Practical analysis for investment professionals
13 August 2012

Generating Investment Ideas: Interview with Futurist David Houle

In a recent post, “Generating Investment Ideas,” I interviewed scenario-planning expert Jim Butcher, the former head of Morgan Stanley’s Strategic Engagement Group and current CEO of boutique consultancy Entegra Partners. In this installment, my interviewee is renowned futurist David Houle, who has spoken to or advised more than 2,000+ CEOs and business owners in the past four years — and who enjoys an impressive reputation for predictions that have a knack for coming true. Houle is well-known for having been a part of the teams that launched MTV, Nickelodeon, and Headline News, and he has won several Emmys and been nominated for an Academy Award. Houle’s book, The Shift Age, seeks to explain the forces that will reshape the world over the next 20 years. In the last several years alone, he has given well over 500 speeches and led workshops for businesses on six continents.

I opened our discussion by asking Houle about his accurate predictions. He differentiated between “lower level, short- to medium-term forecasts” and forecasts about the “higher, longer-term level of the direction of humanity” over the next 10–20 years. In the first category, Houle’s accurate predictions have included the following:

  • April 2006: That oil would cross $125 a barrel in 2008.
  • August 2007: That the housing collapse in the United States would show how interconnected the global financial marketplace has become.
  • September 2007: That Barack Obama would be the next president of the United States.
  • September 2009: That there would be 5 billion cell phone users by the end of 2010.
  • December 2010: That tablet computers and powerful mobile devices would surpass PC sales in 2012.

With regard to the higher order, longer-term trends, Houle argues that three fundamental forces define the Shift Age, as follows:

  • The Flow to Global
  • The Flow to the Individual
  • The Accelerating Electronic Connectedness of the Planet

In the conversation that follows, Houle explains his perspective on these forces, the role of intuition in forecasting, and how he works to discern “directional patterns.”

CFA Institute: What elements that were present at the time of the forecast led you to make your boldest predictions?

David Houle: The Flow to Global, initiated in the last 20 years through the global economy, represents a reorganization of humanity toward a more global construct. The Shift Age is the global stage of human evolution.

There has been an explosion of choice in the developed countries of the world in the last 30 years. This means that the power has moved from the producer to the consumer, from the institution to the individual. This is the Flow to the Individual. We as individuals are more powerful than individuals have ever been before.

Accelerating Electronic Connectedness is perhaps the most powerful force at play in the world today. We are becoming ever more connected at rates unprecedented in human history. For example there are 7 billion humans on the planet and 5.6 billion of them have a cell phone. This means that there is no time, distance, or place limiting human communication. Human communication is now free from these constraints for the first time.

Many people talk about investing and discounting the future as if it were an analytical process. Do you agree or disagree with this statement — or is there something missing from the discussion?

No, I of course disagree. Seeing into the future is not simply analytical. Analysis of current directions can only go so far. Then there has to be a higher, more intuitive sense of what is coming. The problem with simple analysis is that it is based upon data, and data exists in the present or past. Usually, just casting the logic of the present, with present variables into the future, can lead one way off course.

What is the role of intuition in your process?

It matters a lot. That said, I have always been fascinated about the future, about what is around the corner. Through a lifetime of living ahead of the curve I have developed a sense of what might be, of what might happen, of what the next big thing might be. So it is a learned, practiced, constantly adaptive process that becomes assimilative and intuitive. One must learn how to disconnect from the present to see the future. Looking to the past into the present provides data for intuitive projection into the future.

Do you have daily routines that facilitate your ability to anticipate the future?

I am not sure I would use the word “routine.” Rather, it is an ongoing, iterative process of looking widely at all that is going on in the world today to try to discern directional patterns. It is breadth rather than depth that provides a view into the future. I try to consume a variety of media and books, keep an open mind, and since I travel the world speaking to a variety of companies, associations and groups, I get a wide-based global view that most people do not get as they are all into their specific occupations. Many people may sense the future of their respective industries but cannot see outside them or outside their nationality. I also listen to my intuition and keep things open.

What can investors do that you do so that their insights about the future begin to approach the accuracy of your insights?

Well, I often say I am perhaps the most superficial intellectual grazer you will meet. I never fully read a nonfiction book. I scan newsstands. I scan most sections of newspapers. I look for dots that others may not see and try to ascertain if they are connected. Perhaps you could lump all that into the category of “pattern recognition.”

I try not to hold points of view unless I know them to be true or true for me. Too many people allow themselves to hold points of view that they have not fully thought through. I often tell people that it is okay to hold a point of view, but to understand both that it becomes a filter through which you see the world and [that you must] regularly check out whether that point of view is valid. If, for example, you are a technologist, then you will think that technology will provide the answer. Something that was true when your father told it to you 15 years ago may no longer be true, so don’t necessarily hold onto it because it was your father. If one wants to see into the future, one must always be aware of holding points of view.

What common mistakes do you feel people make when they try to discount the future?

The single biggest mistake is looking at the present and making iterative projections of it into the future. There is always going to be something that comes along, that gets invented, that occurs which is not now present. Manned flight, the computer, the Internet, the advent of the cell phone, and the effects these had on shaping and altering humanity were not iterative steps from the present. They were transformative breakthroughs. It is hard to look at the present and see what future breakthroughs will be, simply because they don’t yet exist, though they may be in a formative stage that is either subtle or not yet known.

What current seismic shifts are underway that you can share with us?

Well, in addition to the three forces of the Shift Age I mentioned above, there is the dynamic of the ever-accelerating rate of change. I have named 2010–2020 the Transformation Decade. The dictionary definition of transformation is “a change in nature, shape, character, or form.” This means that during this decade, most of humanity’s institutions will change their nature, shape, character, and form. What is may no longer be by 2020. If the world is in transformation and your thinking or your company is not, you will fall behind the marketplace and the developments in the world.

I think the major impending development of the next 15 years is that we will probably have an evolutionary shift in human consciousness. When I launched my blog six and a half years ago, I called it EvolutionShift. If you look at the digital natives, the children 18 and under, they are the first generation born into the digital landscape. They are the first generation that, from childhood, is using all the great digital and connective inventions and innovations of the last 30 years. They think differently. I think that the Neurosphere, the cyberspace that is the ever-growing neurological extension of all of our thinking, history, knowledge, entertainment, and economic transactions, is a technological model for a new form of human consciousness that will emerge in the 2020s if not before.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Voss also sub-contracts for the well known firm, Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: [email protected]

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