“It is very hard to predict, especially the future.” This Niels Bohr quote may well be the last word on our ability to predict the future — we just cannot.
The history of humankind is a history of impatience. Not only do we want to know the future, we want it when we want it. When gods turn their back, men take things into their own hands — looking for ominous signs in the sky or clues hidden in a candle flame or the entrails of poor Mesopotamian sheep. Armed with these accessories, wars could be planned, pandemics predicted and even bad marriages averted. In those places where the gods communicated verbally with humans, prophets and oracles were appointed to provide answers — on demand, when the mood strikes us.
Apollo, the Greek god, established at Delphi an Oracle where anyone could ask him or his designated priestess questions about the future. In a trance-like state of prophetic ecstasy, the priestess would sit away from her “client’s” sight, and call her cryptic prognostications up into the chamber above where the anxious petitioner awaited her proclamation. Vapours that many believed to be Gaia’s (Apollo’s great-grandmother) actual breath, emanated from under the ground. Apollo always speaks the truth, but never gives a straight answer, often replying with a riddle so ambiguous as only to make sense when it is too late to act upon it. It was a successful start-up and transformed Delphi into a prosperous town.
Predicting the alphabet
The town square is again teeming with economists and politicians — the modern-day oracles and prophets — claiming to foresee the post-pandemic world. They have extinguished the candle flame and replaced it with Big Data, statistics and models.
So, what do these soothsayers predict? Are we going to see a U-shaped recovery or an L, V, W or something else?
According to JK Galbraith: “The only function of economic forecasting is to make astrology look respectable”. When the 2008 financial crisis struck, Queen Elizabeth II visited London School of Economics to listen to the dignitaries describing the ongoing crisis. The Queen wondered: “Why did nobody see this coming?” Robert Lucas, the Nobel prize-winning economist, explained later that economists didn’t predict the crisis because they had predicted that this kind of event couldn’t be predicted! We are unsure whether the Queen was any the wiser for that.
Pundits are once again busy with media reports simmering with alphabet soup of economic recovery.
Analysts predicting a “V”-shaped recovery believe the economy will return to its earlier level very soon. Wall Street, yet again proving to be on a different planet from Main Street, seems to be factoring in a V-shaped recovery, where vacationers, emerging dazed from lockdowns, jet off to sandy beaches.
The proponents of “U”-shaped revival predict “sluggish revivals, episodic setbacks, and pricey adjustments” but not a decade of catastrophe. They expect many small businesses and popular brands to perish, and skilful adaptors and disrupters to emerge stronger (think Big Tech). Zoom has played host to meetings, conferences, firings, birthdays, weddings and even break-ups (“zumped”). It raised its annual sales forecast by a ‘conservative’ 100 per cent — an update that comes once in a company’s lifetime, if ever. Its share price has grown around 500 per cent since debut.
Some die-hard pessimists are betting on L, where growth remains weak. The Bank of England said the UK has slipped into its deepest recession in three centuries — since the “Great Frost” in 1709 — with output plunging almost 30 per cent in H1 2020.
In a W-shaped recovery, the economy is expected to partially bounce back before plunging again amid a second round of infections as cities reopen and people are tormented with renewed exposure to the virus.
So, which is most likely? Nobody knows. How about a Q-shaped recovery, where we go round in circles and then fly off on a downward spiral!
Refocus our thinking
Socrates said, “I know nothing except the fact of my ignorance.” We need more humility in two areas: First, from some economists who use models and data weaker than they would like to admit and often speak as if they are relying on Physics when it is actually politics or self-interest. Second, from the public, which is too quick to demand impossible certainty and equally prompt to condemn a prediction that doesn’t come true. This virus is new, so our data and models are preliminary. But the models are still better than nothing. An educated guess is still better than no guess. And it’s certainly better than an uneducated guess that makes us do wrong things (inject bleach!).
Not believing in predestination is not akin to being helplessly tossed by life’s events. Our predictive ability is only as good as our data and models — and they predict probabilities, not certainties.
It’s probably time to turn to literature and philosophy to reconcile ourselves with the future. Both offer life lessons about actions and consequences that might help us cope with our insatiable need for certainty. We never know enough to be certain, but we usually know enough to act reasonably. For better or worse, we bend the arc of history invoking a call to arms — the need to decide what we want to happen, and then set out to turn that into reality. Not through augury or statistical modelling. but utility and hard work. The way we live, the actions we take (or don’t) create the future (Karma). Ensuring people have enough to eat with adequate money and decent healthcare to lead dignified lives contributes towards a more equitable society.
We don’t need to examine the livers of sheep for signs from gods, because there is no uncertainty around that.
The writer is a Harvard alumnus and an investment banker based in Mumbai