Saturday, September 18, 2010

Cost of Forecasting vs. Cost of Mistakes

I’ve written before about the fascination that we have with forecasting and also how technology sometimes removes the need to forecast.

Here’s another way to look at it.

Forecasting, or predicting the future, is time consuming. Whether in personal life or at work, trying to decide what the consequences of our actions will be takes up a considerable amount of energy and time. This time and energy is the cost of forecasting.

If we don’t try to forecast so far into the future or so accurately, but instead choose one set of actions - we can eliminate the uncertainty. Whatever will happen will become apparent and we will learn whether we had made the right move or not. If we got it wrong, then that is the cost of mistakes.

There is a need to weigh the cost of forecasting vs. the cost of mistakes.

There are decisions in life which indeed must be weighed carefully and long until we are sure of exactly what we want to do and what the consequences are likely to be.

But there are other decisions where the cost of delay in making a decision while we discuss the odds is higher than the cost of actually making a mistake and learning from it.

Telling where to apply what is the real art. But at minimum it is important to realize that making mistakes is a legitimate way to make a decision.

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