Last year was a whirlwind of forecasts, particularly in the financial world. Every other day, there seemed to be a new prediction about an impending recession in the United States.
Bloomberg Economics put the probability of a recession in 2023 at a stark 100%—in other words, complete certainty.
Despite these confident predictions, the recession never arrived.
Consider another confident forecast—Paul Krugman’s prediction about the internet. “The growth of the Internet will slow drastically,” he wrote in 1998. “Most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”
That one may have slightly missed the mark. Krugman went on to win the Nobel Prize in Economics.
These aren’t anomalies. In the world of predictions, swinging and missing is far more common than hitting a home run.
Philip Tetlock, a professor at the University of Pennsylvania, conducted an eye-opening study. He tracked 284 experts whose bread and butter included commenting on political and economic trends. Over roughly two decades, from the mid-1980s to 2003, Tetlock gathered over 82,000 predictions from these pros to test their accuracy.
The experts performed terribly. They failed to beat a simple algorithm that assumed the future would mirror the past—for example, that the current GDP growth rate of 1 percent would remain the same in the next two years. The experts’ only victory was over Berkeley undergraduates, “who pulled off the improbable feat of doing worse than chance,” Tetlock writes.
Extra education or experience made no difference. Experts with a doctorate failed to outperform experts without one. Seasoned experts failed to outperform the amateurs.
There was one factor that affected accuracy: media acclaim. Experts who attracted media attention—the type of pundits you see on TV—performed worse than their lower-profile colleagues. The more media appearances an expert made, the greater was their temptation to offer overconfident sound bites and quotable predictions that turned out to be wrong.
Yet the experts who make inaccurate predictions aren’t called out. They often get away with it. People rarely say, “Maybe you should sit this one out, Dr. Stu, since 90 percent of your economic predictions have been proven wrong.” By then, we’ve already moved on to the next, shiny, exciting piece of breaking news.
Every now and then, Dr. Stu will get a prediction right—but not because he’s got divine levels of foresight. It’s because he got lucky. If you take shots all day, you’ll eventually hit the target. But that doesn’t make you a good marksman.
Don’t get me wrong: Experts serve critical functions. I wouldn’t want a dentist who learned how to perform a root canal by watching YouTube videos. Experts have experience, which means they’re terrific at explaining what happened in the past. But they aren’t good at predicting what will happen in the future.
The problem isn’t just with experts. No one is great at predicting the future. Much of life can’t be forecasted, diagrammed, or reduced to a PowerPoint deck. When the future doesn’t match our expectations, our projections get thrown out (or worse, they’re still followed).
Will a recession arrive this year? Maybe. But then again, maybe not.
That’s the point: We just don’t know.
It’s better to be uncomfortably uncertain than comfortably wrong.
And in the uncertainty of life lies the opportunity to create your own future, rather than just guessing it.
