The Precarity of Predictions

I recall Angela Merkel lamenting a gathering in Lindau of former Nobel laureates in Economics following the financial crisis for their ability to ‘explain everything and predict nothing’.
Many of us are ambivalent about predictions. In part because they are not easy to get right, so they invite embarrassment. Niels Bohr, a Danish Nobel Prize-winning physicist, was attributed with saying: “Prediction is very difficult, especially about the future.’’ Karl Marx was more precise: “Men make their own history not as they please, but under circumstances existing already.’’

Yes predictions are difficult, or conjectures for the more modest among us. We are constantly required to form a view based on incomplete information so predictions are inevitably part of our everyday lives. Will it rain today? Which subject should I study? What partner should I marry? How should I invest my retirement savings? Each choice is a prediction of sorts, whether we like it or not. Doing nothing is also a choice, a kind of prediction by default that the status quo is the optimal pathway.

Undaunted and in this spirit, we invited our followers and friends to submit one or more predictions for our consideration.

The instructions were as follows:

While we’re open to all, preference is given to predictions that are: relevant to a broad readership; counterintuitive; and constructive (Lehrreich). We especially like those where the consensus may be misled, or the prevailing view of risk or certainty of expected outcomes seem exaggerated. If additive, amusement and provocation are also helpful.

Here are those that I felt met our criteria closest:

1. Social Media

The decimation of the media and retail landscape continues apace at the hands of the four horsemen: Amazon, Google, Facebook, and Twitter. Other industries begin to feel the pain. Elizabeth Warren (US Democratic Senator) and Margrethe Vestager (the Danish EU Commissioner on Competition) lead the charge, but others follow suit.

Norway is the first country to pass laws seeking to deal with the addictive consequences of social media among its youth. France follows behind closely. Canada requires Facebook to install a ‘not like’ button resulting in a 75% decline in traffic (and ‘friendships’). Holland, more commercially minded, levies a fee per user, arguing its citizens are the product generating advertising revenues so they deserve compensation. The proceeds are used to shore up its social security fund. Japan establishes fines against so-called ‘smart phone zombies’ who are caught bumping aimlessly into pedestrians while staring at their phones.

2. Bitcoin

The speculative fever in Bitcoin and other crypto currencies causes a roller coaster of price rises and falls and it finishes the year 95% below its value at the beginning of the year. One speculator grieved, “it went down 70%, three times!!”

The fatal fall is triggered by regulatory interventions following revelations that Bitcoin was used to fund covert operations of ISIS and to payoff a ransom demand arising from the kidnapping of a multi-billionaire Chinese tech mogul.

While Bitcoin’s future as a payment mechanism and store of value seems thwarted, the debate shifts towards the merit of blockchain as a potentially groundbreaking technology worth investing in. Later in the year, first mover initiatives are announced by Sotheby’s concerning art provenance and by Lloyds of London for the insurance of ‘smart contracts’.

Zug seeks to rebrand itself from ‘Crypto Valley’ to ‘BlockChain Valley’, distancing itself as a burgeoning center for the launch of crypto currencies by attracting more serious and sustainable ventures where blockchain technology can provide a sustainable advantage (i.e. Urkunde).

3. Geopolitical

The Republicans retain control of both the Senate and the House of Representatives in the November election. This is due to unemployment hitting twenty-year lows and wages that are finally rising, making voters reluctant to abandon the course. Despite this, Trump’s approval rating remains abysmal.

Trump’s major achievement is when China finally decides that nuclear capability in the hands of an unpredictable leader on its border is not tolerable even though North Korea is a communist buffer between itself and democratic South Korea. China cuts off all fuel and food shipments to North Korea which soon after agrees to suspend its nuclear development program.

Following the rising risk of a hard Brexit and increasing consternation among the vast majority of voters, Tony Blair experiences a resurgence of his popularity and leads the Labour party to victory on the back of a ‘no more Brexit’ campaign.

France has the best performing stock market in the wake of far reaching reforms in labor markets seen through by Macron.

4. Switzerland

The ‘no Billag’ referendum, which proposes to eliminate funding for public broadcasting in Switzerland, passes by an ever-so-slight margin. Political experts say voters punished the Swiss parliament for its failure to provide them with a more viable proposition that responds to the challenges of the future of public broadcasting, particularly in a digital age where demand for sequential programming is rapidly deteriorating.

After a period of chaotic dislocation, the debate ironically leads to the growing consensus that better independent public broadcasting is required rather than less. This is primarily as a result of the dire financial state of private media and its increasing tendency to produce content on the basis of its ability to raise advertising revenues or succumb to political interests as a quid pro quo for financial patronage.

The ETH becomes the latest higher education institution to raise money for investment through international capital markets as educational institutions take advantage of low interest rates and high demand from investors.

The move comes on the heels of Oxford University’s recent decision to do the same. The ETH raises Sfrs 10 billion through a 100 year bond yielding a negative 0.5% interest rate with the ratings agency, Moody’s, assigning the bond with its highest credit rating. A condition of the bond offering is that donors match the proceeds, resulting in new source of proceeds of Sfrs 20 billion for the ETH Foundation.

The loan will be repaid from royalties generated from innovations arising from ETH sponsored research. The enlightened move takes advantage of the only time in history when borrowers have been perversely prepared to pay someone to lend them their money. The successful offer vaults the ETH into the top five endowments among leading universities in the world (from among the smallest), enabling it to more effectively compete for the world’s best faculty and students.