The future is not a straight line

Posted by Mike Kaaks

23 August 2013

The future is not a straight line Why are we only prepared to accept a view of the future which is conservative? I listen to public debate about the end of the mining boom. It will never happen again they say. Why not? As a caller pointed out on talk back radio recently the Eppalock dam was "never going to be full again" and now it has overflowed. Why were we not prepared to accept an extreme view of the future? Why do we only see the future in small steps along a straight line from where we are now, irrespective of the size and direction of the strides in our past. It was there again on Inside business this week - a chart which plotted GDP and Domestic demand over time, historically and into the future. The history looked like spaghetti thrown at the wall to test for al dente, up and down all over the place. The future showed two neat smooth lines trending toward sameness. It's everywhere.

First its about economics and economists. A wonderful discipline full of well intentioned people who sadly don't see the flaw. It only works in the rear view mirror. Listen to their advice recently in the face a an unexpected blow out in the federal budget.."we need to address this through a combination of cuts to spending and increases to tax". OK, but which cuts, which increases. And by the way, how did economists not tell us that this was about to happen? Not surprisingly, they are like all of us; none of us can tell the future. About a decade ago business at large was on the verge of doing something about this as it considered using a more robust forecast mechanism in place of annual budgets. Over time the commitment aspect of a budget has outweighed the planning vaue of teh forecast. I love the Eisenhower quote which I paraphrase as follows: plans are nothing; planning is everything. The message is simple. Once in battle he found that plans had little value, but his planning was indispensable. In our businesses, in our budgets, we plan in great detail only to find out a short time into the budget year that something is radically different from that which we had assumed. What helps us at that point is the planning we did, not the budget accurate to three decimal points. The same experience applies to new product launches, to A&M, it's everywhere.
Back to economics. There's now a field of study called behavioural economics where economists call on psychologists to explain why what we do doesn't follow economic logic. Think about that. Economic logic. Now there's an oxymoron for you.