Fortune Sellers

1. Fortune Sellers Concepts, Ideas, and Lessons Learned

2. Outline • Future is unpredictable • Forecast Definition • Examples • Chaos • Complexity

3. Outline • How to reduce risk of unpredictability • Horizon • Adaptability • Leadership • Emulation • Thought slides • Insurance • Humility • Creativity • Action

4. Forecasting and Prediction Prediction Forecast • Forecast • To calculate or predict (some future event or condition) usually as a result of study and analysis of available pertinent data • Prediction • To declare or indicate in advance; Especially: foretell on the basis of observation, experience, or scientific reason

5. Beliefs vs. Forecast • Manifest destiny • Domino theory • Mr. Sherden’s education forecast • Beliefs • Guide to action • Connections • Forecasts • Specific • Inform beliefs

6. Future Is Unpredictable • How do we know? • Book gives many examples • Forecasting accuracy is not converging (pg68) • The future does not exist • Compare against naïve prediction • Same as yesterday The Future Now

7. Forecast Vs. Naïve Prediction

8. Chaos • Sensitivity to initial conditions • Constant natural laws • Butterfly effect • Smoke

9. Complexity • No constant natural laws • Adaptive: the rules change • Models become obsolete cannot be dissected into their component parts • Counterintuitive cause-and-effect results • Periods of order and predictability and moments of turmoil • No fixed cycles • Economy, technology innovation, stock markets, and social sciences

10. “Past performance is no indication of future results” • Stock market technicians • Analyze data tendencies • Long-Term Capital Management • Based predictions on past events • Had to be bailed out in 1998

11. Reducing the Risk of Unpredictability

12. Use Short-term vs. Long-term Forecast • Dismal economists: Forecast accuracy drops with lead time. • Research was conducted based on 5,000 forecasts made between 1976 and 1988 by fifty leading economic forecasters. • Forecasts on GNP growth and inflation rate. • Weather • predictions are accurate over 12-24 hour period • become less accurate over time

13. Be Willing to Change • Forecasts should be updated often • Prepare contingency plans • Build “highly responsive organizations that will adapt” • Examples • IBM in the 1980s • EWR Inc. and data comm. technology

14. Recognize Difference Between Leading and Controlling • Organizations are not directly controllable • Businesses must strike a balance between achieving efficiencies and remaining flexible to adapt • Tom Peters wrote about abandoning hierarchical organizations for flexible groups in Liberation Management: Necessary Disorganization for the Nanosecond Nineties, 1994 • Businesses must manage in the short term, while they lead in the long term

15. Controlling: Set minimum level of sales revenue through use of forward contracts on future production output. Recognize Difference Between Leading and Controlling Mining Industry • Managing: • Technology innovation, integration & development in strategic mine planning. Military • Managing: • Use of Reserve training to generate expertise in billet assignment. • Controlling: • Use of Boot camp to generate a team thought process.

16. Follow Example of Most Successful Organizations • Self-organization (d-day) • Organizational intelligence(Toyota) • Natural reflexes(royal Dutch/shell) • Mutation(joint venture of CICC) • Symbiosis(VCR standard) • Competitive challenges(Fedex express)

17. Use Insurance • Farmers know weather is unpredictable • Options • Crop Insurance • Investors know market is unpredictable • Dollar-cost averaging • Redundancy in IT systems

18. Be Humble 夫欲致精者，必虚静其形；欲致贤者，必卑谦其身 • The saying of Ancient Chinese “To live a long life, make your mind disinfect first; to govern a country, be humble first.”

19. Be Humble • Business & playing chess

20. Be Creative • Capacity to have newthoughts and to create expressions unlike any other.(Encarta) • Basic element in many human endeavors, such as art, music, literature, and performance • Video games • Atari was craze in 1970s but it popularity decreased in 1980s • Nintendo made video games a craze again

21. Act • Act or not act in the face of uncertainty? • New Deal, Great Society • What is the cost of not acting? • Prediction interact with the phenomena they predict • Often the best research could not have been predicted before the work began • We are often surprised by the research topics that we “back into” (bottom-up) • Business plans are successful not because of their concept, but because of successful implementation

22. Application

23. “Innovation is essentially a process of coupling” • Don’t try to reinvent the wheel • Find place in research field • review literature • Research may end in an unintended area

24. Reduce Uncertainty in Social Research • Critical thinking • Sound theory base • Avoid predicting on cycles • Check credentials of sources • Discount track record • Avoid personal bias

25. Insure Lead Be humble Change Act Be Creative Conclusion • The future is unpredictable • Be willing to change • Recognize difference between leading and controlling • Use insurance • Be humble • Be creative • Act Chaos & Complexity