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Can you learn to navigate uncertainty?

https://www.bbc.com/future/article/20200619-why-you-are-better-at-predicting-the-future-than-you-think

bbc.com

Can you learn to navigate uncertainty?
When we asked our readers to predict the outcomes of key moments over the last year, it revealed some surprising lessons about how to predict the future.

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The Self-Perception of Experts

The Self-Perception of Experts

New research on the accuracy of future predictions by people has some interesting findings:

  • Experts, largely considered an authority, fared poorly than the novices, due to their overestimating their abilities, something known as the Dunning Kruger Effect.
  • People who considered themselves more experienced or educated turned out to be closed-minded and more unlikely to learn from others, leading to a myopic or distorted view of the world around them.

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Facing Change: Millennials Vs Boomers

Past experience, which many experts think helps them to better understand the world, surprisingly does not improve the ability to predict the future. The research data showed accuracy levels of the younger generation (25 to 35 years of age) being the highest.

Old people are slower to comprehend change, faster to believe and share fake news and less likely to be objective.

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Humility

Working with an open mind, ready to dive into unfamiliar territory and learning new things, makes the entire exercise stress-free and rewarding experience. This state of mind, along with basic humility makes for better performance. One’s arrogance, ego and past can negatively affect the prediction quality.

A humble attitude also makes people listen to others opinions and share their own unique insights, helping collaboration and constructive teamwork.

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Disagreements Are Good

While we talk to people we disagree with, without getting personal, we tend to learn new insights and ways of thinking.

In contrast, if we only expose ourselves to people who think like us and share our worldview, we start living in an echo chamber, away from reality.

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Mistakes in predicting our future feelings

Mistakes in predicting our future feelings

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But our br...

Overestimating our future emotions

We overestimate the strength of our emotions in the future.

Studies show that people overestimated their happiness at winning and their disappointment at losing because they forgot all the other things that would happen in a day that would influence their mood.

Feelings are not long-lasting

A lottery winner, for instance, won't spend every day celebrating their win. Nor will someone with a disabling accident spend all their time in shock.

When imagining either situation, we like to think that the feelings will be long-lasting. We forget that we will adapt and that the feeling will eventually wear off.

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Simulating a crisis

Simulating a crisis

Modeling systems are used to provide a better understanding of a bad situation and how to possibly prevent it.

Groups of researchers, teams of engineers and companies are d...

Why we use models

  • A model is just a series of calculations that abstractly represent some systems in the real world. We use models all the time.
  • We may work out the routes we could take to get to work at a specific time of the day. We use past data to make predictions about what we can expect in the future in a given set of circumstances.
  • As the volume of data and the number of variables increase, the computational task would increase.
  • Powerful models aim to forecast inherently unpredictable events and make use of machine learning to look for patterns in the data that would otherwise be missed.

The accuracy of a model

You can never accurately predict what's going to happen. Some efforts come close.

For example, models looking at the weather can achieve more than 90% accuracy. But crises are about change, and a model working from historical data may miss a dramatic and new change.

Scenario planning

It aims to define your critical uncertainties and develop plausible scenarios in order to discuss the impacts and the responses to give for each one of them. If you are aware of what could h...

How to use scenario planning

  1. Identify your driving forces: the big shifts in society, economics, technology and politics in the future and see how it will affect your company.
  2. Identify your critical uncertainties: pick 1-2 of the driving forces (with the most impact).
  3. Develop a range of plausible scenarios: Form a kind of matrix with your two critical uncertainties as axis and depending on what direction each of the uncertainties will take, you are now able to draw four possible scenarios for the future.
  4. Discuss the implications: discuss the various implications and impacts of each scenario and start to reconsider your strategy: set your mission and your goals while taking into account every scenario.

Some pitfalls to avoid

  • Don't fall into the trap is to be paralyzed by the multitude of possibilities. Keep it simple and focus on two major uncertainties.
  • Don't believe that you have to choose one particular scenario and build your strategy around it. Scenario planning is not about choosing just one option for the future but rather dealing with all of the possible outcomes to develop a strategy that will stand the test of all scenarios.
  • When developing your different scenarios, try to not look at the short term. Do not hesitate to look far ahead, anticipating what the market and competitors are going to be over the next years.