Brainless Forecasting 2: Getting it Right (Occasionally)

Back a post or two ago I discussed how difficult it is for human beings in general, and Americans in particular, to forecast the future.  The future of their inventions.  The future of their society.  Any future at all. 

We measure the economy every day, for example, but our smartest economists just happened to miss the current worldwide recession.  We invent a device like the telephone and then predict that it will never replace the telegraph (on the one hand), and that it will bring about a universal language and world peace (on the other).

I also mentioned in this earlier post that one person in particular got the future right vis-à-vis the telephone, and well before anyone else.  That person happened to be its inventor, Alexander Graham Bell.  In a remarkable 1878 letter to the organizers of the Electronic Telephone Company, Bell described a universal point-to-point service connecting everyone through a central office in each community, to in turn be connected by long-distance lines.

What is stunning about Bell’s vision is that the available technology did not permit universal, switched, long-distance service.  He was describing something that he could not build, at least in 1878, but that would exist in all its pieces and parts a century later. 

Sociologist Ithiel de Sola Pool pondered why the only forecaster to get the future of the telephone right—and really right—was the inventor.  He offered five theories:

1. Bell was a smart guy, as were all the men in his small business group.  Perhaps they were just brighter than the rest of the world.

2. Bell was living with the telephone eighteen hours a day, year after year.  Better than anyone, he understood its capabilities and potential.

3. Bell was a speech expert who approached the problems of telecommunications from the outside.  Folks like Western Union and Elisha Gray thought of the telephone as an extension of the telegraph—the “fallacy of historical analogy”—and missed the future.

4. Bell was not a scientist but, like Morse, Edison, Ford and Land, was both an inventor and capitalist.  These men were interested in what might be theoretically possible and what might sell; “the optimism of their speculation was controlled by a profound concern for the balance sheet.”

5. Bell was in a position to build the system he envisioned—to fulfill this own prophecy.

We know decidedly that having all of those items at your disposal still won’t guarantee success in forecasting, but having each in its measure could get you a lot closer (than, say, “world peace”). 

Personally, I find the fourth item especially compelling; when Edison’s notebooks on devising the nation’s first power grid were examined, for example, they showed on every page “calculations of the system’s market potential, the price charged for competing gas illumination, the cost of copper wiring, and other entrepreneurial concerns.”

It reminded me, for contrast’s sake, of my post on the history of the web and the Internet bubble.  It’s no wonder we forecasted so poorly during this debacle.

Hadi Partovi: There were so many start-ups where they’d have a fund-raising party. The company basically would have a business plan and a PowerPoint, no technology. They’d raise $10 million and then there’d be like $250,000 or $500,000 blown away just on the party.

Jeff Bezos: Many of those companies didn’t spend the money in a thrifty way. They would raise $25 million with a single phone call and then spend half of it on Super Bowl ads.

Hadi Partovi: Most investors didn’t understand the Internet. They just knew that these things that have “dot-com” next to them were worth a lot and were going to be really big someday, and they missed the last one. I remember DrKoop.com. And I remember they were losing money, I think $10 million a month or some crazy amount, and they still had an I.P.O. of almost a billion dollars, something really ridiculous.

Rich Karlgaard’s, whose Upside magazine was the first to cover the Silicon Valley start-up scene: The hottest job title during the frothy days was—you’d see 25-year-olds who had the title of “vice president, business development.” It was like sales without the quota. I remember asking one of these V.P., biz-dev guys how his company was doing, and he says, “Oh, it’s great, we’re into our third round of financing.” And I said, Well, how about the revenue side? Are you profitable? He says, “We’re a pre-revenue company."

Over on TimeTrade’s excellent blog there’s a reminder that not everyone was clueless about the Internet and forecasting its impact.  The 95 theses of the Cluetrain Manifesto (now a decade old) are worth reading again (and then, for kicks, take a look at a very recent Business Week article about companies’ increasing desire to know what their workers post on social networks.  Here’s a forecast you can see unfold before your eyes).

Now, if you want to really get your forecasting-head spinning, dip into Richard Watson’s “Extinction Timeline,” a forecast of, well, the end of things.

You’ll note--if you are a blogger—that most everything (spelling and blogging, anyway) will end in 2022.  For everyone else, peace and quiet will be extinct by 2038 (unless you’ll be flying in one of the new wifi-equippped AirTran planes, in which case peace and quiet just ended).

(I’m frankly intrigued that Watson thinks death will end just about 2057, when I turn 100.  If I turn 100.  Time to go do my 45 minutes of exercise, I think, just in case he's correct.)

I suppose, when we read some of the current forecasts, we can be thankful that we’re so very bad at it.

And when we think about Alexander Graham Bell running a (so-called) pre-revenue company, and being so very right about its future, we can assume that being brilliant, living 24/7 with the innovation, and avoiding historical analogy were all contributing factors.  Maybe, too, the idea of constantly iterating the possible, the impossible, the practical, and the the profitable was also decisive.

And then again, maybe when all is said and done, Bell was just plain lucky.

Posted by Entrepreneur Generations

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