One of my favourite stories about predicting the future is the one about the noted futurist and business strategist Peter Schwartz. He was to chair a conference in New York. The theme: The Big Surprises. It was scheduled for September 12, 2001. The event was cancelled due to unforeseen circumstances.

Back in 2003, former Defence Secretary Donald Rumsfeld got the Foot In Mouth Award from Britain's Plain English Campaign for his mind-numbing quote:

"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - the ones we don't know we don't know."

But Rummy was actually making an interesting point. Think it through and it might shed some light on why business get tripped up by the unknown. Often, managers are too busy to pay attention to the things we know that they don't know. As a result, the unknown unknowns don't even register on their radar. Yet these are often the very things that get them into trouble.

Forces driving change now include the constant shifts in digital technology; biotechnology; knowledge management, which is the code for the kind of branding, marketing and technical knowhow that allows a business like Amazon.com to interact with customers on a personalised basis, or a running shoe to be manufactured for a few dollars and sold for hundreds of dollars; tribalism, where the world is connected through telephone, television, Internet, and satellite links; environmental issues, such as climate change, air pollution, soil degradation and water salinity, and the forces of paradox, which balance such conflicting agendas as population growth vs. sustainability; individualised product offerings vs. mass marketing.


No one has all the answers to these forces. So how do you predict the future?

The president of the Business Council of Australia Michael Chaney once told me how he used to collect forecasts from reputable organisations over a 10-year period and then compare them with the outcomes. The result: some forecasters got it right half the time, but because one could never know which half, every forecast was useless. Moving forward, he said, was a matter of risk management. So rather than gazing into a crystal ball, managers need to make sense of what is happening right now to develop future strategies. they need to learn how to diagnose blind spots and pinpoint weak signals that have not been picked up yet.

It's a point taken up by Nassim Nicholas Taleb in his piece Far and Few Between: Black Swans and the Impossibility of Prediction.

The Black Swans Taleb refers to are the ones discovered in the early years of white settlement in Australia. Before then, people in the old world were convinced all swans were white.

One single observation or event invalidates all assumptions. And yet, the application of the science of unpredictability to real world problems is hopeless. Particularly in the world of finance, economics and business. As Taleb says, go ask your portfolio manager for his definition of "risk" and odds are that he will supply you with a measure that excludes the possibility of a Black Swan. More to the point, Black Swan logic makes what you don't know more relevant than what you do know.

Taleb argues that what we need to do is adjust to the fact that Black Swans exist instead of naively trying to predict them. He doesn't spell out exactly how we should go about it but then, he would argue that wasn't his point. Taleb is telling us we need to change our way of thinking.

It's more about strategic thinking than strategic planning. It's about tapping into various scenarios but it's not about predicting whether something will happen. It's more about exploring patterns of interaction that allow people to see things differently.