351st Post, Chaos Theory for Forecasting

This is the 351st post to the blog - an important milestone for me

Can the principles of chaos theory help in our forecasting techniques?

I found a very interesting paper from the book,

Managing Organizational Complexity: Philosophy, Theory, and Application
A Volume in: Managing the Complex, pages 167-182.
2005 by Information Age Publishing, Inc.
ISBN: 1-59311-319-6 (cloth), 1-59311-318-8 (paper)

The paper is

CHAOS-BASED PRINCIPLES OF FORECASTING
Liu Hong and Kurt A. Richardson

They explain the forecasting as

Quantitative
Trajectory Predicting
Range Forecasting
Qualitative Futuring

The import of the paper for me is that before getting into any forecast one need to understand how much of system is composed of what are called strange attractors or for that matter other attractors.

Given our obsession with forecasting - technological, business and what not, it is important to understand what are we forecasting and what really can be the limits to accuracy of forecasts!

Predicting Black Swans

Black Swan and Fooled by Randomness, the two books by Nassim Nicholas Taleb, keeps on coming back to me. He talks about the futility and fallacy of many of our best practices in predicting future. He is particularly severe on Gaussian Distribution - the Normal distribution, which has been brought into business lexicon by Statistical Process Control (SPC) of the machination of work that brought industrialization to peek - which Motorola took to further extreme of Six Sigma and GE actually sold it to the whole corporate world.

Human beings have been fascinated with future in many ways and since earliest times. The field of astronomy and astrology have a genesis in urge in knowing what is going to happen. Prediction, forecasting and projections are what we want to delve into regularly - in fact the framework of science (a way to explain reality which can be proven) and mathematics - a framework to construct and develop results from key Axioms - are really the outcome of a tendency to forecast or predict.

The stochastic nature of our world however is telling us how limited all these so called futurologists are really. One such author, Alvin Toffler, dazzled us with Future Shock, Power Shift and Third Wave. In 1990s he wrote War and Anti-war and recently he wrote Revolutionary wealth. Well, having read all these - he produces a book in one decade, I realized how less effective the newer books have been compared to previous ones.

Ray Kurzweils is using technological trends to predict Singularity is Near - when Biology is overtaken by machine intelligence (did we hear this before - someone used to talk about Artificial Intelligence ) - well Roger Penrose's in Emperor New Mind and Shadows of Mind thrashed the strong AI proponents.

Now comes the Black Swan and Fooled by randomness.

Where does it take our thinking which is coming from TRIZ on Trends of system evolution and predicting the future. Is TRIZ and thus all of us are FOOLED BY RANDOMNESS? - I intuitively feel it is not about prediction, it is about understanding evolution.

If you do not want to be fooled by randomness, embrace it. How - a combination of Lean Thinking with TRIZ looks like the best recipe - Really? Well to my thinking. Godel proved limitaions of mathematics - The Godel Theorem came as a great shock as was the Quantum Theory with its associated Uncertainty Principle. What is needed- when physics and Maths are failing - look ate Biology and chemistry - The way we have survived and become humans from Atoms need to be understood -

So if you want to predict, use trends and forecasting with futurologists - look to reconcile with Evolution!!!!