Big business in seeing the future of business

Former U.S. Vice President Gore speaks at the Closing Plenary Session of the Global Warming and Climatic Change Conference in Santiago
Former Vice President Al Gore has spread the news about about global warming, a topic that some futurists have been talking about for two decades.Ivan Alvarado / Reuters

In the 1967 movie “The Graduate,” Dustin Hoffman’s floundering character is famously given just one word of advice for the future: “Plastics.”

If Paul Saffo were talking to a young college graduate today, he also might offer just one word of guidance: “Robots.”

And that person might want to pay attention. For the past 25 years, Saffo has been among the growing number of people who make a living telling big businesses, government leaders and others what the future may bring, and how they can take advantage of it.

There’s big business in trying to forecast the future — and, for many businesses, big consequences for being wrong. With corporations fretting about everything from hurricanes to whether high heels will sell this fall, some in the forecasting business say they are more in demand than ever.

“We happen to be living in a time of very rapid change, and I think any CEO or leader ... who’s really worth their salt is looking ahead,” said Kathi Vian, program director for the Institute for the Future’s 10-year forecast.

Forecasters _ several prefer to describe themselves that way, as opposed to the more loaded duty of "predicting" _ also say they are hearing from a wider group of executives and organizations seeking advice about the future. They include governments, nonprofits and industries that used to think such guidance was unneeded.

“It’s clearly a confusing world out there, (so) clearly there’s a big demand for people to make forecasts,” said Dean Baker, co-director of the Center for Economic and Policy Research, who occasionally makes forecasts himself.

Nariman Behravesh, chief economist with Global Insight, remembers how in the 1990s many high-tech companies seemed to see no use for his company’s economic forecasts. Then the tech industry crashed, surprising and devastating many companies.

“Now we have as many of our clients those technology firms, because they realized they’re not immune to the (economic) cycle,” he said.

These days, forecasting can run the gamut from trying to explain to a real estate group how global warming might affect sales in the coming decades to helping a computer maker evaluate how foreign currency fluctuations might impact business in the next few months.

Thanks to unforeseen but devastating events like the Sept. 11 terrorist attacks and Hurricane Katrina, forecasters also are increasingly being asked to provide scenarios for the unexpected.

“They’re interested in the forecast ... but they also want to know, OK, how could things go wrong?” Behravesh said.

Another concern is how to react if things unexpectedly go right. Behravesh said forecasters have been guilty of missing pleasant surprises, such as the U.S. technology boom in the 1990s and the collapse of Communism in Eastern Europe, “because we couldn’t figure them out.”

There’s also a market for analysis that looks further into the future, offering up pie-in-the-sky ideas that could become everyday phenomena later on. (Remember, someone had that wacky idea about the Internet long before we were all posting home videos on YouTube.)

Saffo, a longtime technology forecaster who also teaches at Stanford University, believes that one of those big future trends is robots, who might one day drive your car and do other tasks.

James Canton, chief executive of the think tank Institute for Global Futures, thinks that in the future many of your belongings will have embedded information, allowing, for example, your various pieces of clothing to communicate with each other.

Of course, these prognosticators easily could be wrong. Anyone who’s been in the business long enough has come to experience that particular embarrassment — as well as the joy of getting something really right.

Mark Anderson, who runs the technology industry newsletter Strategic News Service, says he foresaw Apple Chief Executive Steve Jobs’ triumphant return to the computer maker he co-founded two years before it happened — perhaps before Jobs himself even envisioned it.

“You hear a lot of people say you can’t predict the future, and I’m here to tell you you can,” Anderson said.

Glen Hiemstra, a public speaker and founder of, a consulting firm, remembers talking about global warming as early as 1987, long before Al Gore and his cohorts prompted widespread interest. Canton was saying networked Internet communications would change the world as early as 1994, even though by 1998 at least one major corporate client still didn’t want to hear it.

On the other hand, Canton also thought that the health care industry would have embraced advanced technology for recording and sharing patient information by now and says he did not accurately forecast how resistant doctors and others would be to giving up the traditional paper file system.

Hiemstra told people in the early 1990s that he believed the traditional, gas-powered auto  would largely be replaced by cars running on hybrid engines and other alternative fuel sources by 2010 at the latest. Now he sees that “gasoline still has a little bit of a run.” Anderson thought for sure that broadband Internet would experience a huge boost in popularity — around 1996, half-a-dozen? years before it actually happened.

The business of financial forecasting, in particular, also has its share of schoolyard peer pressure. While some forecasters delight in making off-the-wall predictions, for many it can be tough going against the grain.

Baker, the economist, who said he normally stays out of the forecasting business, has been doggedly predicting a housing bust since as early as 2002 or 2003, even when few agreed with him. He took a similarly unpopular view about a stock market downturn beginning in the late 1990s and was eventually vindicated.

Among leading economists, there is rarely a huge amount of dissension, Baker says, because “if you’re wrong the way everyone else is wrong, no one holds it against you.”

Baker, who confesses to using the same excuse himself once or twice, also says forecasters are guilty of defending predictions gone wrong by pointing to unexpected changes. People can talk about prevailing economic theories, Baker said, but “the predominant school in economics is the ‘who could have known’ school.”

For some businesses, Baker sees forecasting as a kind of security blanket, giving companies assurance that they are getting expert guidance — and providing a convenient foil if the company makes a bad bet based on those predictions.

Saffo agrees, noting that it is likely one reason why you can now find predictions for almost anything, ranging from the market for cell phone ring tones to the projected revenue for an obscure type of software.

“We love the future, but we hate uncertainty, and people will do anything they can to reduce uncertainty,” Saffo said.

Saffo, by the way, thinks that logic is flawed. “A business person should love uncertainty because uncertainty means opportunity,” he said.

It also can be tough to keep believing in something that even your clients — the people who pay you — either don’t want to hear or doubt is true. Canton remembers how unhappy an insurance agency was in the 1990s when he told executives they would have to rethink their entire pricing model because of increasing demands for, and access to, information about how such prices are set.

“People pay us to tell the truth,” he said. “It’s not always welcome.”

Still, sticking with your guns, and proclaiming it loudly, can score the biggest victories.

“The thing that’s worse than being wrong is having the right answer, but having that answer ignored,” Saffo said.

One reason forecasting is tough is because, as forward-thinking as they like to think they are, many forecasters have no real choice but to take their cues from behaviors of the past. That can backfire if the world evolves in a way like never before, as it did with the technology boom in the 1990s.

Forecasters have gotten new advantages in recent years, as the advent of more accurate data-tracking technology has helped give people a better picture of everything from what color sweater is selling well to where political instabilities may emerge.

Still, massive amounts of data can easily become distracting. It also can be difficult to sort out what’s important, particularly when some data comes from sources that are inherently biased, like companies or trade groups with a vested interest in a positive outlook.

“You really have to know what you’re doing with it, because more data by itself doesn’t necessarily do you any good,” Baker said.

Many in the business of forecasting say one key element of doing their job is learning who to listen to, and deciding what is worth paying attention to. Vian notes that her institute may spot a trend that’s interesting and valid, but ultimately decide it will have little bearing on, say, corporate practices. Or they may see a trend that looks great for businesses on the surface, but could come around to be devastating later on.

It also can be tough to figure out what to make of even the most clear-cut findings. For example, Vian said it’s well known that demographic changes in the United States mean the population is getting older. But people also are living longer, healthier lives, and she thinks that means many base assumptions — about retirement, lifestyle and finances — could turn out to be completely wrong. If you do some fancy math looking at how long people have left to live,  you could say that, in a way, the population is getting younger.

“Rather than talking about aging, we talk about longevity,” she said.

In looking at future trends, Saffo said he keeps his eye out for anything that’s truly unusual or goes against his preconceptions. Lately, he’s been noticing big corporations and smaller governments, like the state of California and the city-state of Singapore, taking the lead where large federal governments are not, on issues such as global warming. He thinks that portents an important trend, perhaps leading to such an unusual notion as a war fought by privately employed soldiers.

Of course, it may turn out differently. After being in the forecasting business for a quarter-century, Saffo has more than made peace with that notion. In fact, he’s come to embrace it.

“The delight to this world full of surprises is we’re mostly wrong,” he said.