SIX RULES FOR EFFECTIVE FORECASTING by: Paul Saffo

1. Which is more appropriate to use “accurate forecasting” or “effective forecasting”? Why?

The aim of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present so it is more appropriate to use effective forecasting since the primary goal of forecasting is to identify the full range of possibilities, not a limited set of illusory certainties. Accurate prediction is possible only in a world in which events are preordained and no amount of action in the present can influence future outcomes. In the real world nothing is preordained and what we do in present affects how events unfold, often in significant unexpected ways. Whether a specific forecast actually turns out to be accurate is only part of the picture. Above all, the forecaster’s task is to map uncertainty, for in a world where our actions in the present influence the future, uncertainty are opportunity. The forecaster must be able to articulate and defend its logic. Moreover, the consumer of the forecast must understand enough of the forecast process and logic to make an independent assessment of its quality and to properly account for the opportunities and risks it presents. Effective forecasting provides essential context that informs our intuition. A good forecast broadens understanding by revealing overlooked possibilities and exposing unexamined assumptions. It narrows down the decision space in which intuition must be exercised. The author mentions six rules for effective forecasting. First rule is to define a cone of uncertainty which is a tool to delineate possibilities that extend out from a particular moment or event. Many factors go into delineating the cone of uncertainty, but the most important is defining its breadth, which is a measure of overall uncertainty. The art of