The 2008 financial crisis, Brexit, the election of Donald Trump, the Covid-19 epidemic, the invasion of Ukraine, the return of inflation, and what next? The list of surprises keeps growing. Against this backdrop, a new perspective on forecasting is imperative. How can we thrive in a world we can’t predict? This is the question I address in my new book “Welcome to uncertainty” out today.
Surprises are nothing new in human history, especially in wars or in the world of finance and economics. But we are most helpless in the face of the unprecedented, that is, the completely new. In war, an attack like the German invasion of Poland in 1939 often comes as a surprise, but it can be nothing new. Similarly, the arrival of a competitor may come as a surprise, but that’s business. Novelty brings an additional difficulty. It has never happened before, which makes it hard to imagine that it is even possible. What’s special about the unprecedented event is that its main effect is to render obsolete the assumptions on which predictions were made, and even our mental models, those big beliefs we’ve built up about the world. For example, the launch of the Sputnik satellite by Russia in 1957 was a major shock to America, which discovered that its main adversary, whom it had thought to be far behind, was in fact leading the space race.
The consequences of an unprecedented event are sometimes considerable, often painful, as in the case of Nokia, or even dramatic, as in the case of Covid-19, which officially killed about 4.4 million people at the time of this writing (certainly many more in reality). It’s the navel-gazing hotel industry that doesn’t see Airbnb coming. It’s the taxi companies that, after years of comfortable monopoly, suddenly see Uber and Lyft coming out of nowhere. It’s the retail industry, which is slowly waking up to Amazon’s growing strength after years of underestimating it. France is stunned to discover the Islamist insurgency in Africa that has been brewing for years. None of this had been predicted by the armies of analysts maintained at great expense by giants – companies, states – who have discovered that they are blind.
So, analysts be damned? Forecasters be damned? What if, instead, the problem was with the very idea of forecasting? The world is changing radically, becoming increasingly uncertain. In such a world, it is not possible to predict the future, and those who base their actions on predictions sooner or later expose themselves to catastrophe. Predictions inevitably fall victim, sooner or later, to the unprecedented event that renders them obsolete. And yet the decision-making tools we use have not changed. They are based on a predictive paradigm. Most of them date back to the 1970s and are rooted in the civilization of the Industrial Revolution that began one hundred and fifty years ago. It’s high time we completely rethought them for the new world.
For almost twenty years now, I’ve been defending the idea of the impossibility of prediction in my work with students, corporate executives, and public officials, and I’ve always noticed how difficult it is for my participants to accept it. The rhetorical technique I use, I confess, is relatively crude: it consists of listing ad nauseam examples of false predictions that have cost dearly to those who believed them. The exercise isn’t difficult; you can easily find hundreds of them, famous or not. After a while, the message seems to sink in, and doubt begins to creep into the minds of the participants, or at least some of them. That’s usually when the retort comes: “Fine, but what do you suggest instead?” This question always reminds me of the following anecdote: I am walking in the countryside with a friend after a heavy storm, and we see an electrical cable lying on the ground. My friend reaches out to grab it, but I suggest that he shouldn’t touch it because it’s dangerous. He turns to me and replies, “Fine, but what do you suggest instead?” Well, nothing. All I offer is that you won’t die, which is enough, and in principle I don’t owe you anything more. The same goes for prediction. If you use it, sooner or later you will be exposed to disaster. That’s why this book suggests above all that you don’t. It follows the adage of the philosopher Gaston Berger, who wrote: “Life is always a gamble; let’s at least avoid absurd ones”. The point, then, is to avoid the absurd gamble of making predictions in an uncertain and therefore unpredictable environment. In practice, of course, it’s a bit more complicated; not having an accident is not enough to guide a strategy, but it’s a good place to start.
But to eliminate the absurdity of prediction, you must show why it’s absurd. Is that enough? Not really, no. Whatever the argument, whatever the number of examples, each more striking than the last, whatever the understanding of the problem, it does indeed seem impossible to bring about a change in management practices. So the central question we need to answer is: Why do intelligent people who know their approach is dangerous continue to use it despite clear evidence of the disasters it brings? Part of the answer lies in human psychology, part in the training we’ve received, and part in the fact that prediction is an institutional reality in most organizations. It is so widespread that its costs are shared. We can’t hope to reduce its use without addressing the cultural dimension of its universality. Prediction is a cultural practice and an ideology; it cannot be swept away simply by showing that it doesn’t work.
What if we can’t predict? It’s not a matter of replacing one method with another. The very nature of uncertainty makes the idea of a method, in the sense of a recipe that guarantees a result, impossible.
The thesis of this book: change the way we see the world
The thesis of this book is that to propose new tools and approaches, we must first clarify our understanding of the environment. If the way we see and understand the world is wrong, then everything that flows from it, including management methods and principles, is wrong and will lead to disaster. To deal with an uncertain world, therefore, we need to clarify three issues: first, the nature of the world and how it is evolving; second, how we can obtain valid information about the world in order to act; and third, how the various actors involved in decision making under uncertainty interact. This is what this book proposes. On this basis, it provides decision-makers and those who advise them with a set of principles to help them understand, protect themselves from, and above all take advantage of uncertainty and the unpredictable.
The idea of this book was born in 2016, when I was invited to give a course entitled “Anticipation and Action” to students in a specialized master’s program “Operations and Crisis Management in Cyber Defense” at the Saint-Cyr military school in France. My interest in uncertainty, however, goes back a long way. As far back as I can remember, I’ve always seen time as a progression toward something new. Long before I knew this, I adopted Gaston Berger’s position very early on: tomorrow will not be like today, it will be different and needs to be created. As an economics student, I was struck by the absurdity of neoclassical models, timeless and so far from reality. Later, as an entrepreneur, I was directly confronted with uncertainty: having to make decisions with virtually no tangible evidence, when every direction seems equally valid, and not knowing for a long time, often until it’s too late, whether you’ve made the right ones. I suspected, again intuitively at the time, that uncertainty was a kind of dark matter in decision making: important but largely invisible in the management literature of which I was an avid reader. It was only with the discovery of effectuation, a theory of entrepreneurship developed by the Indian American researcher Saras Sarasvathy, that I realized that uncertainty is in fact the raw material of entrepreneurs, the stuff they feed on to create new products, new markets, and new organizations.
For entrepreneurs, innovators and, in a sense, all those excluded from the system, uncertainty is therefore an opportunity, because change can benefit them. It is the precondition for creative change. As such, it is interesting to note that it is a central concept in seemingly very different activities: politics, intelligence, entrepreneurship, large for-profit and not-for-profit organizations, public administrations, associations, and so on. And yet it strikes fear into the hearts of the managers of large organizations that I work with in my training seminars, and into the hearts of our fellow citizens. Faced with a world that is changing rapidly and profoundly, they are at a loss because the usual decision-making models no longer work.
What entrepreneurs feed on when they change the world is also what frightens politicians and decision-makers. For the established organization, which sometimes has much to lose in the face of change, uncertainty is experienced primarily negatively. Much of their work consists of protecting themselves against the dangers of uncertainty: technological change, disruptions in their environment, the emergence of new competitors, changes in regulations, etc. But uncertainty is also the only source of opportunity for future growth. It is more than that. It can be a source of happiness, the joy of mastering one’s environment, of inventing and charting one’s own course, for individuals and organizations alike. Why should what motivates and delights entrepreneurs necessarily frighten corporate decision-makers? Fear-inducing uncertainty is a perception that needs to be changed. A world without uncertainty would not only be boring; it would be inert and deadly. We’d be a colony of ants going about our physiological business for the rest of our lives. Instead, we can constantly invent the world around us and in which we live. In fact, it’s a distinctly human trait to construct the world we live in through thought and action. It is this dual nature that gives rise to the attitude of this book: to protect ourselves from uncertainty when necessary, of course, but to take advantage of it as much as possible.
So, welcome to uncertainty!