Forecasting is hard, whether it’s about the weather, economic performance, sales volumes, or anything else. This article by Dan Gardner, originally in the RSA Journal, makes some very helpful observations on the psychology of forecasting, and on how to get better at it.
We all have unconscious biases. A lot of people remember the things they forecast correctly, but not the rest – this is called the outcome bias. Looking back with a view that everything that happened could have been predicted is also common – this is the hindsight bias. Wikipedia has this excellent list of cognitive biases.
Hindsight bias makes it very hard for people to compare today with the past reliably. In his article, Dan Gardner talks about the recurrence of people looking gloomily at the present and nostalgically at the past, because the things we were anxious about in the past are so readily forgotten. He writes:
“Dig into the contemporary records of almost any year and you will find people worrying about the future and looking back to more certain times.”
A sensible, practical thing we can all do to improve our forecasting, and address these biases, is to track forecasts and their outcome, and to learn from the good and bad outcomes. This is common in science, but a lot less common in business.