Forecast, Don’t Predict

8 May

Predict: to declare or tell in advance; prophesy; foretell

In short, a prediction is looking in a crystal ball and is based on one’s knowledge and gut feeling. We all think we are very knowledgeable and can predict the future, and we all know how things turn out. Exactly the opposite.

Crystal Ball

Crystal Ball

A few examples

Apple: A prominent VC, Fred Wilson, recently predicted that Apple won’t figure among the top three companies by 2020 while Google and Facebook will. His logic is based on his knowledge of the hardware industry. We have to wait six years to see how true this prediction is.

The Beatles: “The Beatles have no future in show business.” — A Decca Records executive to the band’s manager, Brian Epstein in 1962

Harry Potter: “Children just aren’t interested in witches and wizards anymore.” — A publishing executive writing to J.K Rowling, 1996

iPhone: “There’s no chance that the iPhone is going to get any significant market share. No chance.” — Microsoft CEO Steve Ballmer, 2007

Computers: “I think there is a world market for maybe five computers.” — Thomas Watson, chairman of IBM, 1943

Personal computers: “There is no reason anyone would want a computer in their home.” — Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

Invention: “Everything that can be invented has been invented.” — Charles H. Duell, Commissioner, U.S. Office of Patents, 1899

Computer memory: “640K ought to be enough for anybody.” — Bill Gates, 1981

Big iPhone: “No one’s going to buy a big phone,” – Steve Jobs, 2010

Forecast: to
predict (a future condition or occurrence); calculate in advance

On the other hand, a forecast is based on cold, hard data. Removed from gut feeling or one’s own knowledge or emotion, a forecast takes lots of data and extrapolates from it. Could a forecast be wrong? Yes, it’s possible. However, a forecast always comes with a probability, the chance of something happening. While a prediction carries with it a heavy load of 100% probability, a forecast can be 0% or 100% or any figure in between.

Nate Silver, the founder of and the guru of statistical forecasting, has risen to be the most prominent figure in this field, especially after the 2012 presidential elections when many people and polls predicted a Mitt Romney victory. Nate Silver took the data from many polls, ran them through his forecasting analysis, and said that there was a 90% chance of Obama’s victory. His forecast of all 50 states came true. Not all of his forecasts for this year’s Academy awards were true, but at least, he didn’t make a fool of himself like so many famous people.

Suggested readings:
25 Famous Predictions That Were Proven To Be Horribly Wrong
15 famous predictions that were spectacularly wrong


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