Tuesday, April 5, 2011

Book Review: "Future Babble: Why Expert Predictions Are Next to Worthless, And You Can Do Better."

A subject near and dear to our jaded hearts.*
From Reason:
The new book Future Babble explains why dart-throwing monkeys are better at predicting the future than most pundits.

The price of oil will soar to $200 per barrel. A bioterror attack will occur before 2013. Rising food prices could spark riots in Britain. The Arctic Ocean will be ice-free by 2015. Home prices will not recover this year. But who cares about any of those predictions: The world will end in 2012.

The media abound with confident predictions. Everywhere we turn, we find an expert declaiming on some future trend, concerning nearly every activity. Should we pay much attention? No, says journalist Dan Gardner in his wonderfully perspicacious new book, Future Babble: Why Expert Predictions Are Next to Worthless, And You Can Do Better. Gardner is previously the author of The Science of Fear: Why We Fear the Things We Shouldn't—and Put Ourselves in Greater Danger.

In Future Babble, Gardner acknowledges his debt to political scientist Phililp Tetlock, who set up a 20-year experiment in which he enrolled nearly 300 experts in politics. Tetlock then solicited thousands of predictions about the fates of scores of countries and later checked how well they did. Not so well. Tetlock concluded that most of his experts would have been beaten by “a dart-throwing chimpanzee.” Tetlock found that the experts wearing rose-tinted glasses “assigned probabilities of 65 percent to rosy scenarios that materialized only 15 percent of the time.” Doomsters did even worse: “They assigned probabilities of 70 percent to bleak scenarios that materialized only 12 percent of the time.”

In this excellent book, Gardner romps through the past 40 years of failed predictions on economics, energy, environment, politics, and so much more. Remember back in 1990 when Japan would rule the world? MIT economist Lester Thurow declared, “If one looks at the last 20 years, Japan would have to be considered the betting favorite to win the economic honors of owning the 21st century.” Thurow was far from alone. Back in 1992, George Friedman, now CEO of the geopolitical consultancy Stratfor, predicted The Coming War With Japan. Twenty years later, for those hungering for more predictive insights from Friedman, he has recently published, The Next 100 Years: A Forecast for the 21st Century.

As oil prices ascend once again, naturally many predict that the end of oil is nigh. Back in 1980, Gardner reminds us, The New York Times confidently declared, “There should be no such thing as optimism about energy for the foreseeable future. What is certain is that the price of oil will go up and up, at home as well as abroad.” By 1986 oil prices had fallen to around $10 per barrel. On the accuracy of oil price predictions, Gardner cites U.S. Foreign Service Officer James Akins, who said: “Oil experts, economists, and government officials who have attempted in recent years to predict the future demand and prices of oil have had only marginally better success than those who foretell the advent of earthquakes or the second coming of the Messiah.”...MORE
* "20 predictions for the next 25 years"
There is opportunity every morning and in every event.
It's what you make of the situation, not the situation itself, that matters.
[good grief, that concludes our Pollyanna moment -ed]
Attention Market Pontificators: Witches to be Fined, Jailed if Predictions Don't Pan Out

"Following Doug Kass' Prediction Of A 25% Drop In Gold, Here Is How His Other Recent Forecasts Have Fared"

87 Worst Predictions of All Time
A re-post from November '07. A surprising number of them came via the pages of Scientific American.
[and Lord Kelvin seems a bit of a twit -ed]
Dan Gardner . I predict your prediction is wrong

"Solar: Kurzweil Sees Energy Need Met In 16 Years"
We also have "Ray Kurzweil: Cost Competitive Solar Within Five Years" from June 2008. I don't think Ray's going to make it by 2013.

Last week I said,
en passant, "The current McKinsey Quarterly has an interview with Ray Kurzweil, arguably one of the slipperiest prognosticators currently predicting. On the other hand the McKinsey folks I've met told good jokes."

Be that as it may be, here's Tech Trader Daily...
"The 2012 sunspot sell-off"

How to Predict a Nation's GDP per Capita at r=.97 Using "Economic Freedom and average citizenry IQ -- plus slight tweaks from trading block membership and oil"

And many more, use the search blog box, key word prediction.