You are not crazy, and forecasting works

If you watch the TeeVee Box, the world and its institutions seem inherently irrational. It’s a world of crazy risk, cataclysmic downfalls, nonsensical solutions from people who ought to know better.

One of America’s high priests, Ben Bernanke, has just been taken on for a second term at the head of the powerful and enigmatic Federal Reserve bank. See my post from yesterday to understand why this surprised me. For a moment I had the all-too-common though:

In a world this nuts, why even forecast? I mean, why study housing prices, water tables, healthcare expenditures, and all the rest if the world comes down to the actions of a select, semi-rational few.

Then I thought it over. The last year has unfolded in a strictly rational way. The trick to understanding the future (and the method I teach) is to analyze a combination of three things:

• structural trends
• actor decisions
• wildcards

Understand what’s happening, the options available to actors in a system, and the crazy stuff that can happen when you’re not looking.

Look at the economics of 2008 – 2009 through that lens and it all makes sense.

This is the subject of today’s podcast, so KEEP THINKING.

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