Apply skepticism to predictions

This is my favorite time of year. For me, it’s the time of year when every journalist, pundit, analyst and anyone else with an opinion publishes a list of predictions for the new year. We’ve heard before of the Year of the LAN, the Year of the Network Computer and the Year of the Internet. While all these events actually occurred at some points, they never occurred in the years for which they were forecast. This year, we’ll hear about the Year of Wireless or perhaps another prediction of the PC’s demise. Again, the pundits will mostly be wrong.

So, rather than yield to the temptation of creating my own list, I’m going to explain why folks are consistently wrong and how you can test the validity of experts’ predictions.

Imagine that you’re standing in Kitty Hawk, N.C., in 1903. After many attempts, Orville and Wilbur Wright have finally succeeded in making the first manned flight. While their time aloft is short, their actions will change the course of history. It will change the way business is conducted. It will change human behavior into the 21 st century.

Now, imagine that at the end of that historic flight, you were to go to Orville and Wilbur, clearly the aviation experts of their day, and ask their opinion of frequent-flier programs.

The problem with predicting the future is the nature of the method used. Most analysts and pundits who are good at what they do have excellent pattern-recognition skills.

The ability to observe early on the repetition of established rules of behavior – or what has already occurred – gives a good analyst an edge.

For example, want to impress your friends and family with the date the next upgrade of Windows will ship? That’s easy. Take the beta release date and add at least one year. It’s a pattern that has held true for every release, including Windows 2000.

But most technologies don’t fit established patterns, and most pundits refuse to acknowledge that they don’t have a crystal ball. So here are some guidelines to help you test the many predictions forecast:

• Any vendor can ship 50,000 of anything. Anytime a new product is introduced, you can always find someone willing to buy it, as well as an analyst who will project a trillion-dollar market for it. A good rule of thumb is to ask: “Would I spend my own money on this?” If the answer is no, it’s likely no one else would either.

• What’s the “visible differentiation?” The next time you hear about a product that’s touted as a “Windows killer,” take a good look. Can you see a visible – and positive – differentiation and tangible benefit for end users, OEMs and independent software? If you can’t, buy Microsoft Corp. stock

• Best of breed doesn’t ensure victory in the marketplace. In fact, if history is a guide, it almost always guarantees the opposite. Take VHS and Beta, Mac OS and Windows. Rooting for best of breed is a great ideal, but it’s not the sole criterion for success.

Technology doesn’t move at clear right angles. Rather, it twists and turns at dizzying speeds and creates new market opportunities and venues for success as quickly as it closes others.

So, how do you predict the future? How do you seize the opportunity to create the Next Big Thing and retire before 30? My favorite visionary, Alan Kay, said it best: “The best way to predict the future is to invent it.”

Gartenberg, former vice-president and research area director at Gartner Group Inc., is a partner at Hudson Venture Partners LP, a New York-based venture capital firm. Contact him at [email protected].

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