The impossibility of long-term forecasting

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Lucy Kellaway wrote an article a while back, poking fun of McKinsey Institute’s new set of long-term forecasts, looking 50 years into the future. As part of her brilliant takedown of the report, she makes the very astute observation that the trends that MGI identify are not trends of the future, they are trends of the present. It’s become more clear lately just how hard it is for people to forecast significant change. We can see linear change, but as soon as the curve is not linear, but instead exponential or broken, our foresight breaks down. We are ok with change, we even like it, as long as it is nice incremental change, and not “superchange”. Our brains are programmed to enjoy inertia and protest if things seem too foreign.

I’ve lately been enjoying Nick Bostrom’s Superintelligence. He seems to be one of the few people who is comfortable with the idea of superchange. In the book, he has a chart showing the foreseen outcomes of superhuman machine intelligence by experts in the field. Even among these people, who are the most knowledgeable in the field, a majority of them think super human machine intelligence will most likely have moderately good outcomes. Only a very small minority (<10%), foresee it to have extremely negative outcomes. This feels like an extremely short-sighted assumption.

It used to be the case that we could learn of the future from looking at the past. Now it seem this is no longer the case, since today’s world might in fact be more complex and non-linear than times past. However, even if we can’t learn about the content of the future, we can surely learn about the speed and magnitude of change. It is an undeniable fact that someone looking 20 years forward in 1994 would not be able to foresee the things we take for granted today. This goes from obvious aspects, such as the powerful computers in our pockets that we know as cell phones, to the inescapability of climat change. It is therefore extremely presumptious of us to assume that we can forecast 2034 with anything remotely approaching certainty. It seems to a statistical impossibility that we would not experience superchange at the same rate as the past. It is actually even more likely than in the past, given the combinatorial aspects of inventions, as outlined by Erik Brynjolfsson and Andrew McAfee in The Second Machine Age.

We have developed tools to forecast the future and imagine change based on current irreversible trends, but now we need to invent the tools to imagine superchange. Otherwise, we are proceeding blindly into the future.

The One Unassailable Argument to Act on Global Warming

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Peter Singer, famous ethics philosopher, recently spoke at the Carnegie Council. I wasn’t there, but I listened to the podcast. In it, he stated the case for acting now on climate change in a very simple and clear way.

The two arguments against acting on climate change are that it either not happening, or not caused by human action. Singer’s argument neatly addresses both of them by circumventing them. Singer’s statement can be read in full here, but the basic gist is a simple cost and benefit argument.

The cost of global warming, once it is in irreversible effect, has been estimated to be up to 2.8% of global GDP. Global (nominal) GDP now is now around $70 trillion, so even if we assumed that GDP wouldn’t be higher at the time that global warming really kicks in (an unrealistic assumption), it would still be a cost of 2 trillion per year.

If we look at this cost alone, the second argument (whether it is caused by human action), becomes irrelevant – the costs will be there for us to face regardless of the cause. The first argument then becomes a case of probability-weighted cost. Some people might still question whether global warming is indeed happening. Let’s put a probability on that doubt, perhaps, to be generous, we argue that it is only a 20% likelihood (unrealistically low).

The expected cost then is $400 billion/year. Not to mention of course that this will be unevenly distributed across the world. This cost, for the world as a whole, is the cost we should compare with when we look at the costs of starting to tackle it (costs that will only go up the longer we wait). Looking at it that way, as a simple cost/benefit of taking out an insurance policy, taking action now seems like a very cheap insurance against a potentially very expensive problem. For any other similar risk, we would take out insurance. Not taking it against a risk such as global warming, that could wreck the planet, seems perverse. It suggests that we value future human lives much, much lower than current ones, to a higher degree than previously thought.

Technology drives returns to capital

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Technology is not the solution, Bill Gates said in the FT last year. It’s a surprising statement coming from a man who has made his billions pushing Clippy on people, but in the world Gates inhabits now, in terms of the big challenges facing the world, he’s right that technology can only get us so far.

Similarly, Peter Thiel’s VC firm, Founders Fund, famously has as its motto that “We wanted flying cars, instead we got 140 characters”. It’s become a truism to say that most new applications that we get in the world are solving first-world problems, or really a subset of first-world problems, the problems of 20-year males in big cities. Hence, this is why we get new apps like Washio – Uber for laundry.

As much as these apps are easy to make fun of, if we look further ahead in the future, the problem seems set to just become worse. Almost all technological progress we make is creating competition in places where there earlier wasn’t any, is driving returns to capital and is commoditizing what earlier was precious and had value.

The sharing economy is a good example of the latter – commoditizing. On one hand, it seems like a good thing that we are creating value out of earlier unmonetized assets – empty apartments, idle cars, unemployed people. However, given the endless supply of these, the economics are terrible both for the suppliers of the new good and the old one. Looking at e.g. Uber, the supplier of the old good – the taxi driver – gets put out of work due to the cheaper competition that he can’t compete with, and the supplier of the new good – the Uber driver – gets paid very little for his efforts. The only one making additional income is the company, Uber in this case. You therefore end up with a net loss to the economy. For Airbnb, the same logic applies.

Amazon’s Mechanical Turk is a more egregious example. By breaking a task up into tiny pieces, the value put on people’s time can be set extremely low, such as 10 cents/task, regardless of how long it takes.

The other factor of technology is how it creates competition where there was earlier less. Again, this is good in small doses – when breaking up a monopoly, for example. Good examples are Aereo tackling cable companies or Solar City taking on utilities. Certain industries need to be shaken up. But since technology drives returns to capital, and to scale, there is no such thing as a small dose. Globalization, for example, driven by improved communications technology, doesn’t stop until all countries compete for the same resources. Likewise, automation doesn’t stop with blue-collar workers, it is now the white collar workers who face a slow extinction.

I remain an optimist regarding technology futures overall (at least compared to Elon Musk, who now believes we might be summoning the demon with AI), but it’s becoming harder and harder to see how the combination of a growing population, a new economy with less, and less well-paid work, increased competition between and within countries, and governments with unsustainable debts, will work out.

The smart newsletter and a return to the curated web

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A few years ago, it seemed that email was on a slow and irreversible decline. Beset by high levels of spam and cookie-cutter email marketing, email looked to be taken over by social networks and go the way of the pager and other outdated technologies.

These days, however, email is back and stronger than ever. With there being too many websites to remember, it seems almost quaint to type in a website address and go to a “home page” instead of arriving at through a link. Rather, we seem to be returning to the curated web of the early days, when Yahoo was just a set of links that Jerry and  David liked.

This has given rise to a whole slew of “smart newsletters” that have the potential to eliminate mindless web surfing by providing both a summary of key news of the day, as well as a set of curated links to interesting articles elsewhere. Most days, I could read just these and their links, and still get very close to a full picture of what’s going on.

If we look at the providers of these, Slate was a pioneer, with its beloved Today’s Papers. It was unfortunately replaced by its successor, The Slatest, which unsuccessfully tries to update the format. However, a number of the new media outlets produce fantastic smart newsletters. Quartz might be the best one, with its Daily Brief, which manages to both distill the key news, as well as provide links to interesting, more peripheral stories. Vox recently launched its Sentences, which aims to do the same thing. FT Alphaville was another early mover, and the power of the model can be seen in that they’ve now relaunched this as FT First.

A number of other publications have launched their own, which are all decent, even if they don’t reach the level of Quartz and Vox. These include QED from the New Republic, The Morning Email from the Huffington PostBloomberg View, and Mic. The NYT is jumping on the trend by separating the news roundup from the links to curated content into two separate emails. This still works pretty well, however, with the latter email called What we’re reading.

This trend might be a response to the social news that we thought would take over news delivery, but with Twitter now putting in more and more sponsored stories that I don’t want to read, and Facebook endlessly tweaking its algorithm, but still not showing anything interesting, I think the smart newsletters show that we still need curation from actual journalists.