Do You Think Like A Futurist?

It is awfully difficult to predict the future.  Macroeconomists have found it almost impossible.  In Venture Capital, you have to envision what will happen ten years from today.  Then, find a company that fits that thesis and invest in it.  The thing is, most innovations don’t follow straight line thinking.  Innovation isn’t linear, except when you look backward.

The wheel became the chariot which became the wagon which became the horse and buggy which became the car. Except that leap from horse and buggy to car wasn’t a straight line.

Some corporations employ futurists.  What do they do?  They don’t gaze into crystal balls and try to predict the future like a tarot reader on Jackson Square in New Orleans.  They use a lot of structure and focus.  They don’t make off the hip projections, but work through groups of people for months at a time to try and tease out the future.

They also are relentlessly critical of their own assumptions.  They consistently revise, and re-examine their conclusions.  Their conclusions help corporate planners with budgeting.  It also helps they to shift course when things happen.

Christopher Mims of the Wall Street Journal writes,

Actually practicing futurism, even if only for a day, showed me the reason the future is so confounding: Aside from the fact that anything can happen, those unexpected events rapidly compound on one another. This leads to second, third and nth-order effects that can seem completely beyond the realm of plausibility until they happen. Hence the impossibility of predicting financial crises, wars and technological revolutions.

This is one of the tougher parts of venture capital.  That’s why even as an investor when you do all the vetting of team, market, and technology there is a little bit of luck involved.  It’s also one of the things that make people uneasy about investing.   Most humans don’t like to live in a world of uncertainty, they like control.

  • awaldstein

    In a small seed fund, luck is more than a ‘little bit’–don’t you think?

    • Depends. Focused funds with experienced investors can often spot diamonds in the rough-but the timing has got to be right or it won’t work. Investing in grass fed beef back in 2005 is an example of that. It started to get a little more popular in 2015…..