Limits to modelling

There are limits to what we can predict. 

With integrated scenario models you can explore events within the scope of your imagination. “If things change in ways that we can imagine, what outcomes could result from our decisions?” 

• If attrition curves get sharply steeper ...

• If we were forced to stop using our top performing acquisition channel ...

• If transaction frequency from this supporter segment collapses ...

These are all within the range of events that we can imagine, and integrated scenario models are perfect for predicting the outcomes from these events.

Occasionally change - economic, social, technological or policy - happens in sudden, dramatic ways, that cannot reliably be predicted, and might even be beyond our prior imagination. These off-model events are black swans.

As modellers we must be humble and recognise that black swan events can and do occur. Even with the best model there is a residual uncertainty, which can be substantial.

The existence of black swans makes scenario models more - not less - important. A model enables you to combine the best available information that you have today, and quickly reset assumptions if the world changes tomorrow. 

A leadership team that can say,  “We modelled the future, understood our exposure, and accepted residual uncertainty,”  is acting responsibly, even if a black swan later occurs.

A team that refuses to model because “anything could happen” is not acting responsibly.