All Our Predictions Are Wrong

by Paul Deffenbaugh | 1 September 2020 12:00 am

Predicting the future is a dangerous business, though. While I admired the confidence of an economist showing a chart about what will happen, I always got a little jolt of humor when the chart came up on the screen. Invariably, it would feature a vertical line denoting the present. To the left of the line, representing past economic activity, would be a squiggly, up-and-down line. On the right side of the vertical line there would be a relatively straight line, trending up or down and, perhaps, with a gentle inflection.

The only thing we knew for fact about that line was that at any point along it, the prediction was probably wrong. The likelihood of being correct at any specific point in the future is nearly impossible. It’s a little unfair to point that out because predictions are more about trends than data points. Economists might say the retail or warehouse or hospitality construction market will increase 3-5%. They won’t say that on August 30 it will increase 0.3%.

We just don’t have enough experience to predict that accurately.

And it is experience that helps us predict. We can look at what happened in the past and give a good guess about what might happen. Weather forecasting provides the simplest example. Given certain atmospheric conditions, there is a 40% chance of precipitation. In the past, we know that given the same conditions, there was a 40% probability of precipitation, so we can make a reasonable prediction.

But in our current environment—with more than 10% unemployment, a record decline in gross domestic product (GDP) and massive uncertainty about how to protect ourselves from a virus we have never seen before—the only thing we can predict is that we will likely be wrong about our prediction.

Consider the recent presidential nominating conventions put on by the two major parties. In the past, you could count on an arena full of people wearing funny hats and carrying signs who would yell and scream and boo and cheer during the regular parade of political speeches. Not this year. With both conventions appearing solely online, the conventions of conventions no longer applied. The national committees of the Republicans and Democrats had to reinvent the entire procedure to meet the new reality. That’s not surprising, and it’s also not surprising that the nominating conventions four years from now will be nothing like what has happened before, including the ones that happened this year.

Our whole world is like that. What we did in the past, what we could predict from past experience, is now completely unpredictable.

Like the predictions of economists, the only thing we know for certain about the future of our businesses is that any prediction is likely wrong. Our businesses, our industry, our futures will look nothing like what they used to and what we expected just six months ago.

In the best of times, the future can be daunting if not frightening. In the midst of a pandemic that is changing our fundamental understanding of how the world works, the future is just a guess.

In such an environment, the most valuable asset your company has—besides, perhaps, cash on hand or access to capital—is flexibility. Rigidity of purpose and a hard reliance on the methods of the past will, without a doubt, fail to serve you in the future construction market.

My guess, your guess or anybody’s guess about what the future holds for our industry is probably wrong. If that is the playing field on which we’re competing, the only option you have to succeed in your business is to be nimble and ready to change directions quickly. To do that, you actually have to look at your past experiences with a jaundiced eye and question every one of your assumptions.

The future isn’t going to be a simple trend line, but for those of us who embrace and enjoy change, the future is going to be exciting and interesting. In my book, that’s a good thing.

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