Confidence is Back….Already

The Sun Will Come Out

One of the most common mistakes human beings make is assuming that what happens today will happen tomorrow. When we do this we see life as linear. This is not always a bad thing because in many situations it is an effective tool for planning. In fact this is a frequently used technique in the forecasting business which is commonly referred to as extrapolation. We take a small picture of what is going around us at the current time and we project it onto the future through our own individual imagination. Yet, the danger in an exercise like this is fails to ignore possible situations and events that may arise. For example in the current crisis of ‘08 many people assume that the situation will continue to get worse. Why? Because that is the trend for one. It is important at this stage to really try to separate one’s own individual emotions be they positive and negative and arrive at a more balanced viewpoint and understanding of the events going on.

How do we do this? Richard Heuer, a 20+ year veteran of the CIA, provides clues. Heuer wrote what is considered the gold standard in intelligence literature called the the Psychology of Intelligence Analysis. The book lays out the pitfalls the mind can enter into and makes recommendations on how to avoid them. Specifically, he notes we often come up with a story in our own mind of why things are happening now or what will happen in the future. After we arrive at this point we go out and seek information that will back this up. Consciously and subconsciously we ignore all information that does not fix this model. This is also commonly referred to as confirmation bias.

What Heuer argues instead is that we do the exact opposite. When we come up with an initial idea or story we should then try to find information that will disprove this theory. He took this approach one step further when he devised the analytic method known as the Analysis of Competing Hypothesis or ACH. This method allows one to weigh various pro vs. con arguments together to come up with a probable outcome. ACH software allows anyone to follow this process.

So let us look at the current Wall Street Crisis. There are many reasons to look at the facts and assume the crisis has the potential to cascade. Many peope have voiced their opinion that it might to take the country years to recover. For this argument you can cite the a 6.7 unemployment rate or Google cutting back its employee benefits. In fact it is hard to do a quick scan of any of the leading financial websites and not come away with a pessimistic impression. Yet, there are several positive signs out there if we take Heuer’s advice and look for evidence to refute our original perception.

• Business Schools-Traditionally, when the economy falters business school applications tend to rise. This current crisis is no exception. In fact the recent BusinessWeek article entitled “MBA Programs Eye Expansion” noted that testing firm ” Kaplan surveyed 245 B-school admissions officers in August and found that more than half were considering increasing program size, some by up to 25%.” The choice to invest in graduate education is akin to purchasing a big ticket item such as a car or real estate. One does not undertake it without feeling somewhat confident that he or she will reap a significant return on their investment somewhere down the road.
• Video Games- The video game industry primarily catered to the young. Yet, video games are gaining a new popularity with older adults as seen with the popularity of the Wii. According to the AP the November sales for video games, software, and consoles in the U.S. totaled. approximately $3 billion, almost 10 percent higher than last year. The results were reported by NPD Group, who anticipate total video game sales for the year to reach approximately $22 billion in the U.S. Video games are an activity that is pursued in discretionary time.ie after work. It is hard to believe you will be throwing down $40-$50 a game if you think your greatest concern will be keeping or finding a new job.
• Smartphones- Market research and consultancy firm IDC projects that smartphones( BlackBerry, IPhones, Palm, etc.) shipments worldwide shipments will grow from 164.7 million units this year to 363.2 million units in 2012. The number of applications available on these phones continues to grow at an enormous rate. Smartphones have become the new handheld computer. Again, if things are going to be that bad in the coming years why do people think they be so busy that they will have to go out an purchase one.