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Predictions are just that - “predictions”…

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About a decade ago when I was doing my degree in the University, in my management class I clearly remember that the book (I forgot the publisher of the book, but it was pretty standard book, maybe McGraw Hill on Management) was forecasting about the auto-makers of the world. And the book was suggesting that auto industry would consolidate and only few major auto-makers would dominate the world’s auto production. The rest would die of slowly.

And, in the top three spot they were all Western companies (no Asian automaker was in the list), I do not remember the third one but GM and Ford were in the list. But today after 10 years, we see a different picture…

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Today, US auto makers which were predicted to dominate the world’s auto industry are struggling to stay alive. US Congress is yet to decide on the fate of the three automakers, whether to bail them out or to let them bankrupt. The companies were seeking $14 billion from the financial industry bailout for emergency loans, but the bill was rejected in the Congress. Now the fate of the US automakers solely depend on the White House’s next move.

Regarding Asian automakers, we all know that Toyota had passed Ford Motor Co. as the world’s No. 2 automaker in 2003. And it officially took over General Motors as the world’s No.1 automaker in 2007. While Honda is not far behind on the fifth place (see below).

This shows that the prediction was wrong on two counts; one, GM and Ford would be one of the strongest automakers (i.e financially stable). Two, no Asian automakers would be in the Top 3.

It also shows that nothing can be predicted precisely. And you can’t be 100% sure about the future events that are going to take place. I think this is best explained with the whole Credit Crunch crisis that we are now seeing worldwide. It’s really ironic that, after governments of countries worldwide spent millions of dollars on establishing all kinds of economic forecasting and risk management institutions, none of them had detected the Credit Crunch crisis and had an alternative solution in place for it. No one had a clue that the crisis would hit this soon, this quickly and this hard. How come?! So, much for the advancements in forecasting and crisis prevention!

So what was the point of spending all those money in establishing all those institutions, and employing all those professionals for years?