202 THE BiG DROP
When you have a problem in the intelligence world, invari-
ably, it’s what mathematicians call “underdetermined.” That’s
just a fancy way of saying you don’t have enough information.
If you had enough information to solve the problem, a high
school kid could do it. The reason it’s a very hard problem to
solve is because you don’t have enough information.
What do you do when you don’t have enough information?
Well, you can throw up your hands — that’s not a good
approach.
You can guess — also not a good approach. Or you can
start to fill in the blanks and connect the dots.
You’re still not sure how it’s going to turn out but you can
come up with three or four different scenarios. In all probabil-
ity, the problem is going come out one of several ways. Maybe
those ways are deflation, inflation or a market crash like we’ve
discussed. Maybe there’s a good outcome too.
A lot of analysts don’t get that far. They put a stake in the
ground and say, “This is what’s going to happen.”
The truth is, however, that there are several things that
could happen. There could be three or four of outcomes. But
even people who get that far start tagging probabilities on
those outcomes. They say, “There’s a 30 percent chance of de-
flation, 40 percent chance of inflation, etc.”
I don’t recommend doing that either. The way I think about
these problems is that there’s a 100 percent chance of one out-
come happening and a zero percent chance of the rest. It’s just
that you don’t know in advance which one it’s going to be.
What are you supposed to do? In the intelligence community,
we come up with what we call “indications and warnings”, or I&W.
Indications and Warnings are the signposts or the mile-
stones on the path to one of these outcomes. Say we have four
outcomes — four paths — and you start down the path. You
don’t know which path you’re on and you don’t know what
the outcome is. But you can come up with the indications and