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Sunday, 4 December 2016

Trying to Forecast What Might Happen? You Will Be Either Wrong or Lucky!

I feel another rant coming on and it’s all to do with the stupidity or political mind games of those politicians who insist on being told the Government’s plans for the Brexit negotiations.

Let me state my stance here.  I voted remain because while I am less than happy about the impact of the EU bureaucracy on this country, on balance the fact that we have had peace in Europe for 70years is a massive plus.

However, the country voted to leave the EU on June 23rd and that should be accepted as the will of the people.  There are some “remainers” who think that we should now have another referendum to overturn the original so why not a third and then we can take the best of three?

They seem to be the same lot who use statistics to prove their point and frequently very suspect statistics, let it be said.  What is worse they argue on the basis of these dubious numbers that everyone is wrong except themselves.

The Autumn Statement by the Chancellor last week is a typical example.  Using the predictions from the Office for Budget Responsibility he forecast several years of doom and gloom to come.

Very possibly correct and just as possibly completely incorrect.  My old friend economist and revered Vistage speaker, Roger Martin-Fagg says on the basis of his considerable experience that any economic forecast has two alternative results:

        “Either you are wrong or you are lucky”.

How on earth can we possibly predict the future accurately?  Take the example of the polls over the last couple of years.

Examine the predictions for the last General Election, the EU Referendum, the US Presidential election and more recently, the primary for the conservative candidate in the French Presidential election.

In every case the polls, and even the polls of polls, were significantly wrong and certainly not lucky.

Take for instance the way that they use sampling techniques.  Obviously the polls can’t check with everyone in the universe so they resort to taking an acceptable sample of the population and asking them their intentions.

The number of people in the sample depends on the margin of acceptable error in the results and that can be as high as plus or minus 2%/

The point is that all polls work on this “accepted margin of error” which they try to mitigate by weighting the results for age, gender, ethnicity, regions, demographics and so on. 

Naturally the individual polls guard this information jealously and they don’t normally admit that given a plus/minus percent or two the results can and indeed are dramatically different.

The recent lack of anything approaching realistic forecasting has now led to a general dismissal of virtually anything that the polls predict and given Roger Martin-Fagg’s strictures they certainly weren’t lucky.

How much store can we have then given the forecasts of any organisation especially one that has political leanings?

Very little I would suggest.  Remember that most of these predictions are PESTLE, (Political, Economic, Sociological, Technological, Legal and Environmental). These are the ones that we in business can do nothing about other than try to guess what might happen and plan accordingly or simply wait and react.

Either way we will be doing precisely what the Government (of any colour) does.

Another of our wonderful speakers on the Vistage circuit, ex-CIA executive Herb Meyer says that:

      “No plan can survive its collision with reality”. 

This doesn’t imply that we shouldn’t plan. It is, however, prudent to have a cultured guess about what might happen, plan for it and then hang on to your hat. 
You might just get lucky.

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