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Editor’s letter: Optimists v pessimists

Andrew Sawers

The next time you struggle with a project that has overrun its budget and
come in too late, we think we may now know the reason why. Of course, it will be
far too late for you to do anything about it by then, but perhaps it will help
when preparing your next big project. Perhaps.

The problem appears to be that human beings have a built-in inability to
prepare for the unexpected. You might think that that is self-evidently true –
tautological, even. “We cannot prepare for unforeseen circumstances.” “Such as
what?” “Well, if we knew, they wouldn’t be unforeseen circumstances.”

Probability expert, professor and former Wall Street trader Nassim Nicholas
Taleb gave a lecture recently at the RSA, the Royal Society for the
encouragement of Arts, Manufactures and Commerce, to launch his new book,
The Black Swan (Penguin/Allen Lane, £20). (Those of you who like
nothing other than to read a good book about risk might already have devoured
his earlier work, Fooled by Randomness.)

Taleb talked about how bad people are at making forecasts or estimates, even
when asked to do so at what they would regard as a 98% confidence level. You
could ask people anything – the number of books in Umberto Eco’s library, the
age of Rachmaninov when he died, anything at all – and ask them to give a high
and low figure so that the person being asked was 98% sure they had captured the
correct answer within the range of their guess. The results of various
experiments have demonstrated that, far from having anything like the expected
2% error rate, it was more like 60% (barring the clever dicks who put in guesses
of ‘between zero and infinity’).

For the same basic reasons, the phenomenon of ‘tunnelling’ leads us all to
expect the future to be remarkably similar to the present and to not be able to
anticipate sudden shifts. Take, for example, the US agency that had made a fo
recast that oil prices would average $27 over the next 25 years. Within months
– months – it had raised that forecast to $54. Taleb made the point that it is
several trillion times more difficult to make a 25-year forecast than a one-year
forecast – and yet we place so much reliance on such forecasts, while
consistently neglecting to enquire as to the error rate underlying them.

And for just these reasons, we are always surprised that building projects or
IT installations or new product launches never turn out as expected.

Another way of looking at it might be that optimists are perennially
disappointed, whereas pessimists are much more likely to be surprised and
delighted (though presumably not for long, given their nature). Or yet another
way, an optimist is someone who doesn’t know all the facts.

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