Wednesday, September 28, 2011

Prediction: There's No Single Method.

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In my most recent post about using simple linear extrapolation as one of many possible tools which could prove useful in forecasting and preparing for certain events, I'm afraid that I made the terrible mistake (it isn't my first, and will not be my last) of failing to issue a whole roster of circumstances where this approach would not be ideal (if applicable at all), with an accompanying list of limiting parameters where this approach might certainly need to be adjusted significantly if not discarded altogether.

My intention [and perhaps the road to Hell is paved with good intentions] was to cite one very simple approach to discerning a trending pattern and where it might lead. I apparently mislead at least one reader into believing that I thought that linear extrapolation was the absolute best means to make predictions. Now, I hang my head in shame. The linear extrapolation approach to predicting the future has the following limitations, to state just several of a vast number:

1) It assumes a constant (linear) rate of growth or decline over time, which is seldom the case -- the patterns of history do not necessarily repeat themselves, rates of growth and decline are subject to variation, as are many other items. These factors may render our initial projection assumptions invalid;

2) It does not provide for changes in technology, resource availability, demand, competition, regulation, obsolescence, economic markets (fundraising, the cost of capital, the money supply, interest rates, and the like), natural disasters, amazing breakthroughs or the intervention on the part of the futurist making the prognostication in influencing the results via a mechanism correlative with the notion of a self-fulfilling prophesy;

3) It  does not provide for limited markets, holding capacities, or changes in either of these.

In a comment that I received regarding my now infamous post, Xamuel (whose insightful quote is printed below, unretouched) set me straight. Both The Global Futurist and Douglas E Castle humble ourselves before you, and apologize for misleading any of our readers. We also offer our sincere thanks for having this pointed out to us and our readers. Your input, negative, positive or neutral, is welcomed and encouraged. We learn from our mistakes.
Xamuel said...
Linear extrapolation might work sometimes in, say, climatology. It's not going to predict the future worth a hill of beans, though. It completely misses any revolutionary new development-- by its very nature! Even besides that, it has a bad habit of ignoring holding capacities (say), and predicting (e.g.) that a sample of bacteria will rapidly fill up the entire universe.
Although I have been told never to make generalizations, I will take exception with this advice with reference to Futurists (and those people who love them): There is no single method for prediction. There are many approaches, but each has its own inherent limitations. My approach to drawing a futurescape involves a great deal of imagination, a great deal of data collection, and a combination of a large number of approaches, each with its own respective strengths and weaknesses.
Sadder still is the fact that unpredictable events happen during the course of the extrapolation period (which makes any forecast a moving target) which cause a need for us to re-evaluate our assumptions and our methods to be changed dynamically. Forecasting requires constant monitoring, adjustment and correction for the effects of reactive intervention or interference, self-fulfilling prophesies, and other recursive variables that blur the line between predicting the future and causing the future.

Tuesday, September 27, 2011

Forecasting Simplified - Growth Rate Extrapolation

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In generating predictions about the future, one of the mechanical mathematical operations we often use is simple linear extrapolation. This approach is very elegant, very conservative, and is broadly applicable to a myriad of  forecasting situations involving relative (differing) rates of growth. For example, if we are attempting to project what our company's gross profit margin on sales will be in three years, we might collect historical data about our price per unit sold (one variable) and about our direct cost per unit sold (the other variable).

Based upon prior data, we might determine either an average or anticipated rate of growth per year in each of these two "competing" variables. If we simply graph the respective rates of growth in each of these two competitive variables (usually I prefer to use a compound interest growth formula) we can see the difference between the two at any given time by superimposing the graphs.

For an example of this, you might wish to visit my Braintenance Blog post, located at: .

Simply hit the "BACK" button on your browser to return when you've finished.

The reason that this growth rate extrapolation so useful is its simplicity in terms of citing and illustrating trends involving two or more variables. Generally speaking, the greater the difference in annual growth rates, and the greater the passage of time, the larger will be the gap between the two. In some situations the two lines will eventually converge and cross each other -- in others, the two distance between the two lines at any given point on one axis will simply continue to increase, and never converge.

If we now enjoy a gross profit margin of 30% (for illustrative purposes), but our price per unit can only be increased by 3% annually due to competitive or economic concerns while our direct materials supplier is one of the only sources of supply accessible to us, and that company has been consistently (despite our pleas for mercy, and our whining about college tuition for the kids, confiding about Aunt Tillie's desperately-needed life saving surgery, sharing our worst fears about how we'll soon actually be losing money on our sales of our principal product, and the like) raising costs at an average of 7.5% annually, we can estimate the amount of decrease in our margin at any given time in the future during the forecast timeframe, and we can even determine at what point our gross profit margin will simply be too small to continue our manufacturing and sales of that particular product.

The notion and application of differential growth rates is one of the most crucial steps to making any predictive analysis.

This type of procedure is incredibly simple -- the greatest challenge to the prognosticator is determining which growth rates are most appropriate [and sadly, in the real world, they are seldom linear], while the greatest challenges to leadership and management are to monitor these changes and to prepare an actionable agenda to prevent the fulfillment of these prophesies.

In The Global Futurist, we paint scenarios of the future if trends or tendencies are permitted to continue along their current paths. A proactive strategist can change the future by his or her early intervention. Free will and the prospect of precipitous action are the "Human Factor Wild Cards" that can alter the sequence and path of events that lead to the future. The future is never certain, as long as 1) forecasting is not an exacting science, and as long as 2) Human Beings can choose to act upon their expectations of the future and take the initiative to change outcomes.

Douglas E Castle []

Monday, September 19, 2011

The Global Futurist: New Resources And Tools

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Dear Readers:

When you are able to find a quick moment, I would be deeply appreciative if you would be kind enough to visit the actual site for this blog, located at and take some time to explore the site and look through our extensive library of links and our trends, breaking news and RSS feeds sections. It is our intention to provide excellent articles (original content which you'll not find elsewhere, but also to be a resource, research and reference center for you to bookmark as one of your favorities.

If you have additional links to resources (websites or blogs) or to RSS feeds which yoiu think would be of benefit to other of our readers and colleagues, please suggest them in a comment of this post, and I will see to it that they are given serious attention. Your input is heartily encouraged.

As always, thank you for reading me, and for your referral of this site to your friends and associates.


Douglas E Castle

Wednesday, September 14, 2011

Deepening Divides: MegaTrends To Watch - Part 1

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Differential rates of growth or development between any two socio-economic variables over time, i.e., a divergence, create a growing divide - a gap - that is generally indicative of a very powerful, paradigm-shifting MegaTrend. These MegaTrends are not usually abrupt shocks to the system, but they are juggernauts, growing either steadily or at accelerating rates over time, with their influence becoming increasingly powerful over time, and affecting every significant aspect of life and commerce.

These growing waves or cracks (depending upon your perspective) are tremendous in terms of their ultimate effect, which can either take the form of a growing shift over time, or, like the stress cracks in an aging bridge, finally yield completely to the elements and the constant flow of traffic and collapse...with catastrophic results. Ironically, these trends or tendencies are almost invariably observed and noted by many futurists (including engineers, scientists, geologists, biologists, sociologists and other technical specialists who are involved in prediction and planning), well in advance of serious and irreversible harm. Equally ironic, is the propensity of business and political leaders to defer addressing these issues, postponing taking any action until tragedy is imminent.

A perfect illustrative example is the precipitous near-collapse of the world's financial markets, central banking systems and the global economy. Many saw it coming, but few failed to act. As one of my college professors once said (to a crowded lecture hall filled with somnolent students), "There's nothing wrong with selling at a profit while you know that you have one. But when people get too greedy, even if a collapse in the markets seems imminent, they continue to hold on and to continue doing what they've been doing; usually until it is too late. That's how fortunes are lost."

Speaking candidly, Global Futurists (such as many of my colleagues and myself) actually must "factor in" this typical failure to take timely action in rendering forecasts.

A number of these MegaTrends (each of which carries with it a chance of catastrophic loss and a chance of tremendous gain utilizing the leverage that comes with informational arbitrage) and their associated impacts are briefly described below. I will speak about more of them in my next installment of this article. The timeframe which I am speaking about is the next 5 to 15 years.

1) The United Nations will become increasingly irrelevant. The reasons for this, as well as the implications associated with it are discussed in my most recent article published in The Internationalist Page Blog, at:;

2) The average Human attention span will decrease very significantly, interfering with the ability of students to learn conceptually and contextually. Many of our greatest prospective minds will be narrowly focused on the concerns of the moment, and their areas of expertise will be limited to the utilization or creation of technology. Communications, the art of conversation, and the quality of the written and spoken word will decrease, despite an increase in the frequency of brief messaging back and forth. Non-verbal communication mechanisms and such phenomenal gifts as intuition and native ideation will atrophy as we abbreviate or eliminate virtually every aspect of Human interaction outside of the scope of the briefest frenzied signaling. De-personalized and de-socialized, our species will become an extension of the things which it has created to serve it. George Orwell, Aldous Huxley, Issac Asimov and a host of other futurists from various disciplines were truly prescient, as I believe we shall see during these next five or ten years;

3) Human immunological responses, resiliency and recovery abilities will wane, ushering in a decline in the general level of public health. Despite some wonderful emerging health care technologies, procedures and pharmacological treatments, we will, as a collective, be more vulnerable to diseases and to accelerated deterioration of health. Epidemiologists and experts at health care and national security command and control protocols had best make preparations for a resurgence of some 'eliminated' diseases, as well as a plethora of treatment-resistant infections and some record-breaking pandemics;

4) Logistics, fulfillment and transport issues will become increasingly inefficient and technologically unsuitable, e.g., outmoded, to keep pace with the increasing demands for shipments of goods intranationally and worldwide (and to slow the potential for unfettered economic growth) which are ordered via internet for delivery to the purchasers' homes or offices. With ordinary transportation becoming increasingly impractical, shopping trips will be taking place in cyberspace -- but the deliveries will have to take place in the real world, in real time and in accordance with the basic laws of physics. There's a serious divergence and a serious bottleneck. The costs associated with order processing, handling and shipping will skyrocket in response to the pressure imposed by increased demand, combined with with increasing government taxes and tariffs on transactions (analogous to the Value-Added Tax) and on the transportation industry. Ultimately, the purchaser will be made to pay;

5) An increasing percentage of the world's population will become poor, and the differences in living standards and amenities between the small percentage of wealthy persons to working-class (wage-earning) persons will increase to levels which have historically (albeit isolated to states and individual countries) fomented violent social upheavals and revolutions. With each economic contraction, this stratification increases. And with the adjusted increase in wages (actually a decrease in terms of purchasing power) and the increasing costs of necessities, this effect will be exacerbated and accelerated.

Remember that the future is subject to change if preventive or remedial action is taken in the present... but this would require a major change in historically-proven and deeply entrenched patterns of Human and societal behavior.

Douglas E Castle

Increasing leverage (risk) profiles of 5 major U.S. investment banking firms from 2003 to 2007. Everyone was well aware. But greed overtook a balanced perspective of risk versus return. No one believed that the easily-predictable outcome would actually become a crushing reality.


A recursive echo:

Ironically, these trends or tendencies are almost invariably observed and noted by many futurists (including engineers, scientists, geologists, biologists, sociologists and other technical specialists who are involved in prediction and planning), well in advance of serious and irreversible harm. Equally ironic, is the propensity of business and political leaders to defer addressing these issues, postponing taking any action until tragedy is imminent. After disaster has rendered its casualties, there are accusations, recriminations and a host of plans made to prevent the recurrence of such events in the future. These plans are seldom put into place, allowing history to repeat itself at increasing amplitude.

Friday, September 9, 2011

TrendWatch: Biometrics, Cybercrime, Identity Fraud.

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Look for an increase in the number of firms (and their respective visibility and valuations) developing and producing biometric identification systems (facial  recognition, fingerprint recognition, facial recognition voice recognition and retinal scanning) for the prevention of cybercrimes and unauthorized administrative access to information and IT systems.

Watch for an increasing trend in the portion of venture capital financing being allocated to these types of companies by private venture capital firms and governmental intelligence agencies. 

Cybercrime, including sensitive data theft, IT systems security breaches, firewall penetration, backdoor computer comandeering (for espionage -- secret monitoring -- and for robotic enslavement of computers and entire networks), and identity theft all continue to rise in terms of incident frequency and severity of damage per incident on average. This is attributable to:

1) an increase in personal and business computer reliance and e-commerce, with the use of passwords, recorded credit and personal information on visited sites and;
2) a corresponding rise in the level of technological savvy (on the part of hackers, crackers, skimmers, phishers and other cyber-trained individuals and organizations internationally);
3) an increase in the access to sensitive data on a large scale by corruptible financial executives and their administrative staffs (in the private sector) and by certain computer technicians, programmers, developers and other experts (in the public sector);
4) an improved and broadened aftermarket for the ready purchase and sale of sensitive data and stores of personal financial information;
5) a perceived increase in the 'quick turn' profitability of these "black hat" activities in a difficult economy; and
6) a perceived decrease in the likelihood of being found, prosecuted and punished for the commission of these activities, though improved 'cloaking' techniques, IP routing techniques, and multi-jurisdictional organizational configurations, making enforcement more challenging due to various treaties, differences in the laws, and a lack of coordination and cooperation in any truly collaborative effort on the part of all nations. 

Small businesses, healthcare providers, and governmental data respositories are the primary targets of these increasingly aggressive attacks. The ultimate victims tend to be the individuals whose identities and sensitive data are stolen and used for the commission of secondary crimes. The beneficiaries of these criminal activities are the thieves and invaders, as well as the secondary users of the stolen data.

Timeframe: Expect a dramatic increase in  media coverage, advertising and investment in applied biometrics companies, many of which are currently private and closely-held, but which may be acquirable by larger, cash-rich firms, or which may be very attractive, timely candidates for Initial Public Offerings (IPOs), during the next 24 months. Regardless of the vagaries of the capital markets, these companies may be very good strategic portfolio choices.

Action: Start identifying and tracking the emergence (progress) of these applied biometrics firms immediately. Expect a great deal of activity, and, hopefully, opportunity.

Douglas E Castle

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