CAN WE PREDICT THE FUTURE!?
Wait what? I’m supposed to wait until the end of the script to say that? Ok, well, it’s too late now, I already said it… moving on…
Today I want to talk to you about our inability to predict the future, and why that affects us in our decision-making.
As Mitch Hedberg said: “You know when you see an advertisement for a casino, and they have a picture of a guy winning money? That’s false advertising, because that happens the least. That’s like if you’re advertising a hamburger, they could show a guy choking. ‘This is what happened once.’”
Our predictions of the future are like that – if someone predicts something accurately, it’s random chance. And they’d generally like us ignore the many more times they were wrong in their predictions.
As a rule, don’t trust anyone who claims to know the future, in pretty much any capacity.
If you haven’t read “Thinking, Fast and Slow” by Nobel laureate Daniel Kahneman, I would say that it’s a must-read. Blending economics and psychology, it’s a book that’s worthy of its own review.
In it he discusses the biases that cause us to systematically overestimate our own ability and ignore the data available to us.
This idea is echoed in another book I’m reading, Average is Over by Tyler Cowen – in which he shows that human chess players overvalue intuition and “elegant” moves over a computer’s weirder, yet far better moves. As you can imagine, chess players since Kasparov have been learning the hard way that our brains are not so great in the face of AI.
When faced with the decision to trust data or a person, we are generally inclined to trust an expert when they tell us something, be they a chess player, a financial advisor, a business influencer, or a heart surgeon. As Stanley Milgram’s famous experiment showed us, we’ll trust pretty much anyone in a lab coat, even when they tell us to shock the person in the next room, apparently harming or even killing them. Kahneman shows that we are heavily biased to trust people who are confident in their abilities. The same applies to people who are wrongly over-confident. We trust them blindly. We place a much higher value on confidence than we do on objective data.
You might have heard of the “Dunning–Kruger effect”, which showed that people tend to significantly overestimate their own intelligence. Just like how we know that 90% of all people on the road believe that they are “above average” drivers.
And as a species, we tend to value our own expert opinions over the new emergence of artificial intelligence and algorithms/formulas, even though algorithms and formulas routinely defeat humans on matters of “opinion”, such as the future value of Bordeaux wine or when a newborn baby needs help – in many cases, the formulas get it right far more often than even expert sommeliers or doctors, which is a scary thought!
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So why this rant? What does this have to do with you? My point is that if you want to be successful in the new, computer-driven world, you’ll need to work WITH the data, not against it. We need to work WITH the machines, and not overvalue our own intuition. We need to focus on what we’re best at and combine those attributes with what we’re not good at – data, facts, and statistics. The best digital marketers understand this – the new world is all about merging our brains with technology and data, love it or hate it.
On our path to being eventually replaced in many roles by machines, we’ll first work WITH machines and ON machines, says Tyler Cowen. These will be the jobs of the future… And how about that! Me confidently predicting the future in a piece where I specifically told you not to do that! Well obviously don’t trust ME either. I don’t trust me, and neither should you.
The point here is that we’re terrible at predicting the future. When we look at past events, we think they were inevitable. Google was ALWAYS going to be a trillion-dollar behemoth. But what about when they failed to sell their fledgling company for even $1 million? It was anything but inevitable back then… Truly it could have gone either way.
In Thinking, Fast and Slow, a large collection of top CFOs were asked to predict the future of the S&P stock market index over the next year, and there was actually a slight NEGATIVE correlation between their answers and what eventually happened. Meaning, you would have done better to take the opposite of the the advice of all the top experts in the field.
And yet we see pundits on TV telling us what will happen in the future with incredible certainty… Which stocks to buy, and so on. It’s hard not to want to believe them. We want to believe that the world is ordered and not just a series of coincidences. We want to trust the doctor with experience who knows best, no matter what the algorithm says. And we seem to be more comfortable with the idea of dying because a doctor made an honest mistake than if an algorithm had a flaw.
So much of business is built around trying to predict and forecast – what if you run a shipping company? You can calculate the number of goods that can pass through a canal per day, you can extrapolate that over the course of the year, and you can “predict” the future, right? But do we predict that a single ship will get lodged in the Suez Canal and stop shipping for days, costing us billions? Of course not. And yet these completely unpredictable events happen all the time, as we’ve learned repeatedly over the last 40 years, or whenever it was that 2020 began.
As entrepreneurs, we know that statistically only 30% of businesses survive the first couple years, and yet EACH individual entrepreneur believes that they will be the exception – just like the 90% of drivers who believe they are better than average.
Among our many cognitives biases, when we hear of success stories, we ignore “survivorship bias” – the bias that we overvalue the opinion from people who “won”, even though they probably got very lucky along the way. As someone who started a podcast built on “unusual success stories”, I did it knowing this, not because I wanted to give you a concrete roadmap to guaranteed success but rather because I wanted to help you see the many crazy and unexpected ways people have found happiness in this world.
On the one hand, I believe we should start paying more attention to data in all of our lives, and we should be wary of overconfidence coming from any “expert” we see.
On the other hand, I think optimism is something we should cultivate.
Because optimism is a great trait to have – optimists are healthier, they live longer, they’re happier… and optimists are the people who have disproportionately built our world. As Steve Jobs said “the people who are crazy enough to think that they can change the world are the ones who do.”
These days, the numbers all seem depressing, don’t they?
So if you know that 67% of small businesses fail, should you never start a business because the data is overwhelmingly against you?
I would argue that the greatest truth in life is not to be a rose-colored optimist or a purely rational pessimist – but rather to take a page from stoic philosophy and fully grasp that the odds are against you and do it anyways.
I’m not suggesting you take risks or quit your job to start your new company. Rather, I’m suggesting that some people should see the statistics and decide not to start their own company, because it will likely fail. Those people should be at peace knowing they made the right, smart choice. And for the others of you, ask yourself if knowing that you will most likely fail is reason enough not to do something? If it isn’t, then start your business and go right ahead, because that’s what being a human is all about.
There are so many cynics out there. And we also see a lot of influencers who are delusional, overconfident, and overoptimistic, selling you stuff in your feed right now. These have all rung false for me. I’m advocating a 3rd path here – to fully see the problems and data and statistics and to live our lives anyway, because philosophy, that’s why!
I can’t predict the future. And neither can you. But do your best and maybe, just maybe you’ll end up somewhere you want to be.
As John A. Shedd’s saying goes – “A ship in harbor is safe — but that is not what ships are built for.”