Speech at the Albanian Association of Banks New Year Dinner
It is a great privilege and a special honour to have an opportunity to address this gathering tonight.
Before I give you the opportunity to judge, let me ask you a question. How much can we really know about the future? If you promise to keep it for yourselves and not to tell it to my boss or our new heads at the parent bank in Milan, I will share with you a very telling story. The story goes like this. A then young psychologist by the name of Phillip E. Tetlock did not believe much in expert forecasts. So in 1984 he started an experiment. What he did is ask about 300 experts in many fields, including government officials, professors, journalists, etc., to make more than 27,000 predictions about the future. He asked quantifiable, verifiable questions. In 2005 he published the results in the book entitled Expert Political Judgment. His findings? Experts’ forecasts were only slightly more accurate than chance. Let me repeat this once again: slightly more accurate than chance. Interestingly, they were worse than basic computer algorithms (which extrapolated trends).
In other words, experts’ judgments about the future are not very useful. We tend to believe them, we make them all the time, I earn my living by making forecasts, and yet, as Tetlock demonstrated, they are not very accurate. I think we all lost a lot of faith in forecasting when a black swan appeared in the form of the crisis that we are still in today. The point is: we all need to be much more humble about our ability to predict complex and dynamic systems that our economies are. Long time ago, the world was simpler, easier to predict. So, let me share with you one of my favourite sayings: the future is not what it used to be. Sounds ironic, but it is true.