Does the IMF have a clue?
Before the scale of post-electoral crisis was known, IMF projected the following real GDP growth:
The thing with these projections, beyond 2011, is that they are very uncertain. The only thing I’d say with some confidence is that the growth isn’t going to be exactly 6.0%. It’s uncertain not because the IMF has done a bad job, but because an economy is an inherently complex system full of non-linearity and inter-dependencies. In Nassim Taleb speak we live more in “extremistan” than in “mediocristan“.
Looking at past projections there seems to be a tendency for actual gdp numbers to quarter after quarter come in systematically above or below projections. Right now in Western Europe actual gdp figures seem to disappoint at every quarter. It’s a bit like projections play catch up to a reality that’s always more extreme than projections – in one way or the other.
For the Ivory Coast, starting in 2012 the projections are pretty optimistic, and if it wasn’t for the upcoming developed world downturn/crisis, my guess would have been that we’d see see constant surprises to the upside. Now, my guess is that the Ivory Coast growth will outperform developing world and sub-saharan Africa averages, but that these averages at least for the next few years could be lower than expectations due to being dragged down by the developed world crisis.
“Ignore the experts and trust your vision”
Here are a few quotes from venture capitalist and Sun Microsystems co-founder Vinod Khosla on experts’ difficulties in making projections and the implications for entrepreneurs:
[…]Yet his attitude is pretty anti-establishment when it comes to independent thinking, which he believes is essential for entrepreneurship.
“Trust in your instincts and trust in a lot of experimentation,” Khosla said in an interview.
Quoting George Bernard Shaw, Khosla said, “The reasonable man adapts himself to the world. The unreasonable man persists in trying to adapt the world to himself. All progress, therefore, depends upon the unreasonable man.” And quoting Martin Luther King Jr., he said, “Human salvation lies in the hands of the creatively maladjusted.”
In his speech, Khosla spent a lot of time showing how expert predictions have gone awry, like Lord Baron Kelvin, the head of the Royal Society who said that “heavier than air flight” was impossible just a few years before the Wright Brothers flew at Kitty Hawk. And he said that, even today, oil experts can’t accurately predict the price of oil.
McKinsey failed to predict the popularity of cell phones, estimated in 1986 that the number of cell phones in 2000 would be 1 million units. It was off by 108 million units. The forecast was wrong by 10,000 percent. On that basis, AT&T decided to divest itself of its cell phone business.
“It was an expensive study,” Khosla joked.
Philip Tetlock, a professor at the Haas Business School at the University of California at Berkeley, did a study on the accuracy of forecasts going back 25 years. When he finished the study, he had collected 82,000 forecasts against real-world outcomes from nearly 300 academics, economists, policymakers and journalists.
Nobody predicted that Twitter would be used by more than 100 million users. Nobody predicted that India would have more cell phones than toilets. Nobody predicted the Arab Spring. Nobody predicted that China would become a huge consumer of the world’s oil.