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    Path to Science

    Thinking Dictionary

    Scenario planning

    What it is

    Scenario planning means imagining several different ways the future could turn out, and then choosing actions that work reasonably well in most of them. You don't stake everything on one prediction.

    A scenario is a "what if" story about the future, not a forecast. You might sketch three: "things change fast," "things change slowly," and "a sudden shock." Then you ask how each of your options would fare in each one. Choices that hold up across most scenarios are called robust choices.

    Scenarios vs probabilities

    The Probabilistic reasoning entry is about giving outcomes a rough likelihood. That works when you have a decent basis for the numbers.

    Scenario planning is for when you don't. Some futures depend on things nobody can predict well, such as new technology, politics, or how millions of people will behave. In those cases, putting a precise probability on each outcome can give false confidence. Scenarios let you prepare without pretending to know the odds. The Scientific uncertainty entry explains how scientists describe what they don't know.

    Why it matters

    Planning for a single "most likely" future is risky. If that future doesn't arrive, your plan may fail badly.

    Climate scientists use scenarios on a large scale. The IPCC, the international body that assesses climate science, points to methods for finding decisions that hold up across a wide range of possible climate and social futures.¹ Researchers have also written a set of contrasting stories about how the world's population, economy, and technology might develop this century. These stories are used to organise projections of future climate.²

    Does it change how people decide?

    There is some evidence that it does. In three experiments with real-world experts, using several scenarios didn't change how confident the experts felt overall. But it did change how they judged investments. Their views shifted depending on how each option performed in each scenario, and they came to prefer options that kept more flexibility.³

    Whether scenario planning leads to better results in the long run is less clear. There is little direct evidence on that yet.

    A worked example

    Imagine a town deciding how to supply its electricity for the next 20 years. Its planners might sketch three futures:

    1. Cheap clean energy. Solar and wind keep getting cheaper.
    2. Slow change. Prices and technology stay much as they are.
    3. A shock. A sudden fuel crisis or extreme weather hits supplies.

    A plan that relies entirely on one source of power might do well in one future and badly in another. A mixed plan, or one that can be changed later at low cost, might do reasonably well in all three. That is a robust choice.

    In everyday life

    • Moving house. Will you still be happy with the move if your job changes, or if your family grows?
    • Saving money. How would your plans hold up if your income rose, fell, or something unexpected happened?
    • Studying. Which course of study keeps the most doors open if your interests change?

    The common trap

    The first trap is picking the "most likely" scenario and planning only for that. That defeats the purpose.

    The second trap is treating scenarios as if anything could happen. Good scenarios are plausible and based on evidence, not wild guesses.

    The third trap is treating a scenario as a prediction. It is a "what if," not a forecast.

    Some ways out:

    • Sketch a few clearly different futures. Three or four are usually enough.
    • For each option, ask how it fares in each future.
    • Prefer choices that are acceptable in all of them, or that you can easily reverse.

    Try it

    Think of a big decision coming up, like a large purchase or a move. Write three short descriptions of how the next three years could go:

    1. Your income rises.
    2. Your income falls.
    3. Something unexpected happens, such as an illness or a job offer abroad.

    For each option you're considering, ask how it would work out in each future. Prefer the option that is acceptable in all three, or one you could undo cheaply.

    Related concepts

    Probabilistic reasoning · Scientific uncertainty · Scientific models · Facts vs values

    Sources

    1. Mastrandrea, M. D., et al. (2010). Guidance note for lead authors of the IPCC Fifth Assessment Report on consistent treatment of uncertainties. IPCC. https://www.ipcc.ch/site/assets/uploads/2017/08/AR5_Uncertainty_Guidance_Note.pdf

    2. O'Neill, B. C., Kriegler, E., Ebi, K. L., Kemp-Benedict, E., Riahi, K., Rothman, D. S., van Ruijven, B. J., van Vuuren, D. P., et al. (2017). The roads ahead: Narratives for shared socioeconomic pathways describing world futures in the 21st century. Global Environmental Change, 42, 169–180. https://doi.org/10.1016/j.gloenvcha.2015.01.004

    3. Phadnis, S., Caplice, C., Sheffi, Y., & Singh, M. (2015). Effect of scenario planning on field experts' judgment of long-range investment decisions. Strategic Management Journal, 36(9), 1401–1411. https://doi.org/10.1002/smj.2293