Recency bias is the tendency to think that trends and patterns we observe in the recent past will continue in the future. Predicting the future in the short term, even for highly changeable events like the weather or the stock market, according to events in the recent past, works fine much of the time. Predicting the future in the long term according to what has recently occurred has been shown to be no more accurate than flipping a coin in many fields, including meteorology, economics, investments, technology assessment, demography, futurology, and organizational planning (Sherden, The Future Sellers).
Doesn’t it strike you as odd that with all the intelligence supposedly going on that such things as the breakup of the Soviet Union, the crumbling of the Berlin wall, the former head of Sinn Fein meeting with the Queen of England, the worldwide economic collapse of recent years, the so called “Arab spring,” the recent attacks on U.S. embassies in several Muslim countries, and a host of other significant historical events were not predicted by the experts? Wait, you say. So-and-so predicted this or that. Was it a lucky guess or was the prediction based on knowledge and skill? If the latter, we’d expect not just one correct prediction out of thousands, but a better track record than, say, flipping a coin. Find one expert who’s consistently right about anything and we still have a problem. How can we be sure that this sharpshooter isn’t just lucky. If thousands of people are making predictions, chance alone tells us that a few will make a right call now and then. The odds in favor of prediction success diminish the more events we bring in, but even someone who seems to defy the odds might be the one a million that gets lucky with a string of guesses. You flip the coin enough times and once in a while you will get seven heads in a row. It’s not expected, but it is predicted by the laws of chance. Likewise with predicting how many hurricanes we’ll have next year or what stocks to buy or sell this year.
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