I want to talk a little bit about predictability, planning, and being prepared for uncertainty, but it’s all about planning for the future, forecasting.

This was partially motivated by the fact that I read something about you can’t predict or you can’t plan for the future, particularly in the long run. Quite frankly, not only is that wrong, it is really, really bad advice. Yes, the world is uncertain, and there are certain times you have to be cautious. I’ll explain and break this down.

First of all, in the economic world, you have the macroeconomist, that’s the one that’s following unemployment, GDP, and all those sorts of things; and the Micro-economist, the one that’s following business, customers, consumers, production, manufacturing, etc. In the macro world, very often and most likely, the person who at the end of the year who is most accurate is very often actually wrong.

How can the person be right and wrong at the same time? Their number may be right, but why was it right? If there was some significant change or what we call an outside force that was not taken into account This could be anything from a treaty, to a major event, terrorist attack, plane down, could be oil shortage, excess oil. We’re talking about now the dumping of a lot of oil in market. The person that started and made the predictions in January, if they’re accurate in December, and this massive amount of oil from Iran is dropped on to the market, are they really right? No. They got the right number, but for the wrong reasons. It is usually the reasoning that’s crucial in business.

When I say the future must be planned for, but yet it’s usually wrong, what do you do? It seems to be a dilemma. Here, the problem is not that you’re wrong, but keep in mind the difference on the microeconomic scale, you’re looking and understanding and wanting to develop and understand the underlying causal relationships as to why your market should turn out a certain way. You’re going into depth about the long-term perspective, but you’re constantly monitoring it every month so that you’re ready for any quick change, anything that happens. All of a sudden, if prices of oil go down, you’re able to adjust to it. Why? Because you’ve already considered what its current price is and other things, and you’re not just following a trend; you’ve actually done some detail analysis so you’re able to adjust to that one change because you’ve already considered all of your known variables, all the contingencies. You’re better off having all of those factors thought of in your prediction for the future.

Sometimes you’re going to be absolutely 100% accurate, but in any case, you have to have gone through the exercise and thoroughly planned it. Basically what you’re doing is you’re taking a look at the demand for your product given the consideration of a dozen other variables. Now, all of a sudden, something you haven’t considered possibly, a 13th or 14th variable, all of a sudden becomes a major factor. This could be when you’re taking a look at analyzing your competitors. Is there all of a sudden a new competitor? A new invention? A new product? The discontinuation of somebody else’s product that actually helps you, or gives you an advantage? Or somebody who introduces a product that complements yours?

By understanding and planning thoroughly, yes, you can plan, adjust, and pivot very quickly. Keep in mind, because everybody’s talking about looking at your niche and following your niche down, etc., your competitors in your niche are very, very key and important. Always keep in mind that no matter what you think, there’s always substitution between whatever you’re doing and what somebody else has.

As an example, a friend of mine was talking about some drink that was for health. There may not be any exact product, but there can be a substitution between that and other health products...