In 1999 I completed my MSc in Operational Research, having gone back to college part time because, with a BA and MA in Literature with Linguistics and an as yet unexamined PhD studying the literary output of Huguenot refugees in England in the first half of the eighteenth century, I had few hard skills for the world of work. Still, that was the nice thing about the English educational system before fees: one could spend several years enjoying higher learning and then go off and learn a trade. At my 30th anniversary dinner in Oxford recently, I was told by the college barman that today’s students rarely drink, join societies or participate in the college community because they want a first-class degree to get their money’s worth.
My MSc was sponsored by MRC Business Information Services Ltd, the Oxford-based credit reporting agency that focused on the marine fuels business. The board there wanted to forecast demand for their credit reports in order to hire people at the right time so that they could be trained up in time to meet demand. Led by Stuart Kenner, MRC was a forward-thinking (literally and philosophically) business and a wonderful place for me to transition from academia to commerce. There I learned to apply the logical thinking that was drummed into me at Oxford University and to project outcomes based on that logic and real world data. I have made a career out of doing this. How ironic that I didn’t forecast that back in the mid-1990s.
MRC was acquired by Lloyds of London Press (now Informa PLC) which led to a diaspora of talent starting up firms like Bunkerworld, Gray Page, Infospectrum, Ocean Intelligence, Petrospot and, after some delay, Shipping Strategy Ltd. Apologies to any I missed! All of those companies carry a piece of MRC’s DNA in them – that belief that information is power. These days we tend to refer to data rather than information, but I suppose that data is just information reduced to a series of ones and zeros. Our strongly held belief at Shipping Strategy is that one starts with data, applies analysis to achieve insight, and that insight can help others to make better commercial decisions.
Unfortunately, data cannot give one a complete understanding of the world, unless one can use the data to create an identical facsimile of the world. So humans create incomplete models to help us understand the world and to project likely outcomes as well as using our critical faculties to discount outcomes that feel less likely. But black swans will still occur, throwing our forecasts a curve ball that is unplayable. These can be economic, like the Asian currency crisis of the 1990s, the TMT crash of the early 2000s, or the global financial crisis that still plays out around us today. The black swans can be political, like the attack on the World Trade Centre on 11 September 2001, or Brexit and other forms of populism and nationalism around the world.
They can also be regulatory, for the very simple reason that one cannot forecast policy. I wonder for instance what Stuart and his successors at MRC (including my still-missed mentor Adam Dupré) would have made of the Marpol Annexe VI regulations and the changes to the marine fuels business. I guess that they would have agreed with the principle but would have found the implementation to be badly thought-out. The regulations have already caused disruption to the bunker industry and its customers, the ship owners and operators. No single strategy to deal with the regulations has emerged; indeed the number of strategies developed seems to be increasing. Not everyone can be right and some companies will no doubt be forced out of business by the new regulations, not always for good reasons. After years of building companies through diligent and careful consideration, managers are having to deal with ever more new regulations imposed arbitrarily and impersonally. It makes planning a business harder than ever.
The Take Away
After 25 years as a professional forecaster, IMO 2020 shows me that a lesson I learned very early on still applies: there is no such thing as a good forecast, only the least-worst forecast. The technical goal of a forecast is to reduce forecasting error in the knowledge that it can almost never be removed entirely. In the real world, the goal of a forecast is not the quantum, that is the output number, which will almost always be wrong. The goal is to exclude less-probable scenarios from a decision and to focus on likely outcomes. It’s always a case of the technical supporting human wisdom. The trouble is, one can’t easily forecast policy and regulations in a quantitative way. We need wise leaders to see through the fog. In his Introduction to Adam Dupré’s book on Bunker Credit Risk, Stuart Kenner wrote, “The one thing we all know is that tomorrow will not be the same as yesterday, or today.” But he and Adam still used forecasts, and they were two of the wisest people I ever met.