17 questions to ask about that gee-whiz tech development

Science-fiction author David Brin explains his method of examining the future:

“The top method is simply to stay keenly attuned to trends in the laboratories and research centres around the world, taking note of even things that seem impractical or useless,” says Brin. “You then ask yourself: ‘What if they found a way to do that thing ten thousand times as quickly/powerfully/well? What if someone weaponised it? Monopolised it? Or commercialised it, enabling millions of people to do this new thing, routinely? What would society look like, if everybody took this new thing for granted?'”

Those are good questions, as far as they go. My methodology for examining new developments (especially technologies) is to ask additional questions, some with a decidedly negative slant:

  • What if it runs into legal or political problems?
  • What if it can be used by criminals?
  • What if it raises ethical or religious objections?
  • What if people prefer doing it the “old way”?
  • What if a cheaper alternative overtakes it?
  • What if it’s too expensive to make or distribute (in volume)?
  • What if it lacks the necessary ecosystem or support infrastructure?
  • What if it runs smack into a counter-trend?
  • What if entrenched interests squelch it?
  • What if it has unintended consequences?
  • What if the roll-out is botched, glitchy, underfunded, embarrassing?

And, when will it emerge from the Hype Cycle‘s “peak of inflated expectations” and “trough of disillusionment”?

Wall Street analysts still hyping their stock picks

Wall Street analysts are painting an awfully rosy picture of earnings growth, according to a study done by Penn State researchers. “[T]heir long-term earnings-per-share growth-rate forecasts are excessive and upwardly biased,” says J. Randall Woolridge, a professor of finance at the Smeal College of Business.

Over the period 1984 to 2006, analysts’ predicted EPS growth at an average of 14.7% for the long term (three to five years). Actual EPS growth: 9.1%.

On one-year forecasts, analyst projections fared a little better, but they were still overly optimistic: 13.8% instead of the actual rate of 9.8%.

So why is this happening?

  • Analysts’ employers want them to hype stocks so the brokerage can win commissions and underwriting deals. “This conflict of interest should have been squelched by former New York Attorney General Elliot Spitzer’s investigation and the $1.5 billion payment made by U.S. investment firms in the 2003 Global Analysts Research Settlements (GARS).” But the study found that GARS had no effect; analyst forecasts remained at their historic levels of about 15%.
  • Analysts don’t issue forecasts on stocks they don’t like.
  • Analysts becoming attached to the companies that they follow and, as a result, lose objectivity.

Most companies fail at forecasting earnings
The fallacy — and cost — of giving quarterly earnings guidance