Predicting ___________ Is Hard

Fill in the blank. No matter what you place there, you will be right. It has always been so. It will continue that way and for reasons of complexity and opacity of information, it will get harder.

What shall we do about it?

Define predict

According to Merriam-Webster, Predict means “to declare or indicate in advance. Especially : foretell on the basis of observation, experience, or scientific reason.

Some things might be predictable but over time, few are certain. Everything we know about anything is an estimate. We never possess all the puzzle pieces.

  • We don’t know what hasn’t been invented yet.
  • We don’t weigh the variables adequately.
  • We don’t know how people will adapt.

We must try though. Anticipating and adapting are how you influence your future outcomes.

Find a change variable

The future is predictable if you know everything and nothing changes. That never happens. Assessing the future includes finding the new variable?

The new variable will reconfigure the trend that experience, observation, and knowledge predict.

An example from history

How hard would it have been to sell your Blackberry stock and buy Apple after the iPhone appeared? Maybe pretty hard at first, but once you realized how apps, the new variable, would affect things, easy enough.

Androids were growing quickly too. Nokia was in trouble. It was just a phone after all. You had to see Android and iPhones as not phones exactly, but a computer that could make phone calls.

That means, what will the device do as opposed to what is the device.

The extra variable

Applications matter.

All new apps are written first for the devices with the largest installed base. Apple was app-centric, what it will do, while Blackberry was interested in the keyboard and security, what it is. Very quickly there were tens of thousands of apps for the iPhone and none for Blackberry. Even though Blackberry initially dominated market share for smartphones they could not hold it without adapting. They did not.

Blackberry Quits Smartphone Production from 2016 has an interesting graphic of Blackberry device sales.

That’s pretty informative, but notice that device sales fell more than 90% and in an exploding market. At some point the service (apps) provided by a device becomes the salient issue. With Apple, their installed device numbers passed Blackberry and were growing at more than 80% per year within two years of introduction. By 2012, they outsold Blackberry 2.5 to one.

Android based units were outselling iPhone by 2011, so an even larger problem.

Could Blackberry amend their ways?

They could have, but it wouldn’t have mattered unless app developers bought in or Blackberry switched from their proprietary operating system. Developers had no incentive to write for them. Maybe a year later port the software to the other system, but easier to do nothing.

By 2016 Blackberry market share was 0.048%. 48 of every 100,000 devices sold worldwide was a Blackberry. Dead!

The stock price

You might think you could learn about trends from stock prices. In this case, you could not. On the day the iPhone was introduced Blackberry stock was $214.40. Over the next four years their unit sales grew by ten times, but the stock fell to $27.88. A year later it was $7.50.

The stock began to fall within 90 days of the iPhone introduction.

The point: Stock prices do not predict the future.

What we can observe

Trends are a form of regression analysis. That field has one often overlooked, yet important, constraint. An estimate of the trend line outside the data you have, is not reliable. The future will contain some of the information you use but not all. It will also contain information not yet known.

The future evolves based on how the pieces interact. The trend line is based on information that exists in the past and the present only, so it cannot be precise. The best a trend can do is give you a probability space. It might be very narrow when the variables are few, or it may be wide when innovation or change is likely.

Projecting the future when the space is wide, is a “too hard” problem. You cannot know what will happen because all the variables are not yet present.

Will batteries be an important part of our electric future?

Absolutely. Will they be current technology batteries? Not likely. Think about storage per kilogram or cubic decimeter of battery. Think about difficult to acquire materials. Think about price per kilowatt hour stored. Something will replace the current version because it must.

As an investor you challenge is who will do it and when? Or maybe there will be something that isn’t a battery in our way of thinking.

You get the idea, predicting is difficult.

One thing you can do.

Pay attention to the things you use. Identify why you use them, what you would like, and what alternatives there are. That collection of thoughts will help you identify the underlying fundamental factors.

If you had bought an iPhone early on, the apps would have jumped out at you. You could have identified the Blackberry problem early and maybe profited from it.

To Think About

Smartphone sales plateaued around 2015. Is that forever? What should you be alert for? Smaller, faster, more features? We are in the diminishing marginal advantage space. Something will change. Maybe implanted technology. Maybe AI enabled. Maybe much cheaper.

One thing we do know with certainty. Things change. Be a little careful though, old change ideas may not help you. Change changes too. Be alert to the new.

“The art of prophecy is very difficult, especially with respect to the future.”

Mark Twain

Try to find an edge.


I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com

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