The Unpredictability of a Forecast

We often watch the local weather forecast and ask, “How can someone be so consistently wrong and keep their jobs?” But the weather is not easy to forecast as there are so many variables that can affect it. Regardless of the accuracy, we still cling to these weather reports and have apps on our smartphones to guide us by the hour.

Deep down, we all love predictions. We love to listen to so-called experts predict the future of stock prices. In 2008, for example, analysts forecasted a 24 percent increase in stock prices, when, in reality, they fell nearly 40 percent. In fact, between 2000-2008, the analysts failed to get the direction of change in prices accurately in four out of those nine years. But we still covet forecasts because they offer a peek into the future, whether it’s right or wrong.

Philip Tetlock is one of the foremost experts in the study of forecasters and their accuracy rates. One of his studies examined how meteorologists who had 75 percent confidence in their forecasts turned out to be right just 45 percent of the time, worse than a coin toss. So, if this is the case, why do we spend so much time asking for a forecast? Because more forecasters offer excuses to lure us into thinking it was not their fault. They claim:

1. The “IF ONLY” defense. If only something would not have occurred, the forecast was accurate.

2. The “ceteris paribus” defense. This means something outside of the model of analysis invalidated the forecast.

3. The “almost right” defense. Although the predicted outcome did not occur, it almost did.

4. The “it hasn’t happened..yet” defense. The forecast was not wrong; it just hasn’t occurred yet.

5. The “it’s only one mistake” defense. You cannot judge the forecast by the performance of one single forecast.

The key takeaway is we all need some forecasting in our jobs as we lead in this ever-changing world. But we cannot rely on their accuracy or allow the excuses to make us feel comfortable the next time we ask for a prediction.

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