For Better Forecasts, Don’t Forget To Get Weird

Steven Johnson, author of Farsighted: How We Make the Decisions That Matter Most, told the a16z podcast we should do 3 types of plans: one where things get better, one where things get worse, and one where things get weird.

We can make a simple example using a financial plan. Say a couple wants to retire at 66 and expects to spend down a portion of their assets over their lifetime. Under a normal planning conversation, we’d run some software that would project, “if the markets do this you’ll be fine, if they do less than this you’ll still be ok, and if they give you what they historically did you’ll be great.” This is where most scenario analysis starts and ends. For anyone who has either A. done a lot of plans over a long enough period of time or B. lived in the real world, we should immediately recognize that life is messier than the projections suggest. This is where Johnson’s work comes in.

Johnson would have us take our “less than this” market return assumptions and say, “in one scenario you’ll spend less because you’ll be less active, in another scenario you’ll spend more because you’ll have higher health care costs, and in a weird scenario you’ll really want to aggressively gift money to a blind cat rescue. Now, what other better/worse/weird scenarios might you want to add to this exercise?”

A shared process of simply making up stories forces us to break the “illusion of certainty.” Futurist and author Peter Schwartz would remind us that the purpose of better/worse/weird is not to come up with a forecast (which would likely be wrong) but to draw a circle around multiple possibilities and consider them as a range of futures that might unfold.

All stories set anchors in our minds. Having a better/worse/weird scenario at hand means we can compare whatever really happens to what we previously imagined. They won’t exactly line up, but as the Twain quote says, “history doesn’t repeat itself, but it does rhyme.” The more colorful the anchor, the better of a chance we’ll have of feeling like we already planned for something similar.

In a nutshell: make a timeline. Turn it into a decision tree with better/worse/weird branches. Collaborate with coworkers or clients to make them memorable. Embrace both the baseline projections and the uncertainty of the world itself. Our purpose is not to make a plan, but to deliver the preparedness that is the result of the planning process.