Inside the Crystal Ball: How to Make and Use Forecasts

Introduction

What You Need to Know about Forecasting

Everybody forecasts—it is an essential part of our lives. Predicting future outcomes is critical for success in everything from investing to careers to marriage. No one always makes the right choices, but we all strive to come close. This book shows you how to improve your decision-making by understanding how and why forecasters succeed—and sometimes fail—in their efforts. We're all familiar with economists' supposed ineptitude as prognosticators, but those who have been successful have lessons to teach us all.

I have been fortunate to have had a long and successful career in the field of economic forecasting, first at the Federal Reserve Bank of New York and the Bank for International Settlements, and then, for the majority of my working life, on Wall Street. Often I am asked about so-called tricks of the trade, of which there are many. People want to know my strategies and tactics for assembling effective forecasts and for convincing clients to trust me, even though no one's forecasts, including my own, are right all of the time. But most often, people ask me to tell them what they need to know in simple and accessible language. They want actionable information without having to wade through dense math, mounds of complicated data, or “inside-baseball” verbiage.

With that need in mind, Inside the Crystal Ball aims to help improve anyone's ability to forecast. It's designed to increase every reader's ability to make and communicate ...