New Year and New Predictions

Stuart Borgman - 1 February 2011

With the introduction of the New Year, I always look forward to reading the predictions for what we can expect for the year; a fresh year and new opportunity. In my mind a prediction creates a sense of change; however there is no reason why the prediction would not suggest a situation of status-quo i.e. the year ends as it began, the values of the stock markets remain the same and we end the year using the same technology as we had when we exited the previous year. History and common sense suggests that this is very unlikely to be the case. For example, while it remains a valid future prediction that Apple will announce new versions of their iPad and iPhone, its fairly clear that Apple set out on their development path to update the current iPad and iPhone products many months ago; it is highly likely the process started before the current version launched. So the path to our future is as much behind us and as in front. This is why a prediction is a forecast based on trend rather than a mystical talent to look into the future.

The book "The Black Swan" by Nassim Nicholas Taleb explores this area and our ability to predict the future based on history and trends. Financial analysts use an extensive array of tools and modelling techniques to predict future performance. Even at MLL we use our own prediction techniques when planning radio links, looking back over many years to understand weather patterns to assess and plan the future performance of our radio links. The Black Swan looks at the impact of the Highly Improbable - the impact on the future when an unexpected event occurs. Nassim describes this as a Black Swan; before the discovery of Australia the world was convinced all Swans where white, then the first black swan was sighted in Australia. All historical thinking around Swans was changed overnight. The book looks at these at statistical outliners, random events which have a significant impact on the future. Another example is the Kobe, Japan Earthquake in 1995, which finally exposed Nick Leeson the rogue trader. Until this point Nick Leesons trading losses were unknown and if his last stock market gamble had paid off, he may never have been exposed and Barings Bank could still be in existence today. Bank controls would also be very different. However the result of this improbable earthquake was a stock market correction and a catastrophic loss, leaving him in a position he was unable to recover from.

As I read the predictions for 2011 I have my normal sense of disappointment. The predictions continue to evolve the trends we see today, growth in Internet and mobile data, increasing security requirements for mobile handsets, evolutions of social networking...the list goes on. It all makes sense, but it does not tell me where the next Google or Microsoft is going to come from, which I suspect I optimistically hope to spot as I read the predictions. But the reason these companies grew from nowhere to become so successful without other larger companies taking their market, is they did not follow history or predictions, they took a new approach. In many cases helped by "Black Swans". IBM failed to spot the importance of the PC operating system, which opened the door for Microsoft, who grew with the PC market, which accelerated as the demand for Internet access rapidly grew following the invention of the web browser. Even Bill Gates could not have predicted this, no matter how clever.

So the question is whether predictions are useful? In my view they are, they provide a sense of direction. However we need to be cognisant the end destination may change during the journey. It also may mean the destination remains the same, but the path changes. A prediction for 2010 was the final depletion of unique Internet addresses (known as IPv4 address) which are required to continue the growth of the Internet. Vint Cerf, often referred to as one of the Fathers of the Internet, has been vocal about the need to move to the next generation address scheme (known as IPv6 - version 5 was skipped) to overcome this issue. By the end of 2010 the addresses had not run out, but the problem has not gone away, just delayed. The industry is resilient and is figuring out how to continue using IPv4, while it solves the issues of migration to IPv6.

The problem for the Mobile operators is even more challenging; not only do they have the IP addressing issues, but the realisation that mobile data traffic growth will not slow its growth for many years to come. The prediction is there will be one billion high speed data users by 2012, not bad for an industry which was created for voice communications. I doubt this was a prediction back in 1985.

As the likes of the mobile operators evolve their networks to solve the challenges ahead, new companies and technologies will emerge to solve these issues. Some are beginning to appear, such are RAN optimisation technology to allow operators to slow the investment in their backhaul network. This and other technologies are unlikely to make a 2011 prediction list or stand a chance of becoming the next Microsoft. But as the industry sets out to solve new problems, new ideas evolve. Some of these ideas will change the destination of the industry, create improbable events (or Black Swan's as Mr Taleb likes to call them) and impact some future New Year predictions.

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