of course: Prediction is possible only in a world in which events are preordained and no amount of action in the present can influence future outcomes. That world is the stuff of myth and superstition. The one we inhabit is quite different-little is certain, nothing is preordained, and what we do in the present affects how events unfold, often in significant, unexpected ways.
The role of the forecaster in the real world is quite different from that of the mythical seer. Prediction is concerned with future certainty; forecasting looks at how hidden currents in the present signal possible changes in direction for companies, societies, or the world at large. Thus, the primary goal of forecasting is to identify the full range of possibilities, not a limited set of illusory certainties. Whether a specific forecast actually turns out to be accurate is only part of the picture-even a broken clock is right twice a day. Above all, the forecaster’s task is to map uncertainty, for in a world where our actions in the present influence the future, uncertainty is opportunity.
…In the following pages, I try to demythologize the forecasting process so that you can become a more sophisticated and participative consumer of forecasts, rather than a passive absorber. I offer a set of simple, commonsense rules that you can use as you embark on a voyage of discovery with professional forecasters. Most important, I hope to give you the tools to evaluate forecasts for yourself.
* Rule 1: Define a Cone of Uncertainty
* Rule 2: Look for the S Curve
* Rule 3: Embrace the Things That Don’t Fit
* Rule 4: Hold Strong Opinions Weakly
* Rule 5: Look Back Twice as Far as You Look Forward
* Rule 6: Know When Not to Make a Forecast
Paul Saffo is a forecaster based in Silicon Valley, in California.
Recommended by Big Gav.
Although the article is business-oriented, the same guidelines apply to predictions about peak oil and climate change. All sides of the debate have a tendency to lock in on a specific prediction (cornucopia, collapse, etc.) and defend it to the death. More important, says Saffo, is to examine the range of possibilities, estimate probabilities, and continue to monitor the situation. -BA
Nauru Govt calls early election
Campbell Cooney, ABC (Australia)
The leaders of the Pacific Island nation of Nauru have called an election two months early.
Candidates will have just three weeks to campaign before voting for a new parliament is held on August 25.
Mathew Batsiua, a Nauru MP and member of Ludwig Scotty’s Government, says the snap election was called to ensure future support.
Elected in 2004, the Scotty Government has campaigned to reform the financial practices of previous administrations, which have taken Nauru from being one of the richest per capita nations in the world to being technically bankrupt.
Nauru’s only the source of income – its phosphate reserves – is close to being depleted.
(1 August 2007)
Suggested by totoneila in a comment at TOD. Totoneila quotes a CIA report to show how bad the situation is:
Economy – overview:
Revenues of this tiny island have traditionally come from exports of phosphates, now significantly depleted. An Australian company in 2005 entered into an agreement intended to exploit remaining supplies. Few other resources exist with most necessities being imported, mainly from Australia, its former occupier and later major source of support. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru’s phosphate deposits, substantial amounts of phosphate income were invested in trust funds to help cushion the transition and provide for Nauru’s economic future. As a result of heavy spending from the trust funds, the government faces virtual bankruptcy. To cut costs the government has frozen wages and reduced overstaffed public service departments. In 2005, the deterioration in housing, hospitals, and other capital plant continued, and the cost to Australia of keeping the government and economy afloat continued to climb. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru’s GDP varying widely.
unemployment 90%, GDP/capita = $5,000, population 13,500
Environment – current issues:
limited natural fresh water resources, roof storage tanks collect rainwater, but mostly dependent on a single, aging desalination plant; intensive phosphate mining during the past 90 years – mainly by a UK, Australia, and NZ consortium – has left the central 90% of Nauru a wasteland and threatens limited remaining land resources.
Focus on carbon ‘missing the point’
Eamon O’Hara, BBC (comment)
The focus on reducing carbon emissions has blinded us to the real problem – unsustainable lifestyles, says Eamon O’Hara. In this week’s Green Room, he argues that bigger problems await us unless we shift our efforts.
…Global warming – the latest in this list of environmental woes – is a particularly worrying development, not only because it is potentially catastrophic, but because it is going to be incredibly difficult to control.
The solutions currently being put forward, such as those being championed by the European Union, focus almost exclusively on reducing carbon emissions.
However, by focusing on the need to reduce CO2 emissions has reduced the problem to one of carbon dioxide rather than on the unsustainable ways we live our lives.
This oversight has led to the assumption that if we reduce emissions then our problems are solved, hence the focus on carbon sequestration, renewable energies and environmental technologies.
This approach to curing our problems is a bit like relying on methadone to cure an addiction to heroin.
The large-scale transition to renewable resources might provide a safer alternative to oil and gas and other finite resources, but it will not remove our energy and resource dependency, which will continue to expand in line with economic growth.
Before long, we will discover that even renewables have their limits. We are already being warned about the dangers of excessive demand for biofuels, which is reportedly leading to the clearing of rainforests and increasing competition for land between food and energy production.
Ultimately, our problem is consumption, and the environment is not the only casualty.
Eamon O’Hara is a Brussels-based policy adviser for the Irish Regions Office, which represents Irish interests in the European Union
(30 July 2007)
Jonathan Dawson, New Statesman
The terrifying prospect of a post-oil future: no more ready meals, traffic jams or lonely nights in front of television.
We held an â€˜internal conference’ recently on the theme of climate change. These internal conferences give us an opportunity to meet together for three or four days a couple of times a year to consider matters of importance that face us.
During this most recent conference, it felt like the scale and urgency of the climate change crisis really landed within the community. In particular, a film of George Monbiot’s Schumacher Lecture based around his book, Heat: How to Stop the Planet Boiling, had an electrifying effect. True to the spirit of this place, the predominant mood was one of excitement at the scale of the challenge rather than depression.
Anyway, I was asked to give a presentation on the likely impacts of climate change for the work and operating methods of the community. I began by describing the various ways in which we as a society have developed structures – for the provision of food, clothing, building materials, in fact just about anything you can think of – that are entirely dependent on the availability of cheap energy. Fine, except that the age of cheap energy is ending before our eyes, caught between the rock of climate change and hard place of Peak Oil.
Then, keeping a straight face with some effort, I provided a stern introduction to the images I proposed to show to illustrate the world that I suggested we are about to move into. “Scramble for the remaining oil… resource wars… starvation… armed gangs purloining food at the barrel of a gun…”
Some of the images I would show, I suggested, were so disturbing that those of a nervous disposition might choose to avert their eyes. But I defiantly declared myself unapologetic about being the bearer of truths that might be hard to hear.
What followed was a slide-show of happy people working and playing together in community. “We will have no choice but to learn to live without chemically produced food shipped in from the other side of the world” – images of people working in our food gardens. “No more processed, ready-made meals” – pictures of community members happily working in our kitchens. “No more coal-fired power stations” – shots of our wind turbines and solar panels. …
Jonathan Dawson is a sustainability educator based at the Findhorn Foundation in Scotland. He is seeking to weave some of the wisdom accrued in 20 years of working in Africa into more sustainable and joyful ways of living here in Europe. Jonathan is also a gardener and a story-teller and is President of the Global Ecovillage Network.
(2 August 2007)
Adam’s Story: Tillicum River
John Michael Greer, The Archdruid Report.
This narrative is the fourth part of an exploration of the five themes from my Archdruid Report post “Glimpsing the Deindustrial Future” using the tools of narrative fiction. As with the first three portions of “Adam’s Story,” the setting is the rural Pacific Northwest during the second half of this century.
South of the army roadblock, the coast highway swung inland and wove through hills. For three days Adam and Haruko saw no further sign of the Cascade Republic’s forces, or for that matter anyone else. Even before things began falling apart, those hills had been all but uninhabited, a region of timberland and hiking trails pierced by a few roads but never really settled. Now, other than the highway and the healing scars of logging during the warâ€”the government fueled its tanks and planes on wood alcohol once the last overseas oil was lost, and ravaged much of the nation’s woodlands doing itâ€”the hills looked as though they had never been visited by people at all. The woods to either side of the road offered little in the way of forage; it was a hungry time.
Early on the fourth day, the low rumble of diesel engines echoed off the hills behind them, and the two of them hurried off the road and hid in dense brush upslope. Adam worked his way to a place where he could glimpse the road below. Half a dozen trucks painted army green roared south at what he guessed was top speed. After the last echoes died away, he and Haruko picked their way warily back down to the road and followed. A few miles onthey came to a crossing where a road headed east toward the cities of the interior. Tracks in the duff showed the trucks had gone that way, and others had come from the south and taken the same road east.
“What do you think?” he asked Haruko. “South or east?” They’d talked over their route more than once, trying to guess whether the coast or inland offered the best hope of a place to settle.
(2 August 2007)