Optimism Doesn’t Pay the Bills

Did you ever notice how often business people trot out opinion surveys as if they were plausible grounds for forecasting? “Our customers tell us they intend to spend more on equipment in 2012… Human Resource managers say they expect hiring to increase in coming months… The majority of professional fundraisers believe the recent slowdown in giving will turn around sharply next year… 72% of admissions counselors surveyed are anticipating a spike in enrollment, based on continued job insecurity…” And on the basis of statistics like these, we are supposed to make business decisions. Really?

Often, survey questions that include words like “intend” or “expect” or “believe” or “anticipate” are merely asking participants to speculate on future events. And unless the respondent pool is spiked with the genes of Nostradamus, we ought to be more than a little skeptical of its collective wisdom.

Aside from the obvious flaw that none of us can accurately predict the future, these baseless prognostications always seem to be quoted by people who agree with the forecasts. Coincidence? Maybe not.

Confirmation bias is a term used to describe a common phenomenon whereby people find evidence to support their preexisting beliefs, and overlook (or deny) compelling evidence to the contrary. We all suffer from it, to some degree. And our decision-making abilities would improve greatly if we could train ourselves to recognize it.

In business, a good place to start would be surveys. Rather than asking people what they think the future will hold, let’s ask them what happened in the recent past, to identify possible trends. Or let’s ask about concrete, measurable actions they are taking in the present – actions that might indicate changes in direction or rate of acceleration. Or, at the very least, let’s develop the discipline to follow every predictive survey, one year later, with a retrospective survey to determine whether the previous year’s predictions were accurate.

For years, I worked with businesses in the printing industry – an industry plagued with overinvestment in rapidly aging technologies and characterized by continually declining production volumes. Year after year, industry experts reassured print-shop owners with surveys that showed “the slump was over” and print buyers would spend more in coming years. Invariably, these survey results were based on the owners’ collective opinion (read: “hope”) that the market was about to turn – that happy days would soon be here again. And many printers believed the forecasts… because they needed to. Despite obvious trends to the contrary. (Some of which were megatrends.)

What’s the root cause of our addiction to unsubstantiated good news? I’m no psychologist. But I can’t help but be reminded of a Monty Python skit (The Meaning of Life, 1983) in which a British army doctor offers a comforting prognosis after his patient’s leg has been “bitten sort of… off.”

“Yes, well, this is nothing to worry about… there’s a lot of it about… probably a virus. Uh, keep warm, plenty of rest, and if you’re playing football or anything, try and favor the other leg… Be right as rain in a couple of days… Any other problems I can REASSURE you about?”

We seem to have an undeniable need to believe in something. And it might as well be something pleasant. Maybe we find comfort in survey results that REASSURE us. Even when our legs have been bitten sort of… off.

In 1967, Transogram (creator of Tiddledy Winks) released Ka-Bala, a plastic fortune-telling game that leveraged the Eye of Zohar to tell the future. Players were instructed to chant, “Pax, sax, sarax; hola, noa, nostra!” as a mystically empowered black marble circled a thin-rimmed plastic track on the surface of the game, in search of the answer to any question asked. If you look really hard, you can probably find copies of that game somewhere on the internet. And if you insist on being one of those business people who bases your decisions on speculation, you might save a lot of money on surveys just by asking Ka-Bala.

Hey, what do you have to lose? If you don’t like the answer, you can always play again!