41 Forecasting Markets and Predictability?
b'I want to talk a little bit about predictability, planning, and being prepared for uncertainty, but it\\u2019s all about planning for the future, forecasting.\\n\\nThis was partially motivated by the fact that I read something about you can\\u2019t predict or you can\\u2019t plan for the future, particularly in the long run. Quite frankly, not only is that wrong, it is really, really bad advice. Yes, the world is uncertain, and there are certain times you have to be cautious. I\\u2019ll explain and break this down.\\n\\nFirst of all, in the economic world, you have the macroeconomist, that\\u2019s the one that\\u2019s following unemployment, GDP, and all those sorts of things; and the Micro-economist, the one that\\u2019s following business, customers, consumers, production, manufacturing, etc. In the macro world, very often and most likely, the person who at the end of the year who is most accurate is very often actually wrong.\\n\\nHow can the person be right and wrong at the same time? Their number may be right, but why was it right? If there was some significant change or what we call an outside force that was not taken into account This could be anything from a treaty, to a major event, terrorist attack, plane down, could be oil shortage, excess oil. We\\u2019re talking about now the dumping of a lot of oil in market. The person that started and made the predictions in January, if they\\u2019re accurate in December, and this massive amount of oil from Iran is dropped on to the market, are they really right? No. They got the right number, but for the wrong reasons. It is usually the reasoning that\\u2019s crucial in business.\\n\\nWhen I say the future must be planned for, but yet it\\u2019s usually wrong, what do you do? It seems to be a dilemma. Here, the problem is not that you\\u2019re wrong, but keep in mind the difference on the microeconomic scale, you\\u2019re looking and understanding and wanting to develop and understand the underlying causal relationships as to why your market should turn out a certain way. You\\u2019re going into depth about the long-term perspective, but you\\u2019re constantly monitoring it every month so that you\\u2019re ready for any quick change, anything that happens. All of a sudden, if prices of oil go down, you\\u2019re able to adjust to it. Why? Because you\\u2019ve already considered what its current price is and other things, and you\\u2019re not just following a trend; you\\u2019ve actually done some detail analysis so you\\u2019re able to adjust to that one change because you\\u2019ve already considered all of your known variables, all the contingencies. You\\u2019re better off having all of those factors thought of in your prediction for the future.\\n\\nSometimes you\\u2019re going to be absolutely 100% accurate, but in any case, you have to have gone through the exercise and thoroughly planned it. Basically what you\\u2019re doing is you\\u2019re taking a look at the demand for your product given the consideration of a dozen other variables. Now, all of a sudden, something you haven\\u2019t considered possibly, a 13th or 14th variable, all of a sudden becomes a major factor. This could be when you\\u2019re taking a look at analyzing your competitors. Is there all of a sudden a new competitor? A new invention? A new product? The discontinuation of somebody else\\u2019s product that actually helps you, or gives you an advantage? Or somebody who introduces a product that complements yours?\\n\\nBy understanding and planning thoroughly, yes, you can plan, adjust, and pivot very quickly. Keep in mind, because everybody\\u2019s talking about looking at your niche and following your niche down, etc., your competitors in your niche are very, very key and important. Always keep in mind that no matter what you think, there\\u2019s always substitution between whatever you\\u2019re doing and what somebody else has.\\n\\nAs an example, a friend of mine was talking about some drink that was for health. There may not be any exact product, but there can be a substitution between that and other health products. The person, within their budget, who was interested in health will spend so much o...'