Attempting to develop precise forecasts is a fool’s errand. Instead, improve your adaptability and flexibility.
.” He suggested: “A butterfly flaps its wings in the Amazonian jungle and subsequently a storm ravages half of Europe.” While this statement is often interpreted as meaning “small things can have big impacts,” Lorenz’s insight was actually far more profound: In complex systems, small changes in one variable may have no effect or massive onesBefore Lorenz’s work, forecasters assumed that an approximate specification of initial conditions would yield an approximate prediction of future outcomes.
The Covid-19 pandemic serves as testimony to the importance of adaptability. In early 2020, almost no company’s strategic plan forecast the impact that the global pandemic would have on business. The most successful companies quickly adapted to the impact that work-from-home orders and other restrictions placed on workers and consumers. Some expanded capacity in response to the sudden surge in demand; others altered their delivery model to serve customers in new and different ways.
A few industries have already recognized the value of flexibility in the face of extreme volatility and altered their strategies accordingly. Take aluminum production. The future returns on capital projects, such as investments in new smelter capacity, depend upon highly volatile prices for electricity and aluminum.
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