From the Financial Times' FT Magazine:
Billions of dollars are spent on experts who claim they can forecast
what’s around the corner, in business, finance and economics. Most of
them get it wrong. Now a groundbreaking study has unlocked the secret:
it IS possible to predict the future – and a new breed of
‘superforecasters’ knows how to do it
©Laurie Rollitt
Irving
Fisher was once the most famous economist in the world. Some would say
he was the greatest economist who ever lived. “Anywhere from a decade to
two generations ahead of his time,” opined the first Nobel laureate
economist Ragnar Frisch, in the late 1940s, more than half a century
after Fisher’s genius first lit up his subject. But while Fisher’s
approach to economics is firmly embedded in the modern discipline, many
of those who remember him now know just one thing about him: that two
weeks before the great Wall Street crash of 1929, Fisher announced,
“Stocks have reached what looks like a permanently high plateau.”
In the 1920s, Fisher had two great rivals. One was a British academic:
John Maynard Keynes,
a rising star and Fisher’s equal as an economic theorist and policy
adviser. The other was a commercial competitor, an American like Fisher.
Roger Babson was a serial entrepreneur with no serious academic
credentials, inspired to sell economic forecasts by the banking crisis
of 1907. As Babson and Fisher locked horns over the following
quarter-century, they laid the foundations of the modern economic
forecasting industry.
Fisher’s
rivals fared better than he did. Babson foretold the crash and made a
fortune, enough to endow the well-respected Babson College. Keynes was
caught out by the crisis but recovered and became rich anyway. Fisher
died in poverty, ruined by the failure of his forecasts.
If
Fisher and Babson could see the modern forecasting industry, it would
have astonished them in its scale, range and hyperactivity. In his
acerbic book The Fortune Sellers, former consultant William
Sherden reckoned in 1998 that forecasting was a $200bn industry – $300bn
in today’s terms – and the bulk of the money was being made in
business, economic and financial forecasting.
It is true that forecasting now seems ubiquitous. Data analysts
forecast demand for new products, or the impact of a discount or special
offer; scenario planners (I used to be one) produce broad-based
narratives with the aim of provoking fresh thinking; nowcasters look at
Twitter or Google to track epidemics, actual or metaphorical, in real
time; intelligence agencies look for clues about where the next
geopolitical crisis will emerge; and banks, finance ministries,
consultants and international agencies release regular prophecies
covering dozens, even hundreds, of macroeconomic variables....MUCH MORE
