Helping the Chronically Overworked Find Life Balance

What You Can Learn From Black Swans, Forecasting, and Idolatry

Chapter 9 Paint Your Environment Part 8

In this chapter I’ve told several stories about forecasting, because so many dysfunctional companies live and die by the forecast because they can’t seem to agree on anything else they stand for.  I am drawn to the topic because it reminds me of an extensive commentary by the medival Jewish philosopher known at the Rambam which is shorthand for Rabbi Moshe ben Maimon, (AKA) Maimonides.

The Rambam argued that soothsaying, fortune telling, divining and related “black arts” are forms of idolatry perpetuated by unscrupulous leaders as a means to control other people by fear. The Rambam said that “It is not fitting for the Jews who are wise sages to be drawn into such emptiness. ”[i]  To put it in a more kindly and general context, he was saying that educated people should know better.

In a similar way, I think that people in the business world should know better than to blindly follow forecasts or other business means of predicting the future, which is exactly what Professor and former hedge fund manager Nassim Nicholas Taleb argues in his book The Black Swan.  Taleb, like the Rambam, marvels that people seem to ignore the terrible track record of those who routinely predict the future and get it wrong.

Taleb uses the example of the black swan as a metaphor.  For hundreds of years, bird experts said that Black Swans do not exist, because one had never been seen. Which was true until Europeans reached Australia, and found them in plenty.  Taleb shows that financial analysts have a terrible track record at predicting the future – they are no better than someone who looks just at the last quarter’s data and extrapolates.  In fact, the analysts tend to follow the herd, and are unlikely to make predictions that are outliers.[ii]  But the biggest events that change history, like September 11 or the Arab Spring are almost never predicted.

If the wall street experts can’t get it right, what chance has the average forecast in an average company?

You might be wondering what this has to do with your quest for a more balanced life. There is a right and wrong way to use forecasts.  Taleb suggests that forecasts are a good way of charting possible outcomes, what is a potential large seller, but the actual outcome can’t be predicted, which is why every company should have a diversified portfolio of high risk and safer projects.  (And why a one-trick pony startup is inherently risky.)  But many companies, (like Sabina’s),  even if they have the proper portfolio mix, act as if the forecast is a real prediction of the future.

Companies with too much emphasis on forecasting and making the numbers have a higher risk of an idolatry prone culture, that devalues people as individuals. And Sabina allowed forecasting to have too large an impact on her self-esteem.

Someone looking for balance in a numbers first environment has a few options.  1. Play the politics to gain the power to set your own boundaries.  2. Take a lower profile product or project that will bring lower stress.  3. Become an expert at sandbagging the forecast.

Another option, which I will explore in the next post, is to find another company with a different, longer term and more flexible approach to doing business.

What is your experience with forecasts and numbers-first cultures?

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[i] Mishneh Torah Volume 3: Hilchot Avodat Kochavim. By MaimonidesEdited by Rabbi Eliyahu Touger.  Moznaim, (1990) P.212-213

[ii] The Black Swan by Nassim Nicholas Taleb. Random House (2007) p 148-150.


How Do You Know What You Don’t See?

Chapter 2: Idolatry Then & Now Part 12

   We perceive the world as a movie, but the reality is millions of disparate data points that we weave together.  One unfortunate side effect of this skill is that we sometimes shoehorn facts into our preexisting perception of the world.  Ever seen this video?  It is a test of your power of observation. Watch and then read on. [Read more…]