While it is no longer gender-appropriate, Robert Burns was on target in his poem, “To a Mouse” in 1786, when he wrote, “The best laid schemes o’ mice an’ men Gang aft a-gley [often go awry]”. Anyone in the forecasting business struggles with this every day. If you follow any financial reporting, I’m sure you’re painfully aware that many pundits think the market is about to crash while another significant contingent sees a great year ahead. At least half of them will probably be wrong and perhaps even more as the market may stay relatively flat. A few weeks back, I wrote about bookending the outcome and noted that construction costs can vary dramatically from the estimate. I also noted that many of the underlying causes cannot be predicted for a single project although they tend to even out over a portfolio of projects.
A recent Philadelphia Inquirer article reminded me once again of the challenges inherent in predicting the future. A traffic forecast predicted that NJ turnpike traffic would rise more than 70% from 2005 to 2032. That seems like a very logical prediction and I bet many would think we’re on track for that outcome. Surprisingly, one third of the way through the forecast period, traffic volume has actually dropped 10%, raising serious questions about all of the public money invested in highway expansion. What changed? The Great Recession significantly impacted commercial and passenger travel and young adults are driving less, opting for public transportation or living in a virtual world. Care to forecast the next ten years? We can certainly hope the effects of the Great Recession pass but the younger generation’s driving habits may represent a long term shift. How about working remotely, which has become very easy, may be a more efficient use of your time, and is obviously more environmentally friendly?
So…what happens to folks in the forecasting business? There is still value in making a best estimate but you really should conclude with open-ended questions to uncover reasons why the forecast might be wrong and to unlock your creative side. For the traffic study, perhaps you need to ask questions such as: How would a war impact this country? What impact could we expect from a prolonged drought? How will driverless car technology impact the number of cars on the road? Will sustainable energy solutions make it cheaper and more environmentally friendly to drive personal cars? What would cause traffic to be 25% higher? 25% lower?
These questions won’t guarantee an accurate forecast but they will expand the “bookends” and hopefully better prepare you for the inevitable surprises.
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