Business Forecasts Are Reliably Wrong — Yet Still Valuable

At the beginning of each year, while many individuals make New Year’s resolutions, organizations make forecasts about the year ahead. Both have high fallibility. Forecasts are predictions about what will happen in the future based on information currently available. As such, they are exercises of imagination, which studies have shown are rarely correct in their particulars.

Despite being reliably incorrect, savvy leaders can find strategic value from forecasts. When reviewed in aggregate, they capture the zeitgeist. We just need to ask the right questions: What do experts believe is important and likely enough to forecast? Where do they agree, and more interestingly, where do they disagree? Even if forecasts are specifically wrong, what do they indicate about the underlying trends and pivotal issues?

After two tumultuous years of the Covid-19 pandemic, as the world looks ahead to what might become the new normal, it’s a particularly salient time to assess our views and hopes for the future. The study of previous global pandemics and other crises teaches us that the post-pandemic world will likely be notably different — but how?

We’ve undertaken a meta-analysis of 20 forecasts for 2022 and beyond by prominent commentators and thought leaders on business and society. Here, we detail some of the more prominent themes and offer our view on how businesses can leverage these forecasts to gain perspective and advantage.

What the Forecasts Predict for 2022

More than half of the forecasts we reviewed offered predictions that were triggered or accelerated by the pandemic. But are these changes here to stay? Some, such as macroeconomic uncertainties and labor/raw material shortages, are predicted to revert as the pandemic recedes. Others, such as the accelerated adoption of digital business models, reflect how the pandemic has changed the status quo.

Perhaps unsurprisingly, the forecasts with the greatest divergence are those addressing complex emergent phenomena in social, economic, and political systems, such as whether we are heading into a period of more or less globalization, inequity, or polarization.

We synthesized some of the themes that emerged in our review into five categories. Within each category, the predictions are ranked from the highest to lowest degree of convergence.

Business/Finance

• Pandemic-driven raw material and labor shortages will initially keep supply chains vulnerable but will revert to normal as businesses and consumers adapt.
• Labor market will remain tight due to pandemic-induced resignations, reductions in the labor force, and turnover from greater employee mobility.
• Businesses will increasingly leverage technologies such as AI, machine learning, and automation to 1) meet demand in the face of labor shortages, 2) apply adaptive manufacturing technologies, and 3) develop novel solutions to customer challenges.
• Consumers will expect personalization and businesses will leverage technology to create personalized experiences at scale (e.g., music, diets).
• Flexible work models will persist, especially for knowledge workers, as more than 90% of employers are planning for a hybrid work model for knowledge workers.
• Inflation will remain high in 2022, even as central banks raise interest rates while waiting for the economy, labor, and supply chains to adapt. Their focus will be on avoiding a wage-price spiral.
• After two volatile years, meme stocks will fade, and market valuations (especially in tech and biotech) will recalibrate with business fundamentals.
• Digital and crypto currencies will proliferate as central banks introduce digital currencies of their own.

Society/Culture

• Covid will become endemic, with sporadic outbreaks and periodic, new variants, even as vaccine coverage expands to emerging markets and additional age groups across markets.
• Decarbonization will be an increasing concern for consumers and both the public and private sector. As climate catastrophes worsen, customers will make more sustainable choices (e.g., plant-based meat, circular/ local buying, ethical manufacturing), and sustainability will be viewed as integral to business.
• Flexible work will support continued migration from mega-urban centers (such as New York or San Francisco) to suburbs and tier 2 cities.
• Capital shifts from commercial to residential real estate will continue, driven by declining office rents (down 15% in San Francisco) and increasing office vacancies (down 20% in San Francisco).
• Bringing women and people from underrepresented groups back into the labor force will be a key priority for businesses and nations in order to meet demand, and foster diversity, equity, and inclusion.
• Economic inequalities that grew during the pandemic will be exacerbated by the disproportionate impact of inflation.

Health Care/Education

• Continued digitization in health care (e.g., digital therapeutics, wearables, IoT, remote care, interoperable digital health records, etc.) will make patient care more personalized, connected, and precise.
• Pandemic-induced decentralization of health care (e.g., telehealth, at-home testing, etc.) will accelerate.
• The shift to value-based care will accelerate as payers and health systems develop new models of care to deliver better outcomes at lower cost by acting earlier to prevent, diagnose, and treat patients.
• Hybrid classrooms and online learning will persist as 24% of U.S. schools are deploying hybrid models for 2021-22.
• Education and employment will become more aligned as employers try to retain and upskill workers. “Eduployment,” or education fit to a business/job/trade, will become more frequent.

Science/Technology

• Space technologies will proliferate through both privately and publicly funded initiatives. For example, there are five moon missions planned in 2022 by Japan, India, South Korea, the U.S., and Russia.
• Decentralized IoT applications will gain traction, powered by edge connectivity and computing.
• Accelerated investment in climate tech will continue, particularly in areas such as electric aviation, battery technology, and negative emissions technology.
• Nuclear (fission and fusion) will gain momentum as a source of clean energy.
• Investment in biotech for next-gen therapies (e.g., gene therapies, mRNA therapies, cell therapies, etc.) will be spurred by successes from Covid vaccines.
• Metaverse and AR/VR will become more mainstream, but widespread adoption will be limited.
• Web3 will see continued private investment to build platforms, improve scalability, and ease of use but will have little immediate impact.
• There will be significant advancement in quantum computing, driven by continued investment.

Geopolitics

• Rivalry between the U.S. and China will continue to shape the economic and geopolitical landscape.
• Geopolitical conflicts will be amplified by volatility in fossil-fuel economics, influenced by decarbonization.
• Pre-existing social polarization, exacerbated by the pandemic, will make political environments more turbulent.
• Rising multipolar globalization will create more regions with competing interests, increasing the risk of a global conflict, as we’re currently seeing in the Ukraine and may well see in the Middle East and South China Sea.

Using Forecasts to Your Advantage

We suggest the following six ways in which business leaders can use fallible forecasts to gain actionable insights.

1. Look at many forecasts, not one. 

Studies show that an expert’s individual judgement is often no better than a random guess, whereas combining multiple, independent judgments is more likely to yield an accurate answer. Looking at forecasts in aggregate can reveal the wisdom of the crowd.

2. Look at underlying variables.

Even where there is a spread of forecasts, the collection of forecasts can signal a common set of critical variables or underlying trends.

3. Look at areas of convergence and divergence. 

Forecasts with high convergence could be viewed as more likely potential futures for placing conservative bets. Alternatively, diverging forecasts could be seen as alternative potential futures for placing maverick bets, given the outsized value of anticipating or precipitating futures others do not foresee.

4. Look for white space. 

Which topics are notably absent from public discourse? Identifying these can enable you to find white spaces where early-mover advantages are possible, and where you are more likely to have the power to shape future opportunities to your advantage.

5. Look at how predicted trends may shape the nature of competitive advantage. 

Often forecasts stop at predicting what will happen. Go one step further to consider the implied impact on how companies will compete. Think about how your company could secure advantage and ways to adapt your strategy to match.

6. Assess your organization’s future readiness.

Consider your organization’s preparedness and resilience for different future scenarios based on the forecasts — considering those with high impact, even if their probabilities are low. Areas of divergence can help identify the scenarios you should be constructing.

Forecasts are oft misunderstood and underutilized, but they can be a powerful tool when approached critically and thoughtfully. Executives who identify the hidden truths within false forecasts may gain a better understanding of the present and perceive early indicators of the future, giving them a leg up in gaining and maintain competitive advantage.