After The Bell: The wonderful and strange business of prognostication

It is amazing how often we as people think about the future, and what might happen.In fact, I would argue, the main reason people like myself, who get to talk about what has happened and what is happening, are still employed is because of this desire to know about the future.Everyone wants to know what will happen, and the best way to know that is to know what is happening now, and how it will affect the future.This is why so often you and I will have conversations about what is going on in a particular industry or company. What we are really doing is trying to work out what the value of a company or a sector will be in the future.In the case of our macro picture, what is going on in our politics and our economics, and where they collide, has a real impact on how you are living.You want to know if your home in Jozi will have the holy grail of water, power and working wifi when you get home tonight. And then you want to know whether it will be working in five years time and thus what the real value of your home will be then.Nothing stimulates prognostication like a good election.Even if you belong to the quite justified “a plague on all their houses” school of our politics, you probably have some kind of interest in who your mayor is going to be and whether things can really continue the way they are. That’s one of the reasons I’ve found all of the polling done before this election so difficult to understand. They all seem to come to such a huge variety of different outcomes.There are obvious reasons – this is a local election, meaning you have to spend your polling resources metro by metro. In a national election you can get a nice sample across the country and run a proper tracking poll (where you phone the same people every few days and ask them who they will vote for).No one can really afford to run a tracking poll across all eight metros.The other massive problemAnd the other massive problem is turnout. People might tell you how they feel but they just don’t know if they will actually vote on the day. So, if you are polling and you don’t know what is going to happen, what do you ask?If you were sitting in an office in January 2024 would you have thought of including MK in your poll for April that year? A party that was only about two weeks old?And yet they were the story of the election.This is one of the reasons that whenever we see a poll that sees a party we don’t like doing well, it’s entirely human for us to just scoff and say it can’t be true.I’m sure some political party leaders do that too. Only to receive a really rude shock on election day.Things get even more complicated when you consider that some DA polling has, mysteriously, found its way into the public domain.It seemed to me the whole point of that was to try to tell potential DA voters that they had a shot at taking power in places like Joburg.And I’m sure the reason that both the ANC and the DA have been telling people not to vote for smaller parties is because of what the polling is telling them about how these parties are doing.If you consider how much is riding on business for this election, and how so many business leaders and groups have spoken about rescuing Joburg in particular, they are clearly relying on polling to suggest there will be change.But then this raises the real problem of forecasts. If you are expecting one thing and the result is another, the shock is huge.You can, as it happens, place a value to that shock by looking to a place that looks similar to us, sounds different to us and is about half the world away. And yet, its politics is incredibly similar to ours.Precedent defiedLast week almost every investor in Brazil expected Flavio Bolsonaro to win their presidential elections. But when Lula da Silva won instead, defying every previous precedent, their market crashed by 10%.I suspect a very large amount of money is currently at risk in the US.There, while the polls do seem consistent on big wins for the Democrats tomorrow, there is a huge scope for another shock. On top of that is all of the prognostication that you-know-who is preparing to attack Iran again afterwards.There is also a way to value the lack of a consensus forecast on the future.Informed people tell us that oil appears to be sailing through the Strait of Hormuz relatively smoothly at the moment. But because no one knows what is going to happen later this week oil prices are incredibly high.Prognostication is a dangerous business. But you and I both know it will continue, no matter how wrong or how right our prognosticators are. DM