Australian Centre for Innovation & International Competitiveness presented by Professor Ron Johnston...

Australian Centre for Innovation & International Competitiveness

presented by presented by

Professor Ron JohnstonProfessor Ron Johnston

Australian Centre for InnovationAustralian Centre for Innovation

Sydney, AustraliaSydney, Australia

PRESTPREST

July, 2006July, 2006

‘‘So You Think You Know How So You Think You Know How To Think About the Future?To Think About the Future?


Australian Centre for InnovationAustralian Centre for Innovation Mission: ‘To assist public and Mission: ‘To assist public and

private sector to better address private sector to better address the challenges of the future the challenges of the future through innovation’through innovation’

Focus on the interplay of the Focus on the interplay of the knowledge economy, globalisation, knowledge economy, globalisation, connectivity and innovationconnectivity and innovation

Independent non-profit companyIndependent non-profit company http://www.aciic.org.auhttp://www.aciic.org.au ‘‘son of PREST’ son of PREST’


Challenges in Predicting the Challenges in Predicting the FutureFuture

The horse is here to stay, the The horse is here to stay, the automobile is a novelty automobile is a novelty (Michigan Bank manager (Michigan Bank manager to Henry Ford, 1908)to Henry Ford, 1908)

Who the hell wants to hear actors talk? Who the hell wants to hear actors talk? (Jack Warner, 1930)(Jack Warner, 1930)

There is a world market for about five There is a world market for about five computers computers (Thomas Watson, IBM, 1943)(Thomas Watson, IBM, 1943)

Guitar music is on the way out Guitar music is on the way out (Decca (Decca Records rejecting Beatles, 1962)Records rejecting Beatles, 1962)

If anything will remain unchanged, it is If anything will remain unchanged, it is the role of women the role of women (David Riesman, 1967)(David Riesman, 1967)

The Internet is full. Go away. The Internet is full. Go away. (T-shirt, 1995)(T-shirt, 1995)


Remember the definition of Remember the definition of foresight!foresight!

Foresight is a Foresight is a process of anticipating process of anticipating and managing change. and managing change. It is a It is a systematic and participatory approach to systematic and participatory approach to developing effective strategies and developing effective strategies and policies for the medium- to longer term policies for the medium- to longer term future. future. (APEC-CTF)(APEC-CTF)

Foresight is a systematic, participatory, Foresight is a systematic, participatory, future-intelligence-gathering and future-intelligence-gathering and medium-to-long-term vision-building medium-to-long-term vision-building process aimed at present-day decisions process aimed at present-day decisions and mobilising joint actions. and mobilising joint actions. (IPTS - (IPTS - FORLEARN)FORLEARN)

Foresight is a means of systematically Foresight is a means of systematically addressing the future, and acting on it. addressing the future, and acting on it. (R. Johnston)(R. Johnston)


What Can beKnown

Analytic Tools

Examples

1. A Clear-Enough Future

A single forecastprecise enough fordeterminingstrategy

“Traditional”strategy tool kit

School population

2. AlternateFutures

A few discreteoutcomes thatdefine the future

Decision analysis Option valuation

models Game theory

NASA

1

2

3

Tools for Different Futures


What Can beKnown

Analytic Tools

Examples

3. A Range of Futures

A range of possibleoutcomes, but nonatural scenarios

Latent-demandresearch

Technologyforecasting

Scenario planning

Fast changingemerging markets,eg. e-commerce

4. True Ambiguity

No basis to forecastthe future

Analogies andpattern recognition

Nonlinear dynamicmodels

Russia in 1992

?


* Different types of futures guides foresight tool selection

* “The primary function of foresight is to transform Type 3 and Type 4 futures, which we have limited capability to manage, into Type 1 and Type 2 futures, where our management tools are effective and our decision-makers are confident” (Johnston, 2004)


The ContextThe Context

Principles of Good GovernancePrinciples of Good Governance Evidence-based Policy MakingEvidence-based Policy Making Demands to invest in and manage Demands to invest in and manage

intangiblesintangibles Horizontal Governance of Horizontal Governance of

InterdependencyInterdependency


Philip E. TetlockPhilip E. Tetlock

Expert Political Judgment: How Expert Political Judgment: How Good Is It? How Can We Know?Good Is It? How Can We Know?

Princeton University Press, 2005Princeton University Press, 2005


The MethodThe Method Select 284 experts in world politics from Select 284 experts in world politics from

government, universities, think-tanks government, universities, think-tanks “who had shown themselves to be thoughtful “who had shown themselves to be thoughtful and articulate observers of the world scene”and articulate observers of the world scene”

They each make 100 forecasts about They each make 100 forecasts about specific items of world affairs looking specific items of world affairs looking out from 1988 to 2003,on topics such as out from 1988 to 2003,on topics such as transition to democracy, economic transition to democracy, economic growth, war and nuclear proliferation growth, war and nuclear proliferation including an assessment of their own including an assessment of their own confidence in their predictions, and their confidence in their predictions, and their preferred decision-making style.preferred decision-making style.

Time passes – evaluation of the Time passes – evaluation of the forecasts statisticallyforecasts statistically


The ResultsThe Results Average accuracy only just above a ‘dart-Average accuracy only just above a ‘dart-

throwing chimp’, and well behind crude throwing chimp’, and well behind crude extrapolation algorithmsextrapolation algorithms

Generalists are more accurate than Generalists are more accurate than undergraduates who were given a 1-page undergraduates who were given a 1-page summarysummary

Experts do little better than generalistsExperts do little better than generalists Reputation of experts is an inverse guide Reputation of experts is an inverse guide

to accuracy – the more famous the expert, to accuracy – the more famous the expert, the worse the accuracy of predictionsthe worse the accuracy of predictions


The Defences?The Defences?

DiscontinuityDiscontinuity Almost right – pretty closeAlmost right – pretty close Just off in timingJust off in timing Politics is complicatedPolitics is complicated I made the right mistakeI made the right mistake The low probability outcome just The low probability outcome just

happened to happenhappened to happen


The Correlations?The Correlations? Not with field of expertiseNot with field of expertise Not with depth of experienceNot with depth of experience Not with level of educationNot with level of education Not with access to classified Not with access to classified

informationinformation Not with ideology – eg liberal Not with ideology – eg liberal

versus conservativeversus conservative Not with worldview eg optimist Not with worldview eg optimist

versus pessimistversus pessimist Only with Only with howhow experts thought – experts thought –

their style of reasoningtheir style of reasoning


Enter the Animals Enter the Animals (courtesy of Isaiah Berlin, 1997 and Archilocus, 600BC)(courtesy of Isaiah Berlin, 1997 and Archilocus, 600BC)

The The hedgehoghedgehog knows one big thing – true knows one big thing – true believers, single vision eg believers, single vision eg Plato, Dante, Nietzsche, Plato, Dante, Nietzsche, Proust, HitlerProust, Hitler

The The foxfox knows many things – knows many things – scepticalsceptical, , circumspect, cunning eg circumspect, cunning eg Aristotle, Shakespeare, Aristotle, Shakespeare, Goethe, Joyce, ChurchillGoethe, Joyce, Churchill

There are also There are also foxhogfoxhog and and hedgefoxhedgefox hybrids hybrids Foxes avoid the errors of the hedgehogs by being Foxes avoid the errors of the hedgehogs by being

more scepticalmore sceptical Hedgehogs dig themselves into intellectual holes, Hedgehogs dig themselves into intellectual holes,

prisoners of their preconceptionsprisoners of their preconceptions Hedgehogs make many mistakes, but when they Hedgehogs make many mistakes, but when they

are right, they are spectacularly rightare right, they are spectacularly right


““There are two sides to every There are two sides to every argument, including this one”argument, including this one”

Scenarios to the rescue? Well maybe, but: Scenarios to the rescue? Well maybe, but: There is a danger that scenarios fail to open There is a danger that scenarios fail to open

the minds of the close-minded hedgehogs, the minds of the close-minded hedgehogs, but succeed in confusing the open-minded but succeed in confusing the open-minded foxes, by raising too many possibilitiesfoxes, by raising too many possibilities

This reflects a continuing tension between This reflects a continuing tension between theory-driven and imagination-driven theory-driven and imagination-driven modes of thinking. The former provides modes of thinking. The former provides closure and parsimony, the latter allows for closure and parsimony, the latter allows for new possibilities. new possibilities.


How then to explain why How then to explain why hedgehogs are in such demand, hedgehogs are in such demand,

and so dominant? and so dominant? • Harry Truman’s request for a one-armed Harry Truman’s request for a one-armed

economisteconomist• The ‘snappy sound-bite’The ‘snappy sound-bite’• The ‘elevator pitch’The ‘elevator pitch’• The ‘executive summary’The ‘executive summary’• The limited and declining attention spanThe limited and declining attention span

When the world remains at least When the world remains at least

as complicated and uncertain as it ever wasas complicated and uncertain as it ever was


A Current ExampleA Current Example- Expert Group on Knowledge for - Expert Group on Knowledge for

GrowthGrowth

THE MESSAGETHE MESSAGE The nature of the R&D deficit is more The nature of the R&D deficit is more

complex than assumed in policy complex than assumed in policy discussions discussions

The causes of the R&D deficit are The causes of the R&D deficit are difficult to identify difficult to identify

The impact of the R&D deficit on The impact of the R&D deficit on economic growth is difficult to identifyeconomic growth is difficult to identify

The implications for research policy are The implications for research policy are difficult to draw difficult to draw


THE RESPONSETHE RESPONSE These findings remove whatever These findings remove whatever

certainty there may have been in certainty there may have been in forming policyforming policy

These findings undermine existing These findings undermine existing policy, only recently formulatedpolicy, only recently formulated

Here come the experts, unable to agree Here come the experts, unable to agree on anythingon anything

If there is so little agreement, let’s give If there is so little agreement, let’s give the money to someone who knows what the money to someone who knows what they are doing (eg industry)they are doing (eg industry)

We may as well stop subsidising R&D – We may as well stop subsidising R&D – at least taxpayers appreciate us saving at least taxpayers appreciate us saving their moneytheir money


ConclusionsConclusions

I return to my earlier claim:I return to my earlier claim:

“The primary function of foresight is to transform Type 3 and Type 4 futures, which we have limited capability to manage, into Type 1 and Type 2 futures, where our management tools are effective and our decision-makers are confident”

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