Predictive Failures: Analyzing the Limits of Forecasting Across Disciplines
Predictions come a dime a dozen.; they aren't worth the paper they're printed on. Or "Predictions! Predictions! We don't need no steenkin' predictions!"
Note: This summary was prepared with the assistance of ChatGPT 4.0, though any incorrect interpretations are entirely the responsibility of ChatGPT (a cop out I know).
The Fortune Sellers:
The Big Business of Buying and Selling Predictions Hardcover – Oct. 28 1997 by William A. Sherden (Author) An ambitious, intelligent, and very readable guide to understanding our present and our future."-Harry Beckwith, author of Selling the Invisible No one can foretell the future. Or can they? There are many who purport to-and they are making a fortune. From meteorologists to investment advisers, prognosticating professionals are part of a multibillion-dollar industry. No longer merely fortunetellers, they are fortune sellers, offering us a commodity we're more than eager to buy: the future. In this piercing and provocative expose, business consultant and forecasting expert William Sherden casts an unblinking eye on the booming business of predicting the future, separating fact from fallacy to show us not only how best to use the forecasts we're given, but how to "select the nuggets of valuable future advice from amongst the $200 billion worth of mostly erroneous future predictions put forth each year.
Author's Preface:
It all started with this book: "The Fortune Sellers: The Big Business of Buying and Selling Predictions" by William A. Sherden, first published in 1998.
Years ago, a manager of mine gave me a book to read, called The Fortune Sellers: The Big Business of Buying and Selling Predictions by William A. Sherden. It was published in 1998. The theme was making predictions in various disciplines.
I read it at least once, maybe twice. I don't know if I ever gave it back to my manager. I guess I have that on my conscience if I didn't.
In any case, it stuck with me that predictions are fraught with problems. In the book, Sherden outlined half a dozen or more areas where predictions are routinely made and where they routinely fail. The best of all seemed to be climate science, and that wasn’t very good. It was okay in the short term. Maybe it’s getting better.
He outlined the reasons why predictions are made, why they fail, why we believe them, and why we shouldn’t. He goes into it in great depth.
So not remembering the book title, I had ChatGPT dig it up for me, and lo and behold, it did. I asked it to summarize the book, and miracle of miracles, it did. The summary corresponds with my memory of the book quite well, limited though that memory may be. I am getting old, you know.
In any case, here’s the summary, and the link is here. Old as it is, it is well worth the read. By the way, ChatGPT 4.0 did an admirable job of summarizing it, better than the majority of humans.
Book Synopsis:
The Fortune Sellers: The Big Business of Buying and Selling Predictions by William A. Sherden provides a deep critique of the prediction industry across a variety of disciplines. Sherden, a consultant and business strategist, explores how forecasting, while critical to many fields, frequently falls short of its promises.
Key Disciplines and Their Failures:
Economics: Sherden critiques economic forecasting as notoriously unreliable. Despite the widespread use of sophisticated models, economists consistently fail to predict key trends, such as recessions and inflation rates, often with dire consequences for those who follow their advice too closely.
Stock Market: Financial forecasters are often no better than chance when predicting market performance. Sherden demonstrates that even expert investors struggle to predict major market swings accurately.
Weather Forecasting: Although short-term weather forecasting has improved due to better data and models, long-term climate forecasting remains uncertain. Of all the predictive fields examined, weather forecasting emerges as the most reliable—though even it has its limits.
Demographics and Population Trends: Predictions about population growth and migration patterns often miss the mark due to unforeseen social changes and policy shifts.
Technology and Innovation: Predicting future technological developments is especially difficult because of the unpredictable nature of breakthroughs and the disruptive effects of new innovations.
Business Forecasting: Large corporations routinely make decisions based on forecasts of market trends and consumer behavior, yet many of these predictions prove to be inaccurate.
Why Predictions Fail:
Sherden delves into the reasons why these predictions consistently fail:
Complexity: Many systems, like the economy or the weather, are simply too complex for accurate predictions. Small changes can lead to vastly different outcomes.
Cognitive Biases: Forecasters often fall prey to biases such as overconfidence and anchoring, which distort their predictions.
Chance: Random, unforeseen events frequently disrupt even the best-laid predictive models.
Feedback Loops: In financial markets, for instance, publicizing a prediction can change the behavior of investors, which alters the market and renders the original prediction inaccurate.
The Business of Prediction:
Despite their failures, predictions remain a thriving industry. Sherden attributes this to several factors:
Public Demand: People crave certainty, especially in uncertain times, and are willing to pay for predictions, even if they know the forecasts may not be accurate.
Media Sensationalism: The media tends to highlight bold predictions, even when they're speculative or extreme, which feeds the cycle of belief in predictive power.
Expert Authority: Experts, even those with a poor track record, continue to be seen as trustworthy sources, giving the industry a veneer of credibility.
The Best of the Bunch: Weather Forecasting
While Sherden is critical of most predictive disciplines, he acknowledges that weather forecasting has made significant strides, especially in short-term predictions. Advances in meteorological data collection and modeling have improved accuracy, though long-term forecasts remain imperfect.
Conclusion:
The Fortune Sellers is a powerful critique of the prediction industry, emphasizing the limits of our ability to predict the future across many fields. Sherden’s work offers valuable insights into why we should approach forecasts with caution and highlights the importance of skepticism when interpreting expert predictions.
Summary:
William A. Sherden’s The Fortune Sellers critiques the prediction industry across fields like economics, stock markets, weather, and demographics. Sherden shows that most predictions fail due to the complexity of systems, human biases, and unforeseen events. While weather forecasting has improved in the short term, long-term forecasts, like those in other fields, remain unreliable.
Despite these failures, predictions continue to thrive because of public demand, media sensationalism, and misplaced trust in experts. Sherden urges readers to remain skeptical, emphasizing that predicting the future is often fraught with error and uncertainty across disciplines.