Abu Dhabi, UAESaturday 7 December 2019

Not apocalypse now: why it is safe to ignore gloomy forecasts for 2019

Bleak warnings about the future are historically wide of the mark, research has found

It is safe to celebrate this New Year's Eve as 2019 might not be as bad as you think. Victor Besa/The National    
It is safe to celebrate this New Year's Eve as 2019 might not be as bad as you think. Victor Besa/The National    

It can be hard to predict what life will throw your way in 2019 - but for the team at Nasa it is an exact science.

While many of us can only guess if that new job or dream holiday will actually come to fruition - not to mention the much-discussed weight loss plan - a prediction made years ago by space experts will become a reality on the first morning of a brand new year.

At about 9.30am on New Year's Day here in the UAE, one of Nasa’s space probes will meet up with an object lying far beyond Pluto in an out of this world event equivalent to hitting a hole-in-one from a distance of 800km.

Known as Ultima Thule, the 30km wide chunk of rock was discovered in 2014, and currently lies over six billion km from the Earth. Yet so precise are the laws of celestial mechanics that mission controllers have known for years pretty much exactly when and where their New Horizons probe would reach the object.

If only earthbound events were as predictable. Subject to a myriad influences plus sheer blind chance, they seem to defy anything but the most broad-brush forecasts.

Not that this stops the world’s pundits from trying. And if their insights for 2019 are anything to go by, we should brace for everything from market meltdowns and social upheaval to climate-related catastrophes.

But how can we tell when to take any of this seriously?

Fortunately, the reliability of predictions has been the focus of scientific research for some time — and has led to some useful rules of thumb.

And top of the list is that while we may find harbingers of doom compelling, they have a happy habit of being unreliable.

Research shows that we humans have a penchant for giving more weight to bad news than good — and really beat ourselves up for making incorrect decisions.

Psychologists have even quantified our keenness to avoid bad outcomes. Roughly speaking, the impact of a taking a hit packs around twice the emotional punch of the equivalent gain.

Quite why we’re like this isn’t entirely clear. One suggestion is starkly Darwinian: those who are less bothered about making bad decisions have a habit of being taken out of the gene pool.

Whatever the explanation, this so-called loss aversion makes us particularly vulnerable to the doom-laden statements of charismatic “experts”.

Yet even anecdotally, these gurus of gloom have a poor track record. The grand-daddy of them all is the English economist Thomas Malthus, who in 1789 claimed with seeming mathematical certainty that the world was condemned to mass starvation by the “obvious” fact that food supplies can never keep up with the exponential growth of populations.

We now know that Malthus had reckoned without the ingenuity of agriculturalists to feed the world — and that whole nations would lose interest in having big families.

It’s a similar story with resources in general. Back in the 1870s, the chief geologist of Pennsylvania — then America’s leading oil-producing state — warned that the nation would run out of the stuff in a few years. Dire warnings about “peak oil” have continued unabated for the last 150 years — along with a steady flow of billions of barrels of the stuff each year.

Systematic studies of predictions have shown that these aren’t isolated examples. In the 1980s, Philip Tetlock of the University of California set about checking on the abilities of experts to forecast the future.

He interviewed hundreds of experts in economic and political science, asking them to predict what events might unfold over the next 20 years.

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The results, published in 2005, were impressive — though probably not in the way the experts were hoping. It emerged that on average they’d failed to do significantly better than someone simply guessing.

But digging further, Prof Tetlock uncovered some key insights that can help us all make sense of expert forecasts.

First, those predicting negative outcomes were markedly less reliable than their more optimistic counterparts.

One explanation for this might be “Malthus Syndrome”: failing to take into account the ingenuity of humanity in stopping bad stuff happening.

Tetlock found this wasn’t the only trait of unreliable forecasters, however: they also tend to be both confident and precise.

Ironically, these are precisely the characteristics sought by the media in their search for “gurus”, ensuring they get maximum publicity.

Add in our natural desire for certainty in times of turmoil, and it’s clear how we end up being bombarded by dire warnings by experts who are clear, confident — and most likely, wrong.

Paradoxically, however, the worse their track record, the more closely we should listen to what they say. After all, whose advice is more useful when deciding if something will come to pass: an expert who’s right 65 per cent of the time, or one who’s wrong nine times out of ten?

It’s actually the latter — because they can be instantly turned into gurus who are right 90 per cent of the time simply by putting the word “not” in front of what they say.

There’s one more fundamental rule for assessing the predictions of experts: the more extreme it is, the less likely it is to be right.

This follows from something called Bayes’s Theorem, which shows how to combine fresh insights with what we already know. Put simply, the less likely a scenario is, the more reliable the expert has to be before it becomes plausible.

And it’s not enough simply to be good at predicting events that do come to pass. Crucially, you also have to be good at the opposite: correctly predicting when an event won’t happen.

That extra demand sees off all those financial gurus whose reputation for predicting market crashes comes simply from making the same prediction year in, year out.

And so to arguably the biggest question of 2019: will it see markets crash? Based on history alone, the chances are much higher than one might think. Since the mid-1960s, the Standard & Poor’s index of US stocks has plunged by at least 20 per cent over ten times — and we’re well overdue for another.

But as investment advisers never tire of telling us, history is no guide to the future. While there are many signs and portents, from political events like Brexit to esoterica like inverted bond yield curves, they’ve been misleading in the past.

As the Nobel Prizewinning American economist Paul Samuelson wryly noted in the mid-1960s: “The stock market has forecast nine of the last five recessions”.

In the end, maybe we should just hope for the best but plan for the worst. It may not be rocket science — but down here on Earth, it usually works.

Robert Matthews is Visiting Professor of Science at Aston University, Birmingham, UK

Updated: December 29, 2018 01:42 PM

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