With the start of the new year and the inauguration of a new president of the United States, many individuals and organizations are turning their eyes toward the future. Individuals are working on resolutions to make positive changes in their lives. Companies are making plans and strategy adjustments to fit with economic and regulatory predictions. Political entities are adjusting a new course in anticipation of political goals, agendas, and actions of the new administration and the new distribution of political power in the country. However, almost all of the predictions and forecasts of individuals, companies, and political parties will end up being wrong, or at least not completely correct.
Humans are not great forecasters. We rarely do better than just assuming that what happened today will continue to happen tomorrow. We might be able to predict a regression to the mean, but usually we are not great at predicting when a new trend will come along, when a current trend will end, or when some new event will shake everything up. But this doesn’t mean that we don’t try, and it doesn’t mean that we throw in the towel or shrug our shoulders when we get things wrong.
In Risk Savvy Gerd Gigerenzer writes, “an analysis of thousands of forecasts by political and economic experts revealed that they rarely did better than dilettantes or dart-throwing chimps. But what the experts were extremely talented at was inventing excuses for their errors.” It is remarkable how poor our forecasting can be, and even more remarkable how much attention we still pay to forecasts. At the start of the year we all want to know whether the economy will improve, what a political organization is going to focus on, and whether a company will finally produce a great new product. We tune in as experts give us their predictions, running through all the forces and pressures that will shape the economy, political future, and performance of companies. And even when the experts are wrong, we listen to them as they explain why their initial forecast made sense, and why they should still be listened to in the future.
A human who threw darts, flipped a coin, or picked options out of a hat before making a big decision is likely to be just as wright or just as wrong as the experts who suggest a certain decision over another. However, the coin flipper will have no excuse when they make a poor decision. The expert on the other hand, will have no problem inventing excuses to explain away their culpability in poor decision-making. The smarter we are the better we are at rationalizing our choices and inventing excuses, even those that don’t go over so well.