Why prediction is futile

At Tuesday afternoon’s Web 2.0 Summit in San Francisco, Vinod Khosla, founder of Khosla Ventures, took the stage to discuss the difference between innovation and punditry. He started off by mentioning a 1986 study that forecasted that by the year 2000, there would be just under one million cell phones. They were off by 10,000%. There were 109 milllion cell phones in the year 2000. AT&T spent $1 million and then ended up scrapping its whole cell phone business based on this forecast. Why? Because the 1980 ‘mobile phone’ was the size of a cinder block.

He then moved on to a Berkeley study that followed 80,000 forecasts over the course of 20 years and found that “experts have about the same accuracy of dart-throwing monkeys,” said Khosla. “You don’t do unreasonable things by being reasonable.”

Twitter, for example, did not exist five years ago, Khosla added. Which pundit could have predicted that a 140 character tweet would ever take off the way it did, or that a series of 140-character tweets could outline the whole culture and character of a city, like San Francisco when the Giants won the World Series?

Things like Twitter are created by innovators, not pundits.

“In every generation, you’ve seen radical shifts…Almost certainly, the next big thing won’t come from Google, Facebook, or Twitter.” To drive his home point, Khosla pointed out the fact that in the 1980s, no one thought there would be a PC in every home, and in the early 90s, no one could have predicted that email would’ve taken off. Even more shocking, the iPhone didn’t exist before 2007. “Now, it is conventional wisdom,” said Khosla.