Tuesday, May 19, 2009

Brainless Forecasting 2: Getting it Right (Occasionally)

Recently, I discussed how difficult it is for human beings to forecast the future.  The future of their inventions.  The future of their society.  Any future at all. 

We measure the economy every day, for example, but our smartest economists just happened to miss the current worldwide recession.  We invent a device like the telephone and then predict that it will never replace the telegraph (on the one hand), and that it will bring about a universal language and world peace (on the other).

In the case of the telephone, however, one person in particular got the future right, and well before anyone else.  That person happened to be its inventor, Alexander Graham Bell.  

In a remarkable 1878 letter to the organizers of the Electronic Telephone Company, Bell described a universal point-to-point service connecting everyone through a central office in each community, to in turn be connected by long-distance lines.

What is stunning about Bell’s vision is that the available technology did not permit universal, switched, long-distance service.  He was describing something that he could not build, at least in 1878, but that would exist in all its pieces and parts a century later. 

Sociologist Ithiel de Sola Pool pondered why the only forecaster to get the future of the telephone right—and really right—was the inventor.  He offered five theories:
1. Bell was a smart guy, perhaps just brighter than the rest of the world. 
2. Bell was living with the telephone eighteen hours a day, year after year.  Better than anyone, he understood its capabilities and potential. 
3. Bell was a speech expert who approached the problems of telecommunications from the outside.  Folks like Western Union and Elisha Gray thought of the telephone as an extension of the telegraph—the “fallacy of historical analogy”—and missed the future. 
4. Bell was not a scientist but, like Morse, Edison, Ford and Land, was both an inventor and capitalist.  These men were interested in what might be theoretically possible and what might sell; “the optimism of their speculation was controlled by a profound concern for the balance sheet.” 
Personally, I find the last item especially compelling; when Edison’s notebooks on devising the nation’s first power grid were examined, for example, they showed on every page “calculations of the system’s market potential, the price charged for competing gas illumination, the cost of copper wiring, and other entrepreneurial concerns.”

There's something about pushing a technology ahead with a profit motive in mind that creates a sense of clarity.  Most successful entrepreneurs become good at telling the story of a rosy future.  Some have a great technology but no business plan.  Some have a great business plan but no technology.  The ones who succeed have both, or access to both, and clearly separate the real and now from the purely aspirational.

So when we think about Alexander Graham Bell running a (so-called) pre-revenue company, and being so very right about its future, we can assume that being brilliant, living 24/7 with the innovation, and avoiding historical analogy were all contributing factors.  Maybe, too, the idea of constantly iterating the possible, the impossible, the practical, and the the profitable was also decisive.

And then again, maybe when all is said and done, Bell was just plain lucky.  That's how we get most of our really good forecasts, even today.

Wednesday, May 13, 2009

Brainless Forecasting: Remembering the Telephone

One of the lessons of the current recession is that we are, more often than not, just plain clueless when it comes to forecasting our economic future.  And it’s not for a lack of trying.  We give the smartest people in America reams of market data, we create marvelously complex forecasting models, and we end up with vastly conflicting, generally misguided points of view.

More than that, we completely miss the Big Events--the current recession being a good example.

It is the American condition, however, that being bad at something doesn’t stop us from doing it, and doing it enthusiastically.

With this in mind, I’ve been watching the swirl over Twitter, Facebook, the future of search, Second Life, radio, the music industry, the electric automobile and television.  Not only is the debate about our technology future downright confusing, it’s downright nasty.  Technology has become our new religion, our new politics.  To say you support “open source” in certain cocktail settings is like saying you would like to see a socialist President, or suggesting that only Christians can get into heaven.  It’s nasty out there.

This is what I was thinking as I read Ithiel de Sola Pool’s 1977 The Social Impact of the Phone.  In particular, one chapter examines all of the forecasts made about the telephone from 1876 to WWII.  It's a good reminder that we—all of us, worldwide and over time--are really, truly are bad at this forecasting stuff.

The “Just Don’t Get It” Forecast. In 1879, Sir William Preece, the chief engineer of the British Post Office, testified before the House of Commons about the telelphone: “I fancy the descriptions we get of its use in America are a little exaggerated, though there are conditions in America which necessitate the use of such instruments more than here.  Here we have a superabundance of messengers, errand boys and things of that kind.  The absence of servants has compelled Americans to adopt communication systems for domestic purposes.  Few have worked at the telephone much more than I have.  I have one in my office, but more for show.  If I want to send a message—I use a sounder or employ a boy to take it.

The "Get It Even Less If That’s Possible” Forecast.  Joseph Gurney Cannon, the future Speaker of the United States House, describing the phone in 1878: “A damned old Yankee notion (a piece of wire with two Texas steer horns attached to the ends with an arrangement to make the concern bleat like a calf) called a telephone.”

The “Get It Too Much” Forecast.  General Carty, the Chief Engineer of AT&T, predicted the advent of international telephony, forecasting that it would bring peace on earth: “Someday we will build up a world telephone system making necessary to all peoples the use of a common language. . .which will join all the people of the earth into one brotherhood.”

The “Economic Doom” Forecast.  Anyone with a rudimentary grasp of math could see that the number of people using the phone increased the operators’ work exponentially, soon making it impossible for the system to operate.  Some could not see the advent of automatic exchanges.  One early telephone manager commented that “So far as he could see, all he had to do was get enough subscribers and the company would go broke.”

The “Technology Assists Evil” Forecast.  A muckraking article in the 1907 Cosmopolitan Magazine reported that “Every one of the estimated four thousand pool rooms throughout the United States is equipped with telephones used for gambling purposes and for nothing else.”  Further, the article said, the telephone company knows full well who the criminal users are and does nothing to stop them.

The “Technology Assists Good” Forecast.  Many felt that the telephone would bring a decline in crime, for criminals would have little chance of escape one the telephone was everywhere and police could be notified ahead about a fleeing culprit.
The “In-Love with Current Technology” Forecast.  Elisha Grey of Western Union could probably have invented the telephone a year before Bell had he realized its commercial value.  In 1875 he wrote, “Bell seems to be spending all his energies on [the] talking telegraph.  While this is very interesting scientifically, it has no commercial value at present, for they can do more business over a line by methods already in use than by that system.”
A Grand Sociological Forecast.  By 1910 it was hard not to find a forecast that didn’t predict the phone (and the auto) would break the killing isolation of farm life, encouraging children to take up their parents’ trade and stay on the farm.  Needless to say, the 20th century saw one long, unbroken exodus from the American farm.
Lesson #9: When everyone agrees it’s time to worry.

So the question is: Was anyone, anywhere, at any time, able to create a balanced, credible forecast for the telephone?   You bet.  And it happened right off the bat.  

See here.

Monday, May 4, 2009

Kindle Meets the Kodak Brownie

One of the great consumer products of the twentieth century was the Kodak Brownie camera. It premiered in February 1900, cost one dollar, and did for picture-taking what the Model T would soon do for American driving. 

When I was very young I owned a Brownie Bullet, purchased for a special family visit to the New York World’s Fair in Queens in 1965.  I adored that camera, even after I dropped it on the ground near the Westinghouse Time Capsule, cracked its case, and took another three years of pictures with a sun streak down the right side of every print.

So, the other day when I accidentally dropped my Kindle 2 (to no great effect, fortunately), the Brownie flashed before my eyes.

Not so long ago, when Kodak sold millions and millions of boxes of film, the company used to try to calculate how many pictures were “stuck” in peoples’ cameras.  A family would go off on a trip, bring along three rolls of film, shoot two and have a few frames left on the third roll (still in the camera).  Then the camera and undeveloped film would get stuck back in the closet for the next vacation.

As a nation currently suffering under a glut of recession-induced inventory, imagine Kodak’s struggle: They were fully in control of raw materials and production (making the film), fully in control of finished product (making the prints), but essentially excluded from the work-in-process.  In fact, WIP walked out the door of the retailer and disappeared into the Rambler American headed for Niagara Falls.

Certainly Kodak could influence the pace of picture-taking through advertising, selling books, hosting photography classes, and by establishing Kodak “picture spots.”  But in the end it had control of only two of the three stages of its “forward” supply chain, and had to wait for consumers to “add value” and return WIP to finished goods .

This has, I think, much in common with books and what's going on today with our Kindles.

Have you ever gone to a bookstore, found and bought three books that you might like, begun one and parked the other two on a shelf?  Are they still there, unread?  Are they still there despite you having subsequently purchased five more books at the bookstore? 

This is a slightly different problem than Kodak had, of course.  Where most 1960s families owned a single camera, most twenty-first century book-buyers have lots of shelves, as well as closets and basements.  So the warehousing capacity for unread books is much larger than that for untaken pictures.

Peter Drucker noted American’s weird relationship with books in his Innovation and Entrepreneurship (1985). When TV first appeared in the early 50’s, Drucker wrote:
“Everyone knew” that book sales would drop drastically. . .But instead of collapsing, book sales in the United States have soared since TV first came in.  They have grown several times as fast as every indicator had predicted, whether family incomes, total population in the ‘book reading years,” or even people with higher degrees.  No one knows why this happened.  Indeed, no one quite knows what really happened.  Books are still as rare in the typical American home as before.  Where, then, do all their books go?
Now, enter the Kindle.  Depending upon how snoopy Kindle’s Whispernet is, or one day can become, Amazon—for the first time in book-buying history—could know the following:
1. What books I own.  Not my family.  Not my wife and me.  Just me.  And, how many hours a week I really read, instead of those lies I tell to market researchers.  
2. The order in which I read my books, including skipping among them.  And, as I mentioned in my last post on Kindle, which books I have that might influence additional purchases. 
3. The other reading media (like magazines) that influence the pace of my book reading. 

4. Which books I don’t finish (like Gravity's Rainbow; three valiant starts, never past page 50). 
5. Which books I finish.  Which I finish quickly.  (In other words, imagine a publisher knowing what’s really being consumed, and at what pace, instead of simply purchased.)  Information could be sent back to the author: more scenes with saltwater and sharks. 
6. (Now, here’s where it gets really interesting. . .) What sections of a book slow me down, speed me up, or cause me to skip over. 
I’m not saying Amazon and its Whispernet are doing (or can do) any of this; this is all just speculation of what I suspect will one day be done.  And it’s not necessarily 1984 stuff, either.  There are undoubtedly a number of folks who would volunteer to become “Kindle Readers,” just as today people become “Nielsen Households.

Still, this ability to mine “data emissions” where none existed before is changing our world.  Imagine a football player with sensors in his helmet who gets pulled in the last quarter of a game because his “tackle impact" has fallen below the median.  Or one who is retired at 29 because his “aggregate impact” over the season is in the lowest quartile of 28-30 year old linebackers? 

I don’t know what Amazon would find from their Kindle Readers—perhaps still a lot of unread books sitting on our digital bookshelves.  But such insight into “work in process” would have been a godsend for the old Kodak.  Perhaps they could have moved more film.  Perhaps they could have dreamed up new marketing campaigns to get us to empty our Brownie Bullets at the end of vacation.

Perhaps they would have known that I'd dropped my Brownie at the 1964/5 World's Fair, taken pity, and sent me a new one.  But now, of course, we're really talking science fiction.

(2016 update: See this post about Jellybooks, a reading analytics company.  It took only seven years for the speculation in this post to become reality."