Why even great predictions don’t create great solutions
Research on how well people can predict the future comes to a resounding conclusion: not well. Asking “What will happen to me?” in a future situation misses the point. Instead, it’s much more fruitful to consider multiple possible future states and ask, “What would we do if this happened?” Wisdom from Arie de Geus.
The hunger for prediction in an uncertain world
To say that people don’t like uncertainty is an understatement. Journalist Maggie Jackson has written a book about it – called Uncertain: The Wisdom and Wonder of Being Unsure. As she says in a recent interview, we need “routine and familiarity. Most of life is what scientists call predictive processing. That is, we’re constantly making assumptions and predicting. You just don’t think that your driveway is going to be in a different place when you get home tonight. You can expect that you know how to tie your shoelaces when you get up in the morning. We’re enmeshed in this incredible world of our assumptions. It’s so human, and so natural, to stick to routine and to have that comfort. If everything was always new, if we had to keep learning everything again, we’d be in real trouble.”
One consequence of wanting to know what’s likely to happen, even if nobody has the answers, is that we turn to people who claim to have clairvoyance about the future. Why else would the global astrology market be valued at a stunning $13.5 billion?! We ask for and receive predictions all the time. The stock market wants a company CFO to predict sales quarter by quarter down to the penny. Companies want predictions about commodity prices, labor costs, global unrest, likely issues arising from social unrest, and mountains more. Entire industries – consultants, futurists, accountants, every flavor of expert – are quite happy to make their fortunes selling specific predictions about the future. This despite robust research findings (by Phil Tetlock) that “the average forecast was about as a good as a chimpanzee throwing a dart.”
But here’s a super interesting idea that I ran into in re-reading The Living Company, the late Arie de Geus’ marvelous book. The problem with even accurate predictions, de Geus observes, is that the knowledge of what might happen does not correlate well with acting on that knowledge. He offers a thought experiment.
The Mayor of Rotterdam’s dilemma
When de Geus was at Royal Dutch Shell, he used this parable to spark conversations about the value of predictions.
“Imagine that it is 1920, and you have somehow been granted absolute power to predict the future. You happen to visit the mayor of Rotterdam, and during that time, you describe in vivid detail what is going to happen to his town during the next 25 years. Thus, during an otherwise perfectly normal working day, the mayor hears about the advent of the Weimar Republic, hyperinflation, the 1929 stock exchange crash, the Great Depression that followed, the rise of Nazism in Germany with its (for Rotterdam) damaging economic politics of autarchy, the outbreak of the Second World War, the carpet-bombing of the town’s city center, and finally, the systematic destruction of the town’s port installations during the calamitous winter of 1945.
The mayor listens to this information placidly. He gives every sign of believing you. And then he asks, ‘If you were in my shoes, hearing all this, amid all the other opinions and facts that reach me during the course of my day, what do you reasonably expect me to do about this information?’”
De Geus continues, “There is nothing the mayor can be expected to do. Even if he gives your prediction a higher degree of credibility than most of the other information that reached him, he would have neither the courage nor the powers of persuasion to take the far-reaching decisions required by such a prediction.” As he concludes, “few people with real responsibilities dare take decisions based on the information, even though they eagerly asked (and paid for) it in the first place.”
In my work on strategic inflection points, I see this all time. The emergence of a global pandemic was widely predicted, yet when it became unavoidably real, people acted as though it had come out of the blue. Climate change has been observed by scientists beginning as far back as 1896, yet we still drag our feet on figuring out remedies. Russia made no attempt to hide its intentions for Ukraine when it invaded Crimea in 2014, yet the 2022 invasion of Kyiv was treated as a surprise. The digitization of the music business and the end of the highly profitable CD-based business model was seen by every company in the content business, yet it was Apple, a technology company, that ended up winning that round. The likelihood of an earthquake along the Cascadia subduction zone in the Pacific Northwest occurring in the next 50 years is at 1 in 3, and yet the level of preparedness for such a calamity is still quite low.
As De Geus says, the fundamental problem is that in seeking predictions, we seek to find answers to the question: What will happen to us? Like a great many advisors to the Mayor of Rotterdam, we spend endless hours (and no shortage of money) debating whether one future or another is more likely, without establishing any satisfactory conclusion.
What would we do if? A much better question
Why do we not prepare for even fairly reliable forecasts when we ask how a future event would affect us? It’s because we are ignoring a fundamental premise of how human cognition works. Citing the work of David Ingvar, De Geus shows that the brain is constantly attempting to make sense of the future. Ingvar calls it “creating a memory of the future.” For instance, as you are reading this newsletter, you may glance at your calendar to see whether it is yet time to get on another Zoom call. You might consider what would happen if you fail to join the Zoom. You might decide to schedule a stretch break for later that afternoon. You debate with yourself whether the salad shop or the vegan bakery sounds more appealing. As de Geus says, “every moment of our lives, we instinctively create action plans and programs for the future. But why did we evolve to constantly do this?
Ingvar posited that these pathways for the future determine what kind of information we should pay attention to, and just as importantly, which we should ignore. We are inundated with information from all our senses, communication channels, and more. We need some way to filter what is important and what is not. We simply do not perceive a signal from the outside world unless it is relevant to an option for the future that we have already worked out in our imaginations. The more such memories we create for ourselves, the more signals we will be open and receptive to.
For example, consider a week involving a business trip in and out of Newark airport. You get to your destination, expecting to fly home 2 days later. On the second day, you are routinely listening to the news as you get ready for work and hear a report that there is severe weather expected at Newark and that passengers should find an alternative if they possibly can. Here’s the thing: in a week not involving Newark Airport, you probably wouldn’t even notice that bit of information. Given that your plans are likely to be affected, however, you will most certainly be paying attention to it, and that in turn will precipitate a series of actions. You might see if you could leave earlier, later, switch airports, take another form of transportation, whatever. We’ve all had those sorts of experiences, right? Your brain has taken raw information (what could happen) and turned it into relevant knowledge about what you need to do in that situation.
Why the early warnings system works
As I’ve described in Seeing Around Corners, going through what I call an early warnings exercise facilitates you and your team creating a memory of the future. It accentuates your ability to “see” and take action on early warnings and weak signals. The way it works is to specify a “time zero” event which is a potential future inflection point with either good news for you and your organization or not such good news. Then, working backward, you ask yourself “What would have to be true if this were becoming more likely?” Then, you work with your team to think about what action you would take if a combination of weak signals were to begin to come together in a compelling way – we call this the process of establishing tripwires.
How do you identify potential time zero events? An approach I have found that works well is to posit two future uncertainties with a potentially big impact on your organization. For instance, in higher education, we know that the enrollment of undergraduates in the United States has dropped from 18.1 million to 15.8 million over the last 13 years. One uncertainty, therefore, is whether this trend will continue or whether it will reverse. Another, given deep public skepticism about the cost and value of a typical college education, is the assessment of whether it is worth it. Indeed, a recent Pew study found that only 22% of their survey respondents believed that going to college was worth it if it meant taking out loans. For the rest, deep skepticism.
If you put these uncertainties together, you have four possible futures. I like to try coming up with a headline for each.
The first thing this does for your brain is to force it to build at least 4 possible “memories of the future.” This is quite different than developing a point forecast and aligning to that.
What we encourage you to do is go visit that future world in as rich detail as you can. Who’s there with you? What sort of business model might work? How would we develop alternatives to our traditional model? Then, work backward and ask, “well, before that outcome could occur, here are the things we need to be paying attention to?” Then track those indicators and when its time to act, you’ve already primed your brain to take in the information.
At Valize, we’ve discovered that these explorations of the future don’t have to be scary, exhausting or difficult. In fact, when we facilitate the process with companies, participants often report that it is surprisingly energizing, even fun! Contact us here if you’d like to learn more.
What might the Mayor of Rotterdam have done differently if he had asked “what would I do if…?”