The former trader turned professor, Nassim Nicholas Taleb, in his new book The Black Swan: The Impact of the Highly Improbable warns against the danger of forecasting. Forecasting is, obviously, always based on what he know and not what we don’t know. A Black Swan, by the way, is an earth-shattering event we didn’t predict eg, 9/11 (until Australia was discovered everyone believed that only white swans existed).
On my way to work this morning, I heard an interview with Taleb on the BBC World Service where he said that 25 year forecasts, used to justify new projects in any industry sector, were worthless.
He added that the only forecasts of any value were those for 12 months because of a reduced chance of innacuracy.
And he added: “You can guarantee that the cost of a project will be far more than you’ve estimated.”
So sack the consultants and trust in your judgement – provided, of course, you can convince the banks.