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Predicting the Future

Originally published June 25, 2009

Let’s face it. If you really can predict the future, you should be in Las Vegas or at the race track. You can make a lot more money there than you can wherever else you are at this moment. Thereality is that part of the human condition is that of not being able to predict the future. The truth for all of us is that the only real way to know the future is to watch it unfold a day at atime.

Having stated the reality, it is nevertheless valuable to at least project some small part of the future. There is real value in being able to predict even a little bit of the future. If you know thefuture, you can predict marketplaces. You can know what people will want to buy before they know it themselves. If you can predict the future, you can put your company into a proactive position– and being in a proactive position in a marketplace is truly a strong place to be. If you can predict the future, you can get “ahead of the curve.”

There are then many very valuable reasons why predicting the future is a very worthwhile activity. That is, it is very worthwhile if you can actually do it with any degree of accuracy.

So how have people looked into the future – or at least, tried to look into the future – in the past? Despite the reality of not actually being able to look into the future, people havedone a surprisingly good job of at least anticipating some of the future.

In many circumstances, the future can be predicted by looking at the past. A while back, an academic told me that the past is no predictor of the future. When I roll dice, the next number that I rollis entirely independent of the numbers that I have rolled in the past. The academic claimed that this proves that the past is no predictor of the future. I countered by saying that if he reallybelieved that, that he and his university should pay no attention to the grades or behavior of students seeking admission. If the past were no predictor of the future, then it doesn’t matterwho is entered into the university. Or, banks should pay no attention to whom they make loans. The fact that a person has never had a job should not be a criterion for making or not making a loan.This line of thinking, of course, is bogus. The past has a profound impact on the future, despite the academic and his dice analogy.

The simplest – and perhaps most effective – way to look into the future is to look into the immediate past. Examine carefully what is happening today and it is a good bet thatapproximately the same thing will be happening tomorrow. For many events in the world, this approach of looking at what is happening today and then predicting that the same thing will be happeningtomorrow actually works quite well.

A variation on this approach is to look at recent historical trends. Instead of looking merely at yesterday, look at last week, last month or last quarter. And if there is a significant trending thatappears over those periods of time, then the trend that has been discovered is likely to continue into the future. Trending is definitely a step up from merely looking at what happenedyesterday.

However, trending has its own fallacies. It may be true that swim suits have sold strongly in the months of June, July, and August. But it is a good bet that this trend will not continue on intoSeptember, October and November.

Instead, a full annual cycle of data is in order. If you are going to look for trends, look for comparative trends for the same time in a previous annual cycle. Compare this August’s sales tolast August’s sales and you will get a much truer picture of the trend. So we see that looking beyond immediate information to comparative numbers outside the immediate calendar or businesscycle is a more sophisticated approach.

The value then of historical data is that historical data is an excellent predictor of the immediate future, assuming that trends remain constant. But what about circumstances where trends will notremain constant?

Suppose a company is about to embark upon a new product that will bring in an entirely new class and type of customer. Suppose a cosmetics company decides to start manufacturing and sellingautomobile airbags. No amount of past history or past trends will say anything about the activity that will be generated by this entry into the new and unexpected marketplace. Instead, common senseprojections are entered and are extrapolated into the existing foreseeable and likely trends.

But what about unforeseeable marketplace activities and conditions? It is one thing to be able to forecast events that are in the control of the corporation. It is quite another to be able toforecast and foresee events that are not in the scope of control of the corporation.

One approach to looking into the uncontrollable future is to read about new breakthrough and basic technologies. Staying abreast of research and new developments is a good way to look into thefuture. When a breakthrough is forecast, the results of the breakthrough are then extrapolated into the marketplace. For example, it is known that Brazil has discovered huge amounts of oil reservesoff of its coast. The problem is that the Brazilian oil is in really deep water. It is going to take a lot of time and investment to be able to retrieve that oil. So what will the sudden availabilityof Brazilian oil do to the oil and gas marketplace? And when will the Brazilian oil become available? No one knows what marketplace conditions will exist by the time the Brazilian oil is ready.Perhaps by then, the Western world will have already found replacements for oil. Perhaps the advent of new sources of oil will merely further drag down the cost of oil. Or perhaps the world demandfor oil – with China and India now solid players – will still be sky high and the addition of Brazilian oil will merely start to stem the tide of oil that is priced at $1000/barrel.

If there is an attempt to look into the future and gauge the effects of unforeseeable events, there must be some attempt made at projecting ALL relevant unforeseeable events. Otherwise, the impact ofone variable can lead to very misleading conclusions.

Looking into the future then is not an easy thing to do, however it is done.

There is one final alternative. When all else fails, find a gypsy with a crystal ball. Then peer deeply into the crystal and watch the future unfold.

  • Bill InmonBill Inmon

    Bill is universally recognized as the father of the data warehouse. He has more than 36 years of database technology management experience and data warehouse design expertise. He has published more than 40 books and 1,000 articles on data warehousing and data management, and his books have been translated into nine languages. He is known globally for his data warehouse development seminars and has been a keynote speaker for many major computing associations.

    Editor's Note: More articles, resources and events are available in Bill's BeyeNETWORK Expert Channel. Be sure to visit today!

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