The 2 Types of Forecasters

Amar Pandit , CFA , CFP

The Late Donald Rumsfeld had quoted “Reports that say that something hasn’t happened are always interesting to me, because as we know there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.

This has relevance to financial forecasters. ALL (yes there is an emphasis on the word ALL) forecasters fall into 2 categories according to Economist John Kenneth Galbraith. He had quoted “There are 2 kinds of forecasters: those who don’t know and those who don’t know they don’t know.

You will come across many forecasters you think will know. They will even convince you they know. The absolute truth is that there are only 2 types of forecasters.

I had written quite a bit but then deleted it as this itself was super powerful. So, I will leave you to reflect on these quotes along with a few of his other gems.

a. “The only function of economic forecasting is to make astrology look respectable.”
b. “One of my greatest pleasures in writing has come from the thought that perhaps my work might annoy someone of comfortably pretentious position. Then comes the saddening realization that such people rarely read.”

I would love to hear your thoughts.