Missing Gorillas in the Mist
The Harvard Business School (HBS) carried out an experiment several years ago. I call it the case of the Invisible Gorilla. The participants are asked to watch a short video in which six people—three in white shirts and three in black shirts—pass basketballs around. While you watch, you are asked to focus on counting accurately the number of passes made by the people in white shirts. At some point, a gorilla strolls into the middle of the action, faces the camera, thumps its chest and then leaves spending nine seconds on the screen. Did you see the gorilla?
How can you miss an 800 pound beast? In a classroom setting when we watched the video in HBS we discovered that half of the people who watched the video and accurately counted the passes missed the gorilla. I must confess that I was amongst the half that missed the gorilla. In my obsession to count the passes accurately I was oblivious of what else was happening.
With all the sophisticated forecasting models at our disposal and tons of data that we analyse each day, we missed signals of an impending global economic meltdown. Why? Despite so much wisdom and information, the experts we relied on let us down badly.
We blame the meteorologists for not predicting hurricanes and storms with exact precision. But we do not hold to account, experts who publish forecasts that prove to be precisely wrong. They fail to predict big events like the global economic meltdowns. They cannot foresee or predict the impact of the European chill and contagion that is spreading in the Club Med countries in the wake of the Greek economic situation.
How do they miss the gorillas every time? Nassim Taleb has an interesting theory. He believes that those who try to predict what is essentially unpredictable are actually not experts and should never be relied upon. According to Taleb : “Certain professionals ,while believing they are experts, are in fact not. Based on their empirical record, they do not know more about the subject matter than the general population but are much better at narrating –or worse, at smoking you with complicated mathematical models. They are also more likely to wear a tie.” Taleb researched empirical records of “ experts” to verify their predictions and matched them against actual results and outcomes. He found that their track records were abysmal over , say, a five year period.
In a branch of knowledge where events are unpredictable, variables imponderable and uncertainties the norm rather than the exception---- you are unlikely to find an expert. What you will find are various forms of “unexperts” “quacks” or “voodoo” professionals. An old Chinese proverb reminds us : “He who knows not and knows not he knows not is a fool, avoid him”. I would embellish the Chinese proverb in a modern day context thus:“ He who knows not and knows not he knows not and pretends he knows –is a fraud, expose him”.
The rain maker, the astrologer, the palmist, the punter are examples of “unexperts” who cannot alter, influence or accurately predict outcomes. All of them claim to use rules, tacit knowledge and even science for their predictions. Most of their predictions are a shot in the dark. The rain maker in Africa may be familiar with how the weather behaves, the astrologer may claim to have access to many ways of reading the horoscope and the influence of stars and stones. The punter may have done a vast study of the family tree of the horses running a race But in the end, if you plot and track their predictions over a period of time they are unlikely to be accurate on a consistent basis.
More often than not, they have the right answer by fluke. They do not have scientific methods like the ones we use to forecast weather. If we asked a number of portfolio managers to predict whether the Sensex will be 40,000, 20,000 or 10,000 on December 31, 2011 –some will get the answer right and some will get it wrong. Those who get it right may be hailed as financial wizards. But my bet would be that most of these very same wizards will get it wrong if we asked them to predict the Sensex for each year-end from 2011 through 2015. The reason: there cannot be an expert in this branch of “knowledge”.
Much of these “unexperts” have acquired a skill that Winston Churchill attributed to politicians. A politician –he said- needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn't happen.
In planning for the future it is important to avoid the advice of people who are not and cannot be “experts”. These financial prophets belong to a category , in Andre Gide’s immortal description, of people who cease to perceive their own deception, the ones who lie with sincerity.
Instead of spending all our energies on predicting the unpredictable, it is better to focus on the trends and become agile to adapt. If we know that we cannot accurately forecast everything in the future, then we have a valuable insight. And guess what? Your competitors are in no better position either!
In today’s world, it is not what you see or know that matters most. The power is often not in what you do see or know but what you don't see and do not know. Darwin discovered that “it is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change.” In today’s world the ability to live with ambiguity and adapt to uncertainty are critical to survival. It is a given that we should not miss the gorilla in our pre-occupation of counting. When we wade through the forest we will not know if the gorilla is lurking around the corner and is invisible in the mist. Can we deal with the gorilla if he decides to appear through the blurred mist. Can we craft strategies in an environment that is filled with uncertainties , surprises and shocks without relying on oracles and soothsayers?
(Roopen Roy is the Managing Director of Deloitte Consulting. Views expressed are personal).