56. 2015 is Predictably Unpredictable

I was flattered the other day when a friend asked me to comment on what 2015 portends for Kenya. He said the country had gone through a tough time in 2014 and wanted to know what my crystal ball says about 2015. I was flattered and amused that he would think I have a crystal ball with which to peer into the future! My dear friend, I have no crystal balls; those that claim to have are merely guessing.

It is much more useful to invite you on a journey of reflection on the topic of how human beings think and act, or as is often the case, act and think, if at all!

Any normal person knows that our thoughts and actions are less than perfect, and that many events are beyond human control. But the extent to which this is true still comes as a shock! There are far too many things about human thought and action–and therefore the direction of history and its impact on the human condition – that we do not know. The mystery of chance and circumstance and its impact on history is a subject that continues to tax the human intellect. Whilst many books have been written about this topic, much more intensively since the coming of age of the discipline of Behavioural Sciences, a number of recent books stand out. In Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets; and The Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb repeatedly hammers home the fact that prediction is highly overrated. In many cases, predicting the future is impossible; anything and everything is possible – in the long run. Taleb uses the expression “black swan” to refer to any event that is rare, but one with a huge impact. Taleb also reminds us that we often claim knowledge and skill for events that in fact happen by pure luck. We see patterns where we shouldn’t. A series of bad events happen on, say, the 13th Friday and soon that day becomes “unlucky”. Conversely, we attempt to make something happen; on the seventh attempt, we succeed. From then on, seven becomes our lucky number.

In ‘Thinking, Fast and Slow’ the Nobel Laureate, Daniel Kahneman, lays bare our often helpless and hopeless mental biases in making decisions and judgements. Our minds operate on two systems – a slow, deliberate, analytic and rational one; and a super-fast, intuitive and unconscious one that is prone to errors in judgement, leading sometimes to a false view of the world. Mental biases and fallacies dominate our decisions and predictions. Yet, Don Rumsfeld was right, there are unknown unknowns.

Dan Ariely in his highly readable book, “Predictably Irrational: The Hidden Forces That Shape Our Decisions” seems to suggest that we are incurably irrational – happily deluded even. He illustrates many situations where we are hopelessly irrational and are prone to being easily tricked. This is why placebos (harmless substances such as vitamins and water administered to patients as ‘medicine’) work: the psychological effect is enough to relieve pain, or in some cases even heal.

If we cannot be relied upon to be predictably rational in our thoughts and actions; and if we cannot sufficiently grasp the mystery and role of chance and circumstance, where do we get the cheek to believe we can predict with certainty?

Several months back, I followed with interest the debate between two prominent economists (Ndemo/Ndii). At the heart of it, their debate was about prediction: policy actions that should be implemented today to achieve widely shared and sustainable power and prosperity tomorrow. Whilst both economists made useful points (although I would have liked to see more humility in this important public discourse), the answer is not so simple.

Perhaps the best attempt I have seen to explain why some nations prosper and others fail is by James Robinson and Daron Acemoglu. They are the authors “Why Nations Fail: The Origins of Power, Prosperity and Poverty.” After reviewing past theories, they conclude that neither geography nor the weather; culture, the impact of colonialism, or ignorance of what economic policies to implement, explain adequately why some nations flourish and others fail. Nations prosper, they argue; if the political and economic institutions are inclusive, not extractive and exploitative. Their thesis is this: small differences in initial conditions, coupled with small unpredictable incidents can lead to either inclusive or extractive institutions. Inclusive institutions are then best placed to survive or even gain from major unpredictable events.

So, what will happen in 2015 and beyond? Simply this: anything. But, how do I live in uncertain world? My prescription is for you to read another book by Taleb: Antifragile: Things that Gain from Disorder. To paraphrase Taleb: Instead of trying to predict everything…acknowledge uncertainty and expect everything.

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