Since 2012, I’ve run businesses of all shapes and sizes, in multiple countries and sectors. I’ve never obsessively tracked every penny in the accounts. What matters is simple:
- Keep the cash flowing.
- Create value.
I’ve never bothered mapping out the next five years. Why? Because business happens in the real world – a world where so-called “Black Swan” events (as Nassim Taleb calls them) can obliterate the best plans. Think 2008’s banking collapse. Think Covid. Think Russia rolling tanks across a border. You can’t plan for those. The only real protection is having cash in the bank so that one shock doesn’t kill the company.
Which is why, whenever I see long-term forecasts from the likes of the Office for Budget Responsibility (OBR) or think tanks boasting of a “black hole” in the public finances a decade ahead… I can’t help but wonder: what planet are these people on? And why does anyone with half a brain take them seriously?
Jeff Bezos says he’s puzzled when people congratulate him on Amazon’s last quarterly figures. He snaps back: those results were baked several years ago! Same too with economics, same too with countries – recent economic performance was baked over many years.
The UK’s public spending is forecast at around £1.28 trillion in 2024–25. The estimated – and much disputed – £25 billion “black hole” is a rounding error. That’s it.
I studied economics at university. I can tell you with confidence that it isn’t a science – if economists could reliably predict the future, as Warren Buffett quips, they’d be billionaires, like him. But they aren’t.
Worse: there’s no penalty for being wrong. In medicine, you can’t misdiagnose a patient repeatedly and keep your licence. In law, you can’t lose case after case and still be lauded as a top lawyer. Yet economists miss wildly – and still get airtime. Don’t give it to them!
Remember Thomas Malthus and Paul Ehrlich? They were among the experts who predicted that the world would run out of food as the population increased. They were wrong – as wrong as it is possible to be – but they are still regarded as experts.
Here’s a mea culpa, prompted by data that took 14 years to emerge. I knew – just knew from everything that I’d studied – that the austerity post-2010 would trigger a double-dip recession: because cutting spending would plunge confidence, triggering a second contraction. It seemed obvious. But as later ONS and OBR data revisions revealed, the UK never actually suffered a double-dip recession (i.e., two consecutive quarters of negative growth). The earlier narrative was wrong. My apologies to George Osborne, Sir
So my point stands: forecasts are often irrelevant; “black holes” are likely meaningless rounding errors; and even immediate economic analysis can be wrong – only to be corrected years later. What a farce.
My advice: Ignore 90% of economic forecasts.
