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RICHAED DE NEUFVILLE:
I'm now coming

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to the end of this
series of presentations,

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and I'd like to
share with you what

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I think are the
important takeaways

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from these series of sessions.

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So the first takeaway is that
the forecast is "always" wrong,

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where always is in
quotation marks,

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that it is the probability
of any deterministic forecast

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of what will happen over a
period, not just at the end,

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but all the ways in between.

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The probability of that
forecast represent what

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actually happens is very small.

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Other things happen
because there's

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variability, first of all,
because the world changes.

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There's new technologies,
new competitors,

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economic good situations, bad
situations, new regulations,

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whatever.

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Things happen, and
the future is not

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what the single
forecast might be.

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That's number one.

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The second is the complementary
aspect that, since it's wrong,

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we ought to recognize the
reality when we do our design,

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and we do our calculations as
to what is the best solution.

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Otherwise, if we
don't recognize that,

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we get a wrong
valuation from it,

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and we get the wrong answer.

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So you need to take
that into account.

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In particular, we need to do
it because of that phenomenon,

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that fact of the
Flaw of Averages,

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that is, if you calculate
the value of the system using

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the most likely parameters
for the average demand,

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the average cost,
the average use,

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and so forth, then you'll
get the wrong answers.

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This is a mathematical
triviality in many ways.

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But we've got to keep
it in mind because it

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means that that
shortcut route that

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needed to be done in
the past but does not

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need to be done in
the edge of computers

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leads you to the wrong answer.

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We need to take into account
the range of possibilities

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that occur, so we
get the right answer.

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Simulation is the way to go in
terms of an easily accessible

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way to sample the space
of the possibilities

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by looking at 1,000 or so
different scenarios that

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might occur.

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That's take away number one,
the reality of uncertainty.

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Take away number
two is that there

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are remarkable benefits from
flexible designs for dealing

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with uncertainty.

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In general, they give you
the win-win situations

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at a lower cost.

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Less loss and more gain.

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Less investment compared
to alternative choice

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without the flexibility.

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And what's not to like?

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That is the message.

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Now, their actual
results depend upon

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the situation, the
level of uncertainty,

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and so forth and so on.

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But it is a route to explore.

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If you do not explore
that possibility,

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you don't tend to get the
best that you possibly could.

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And that best may be
significantly higher

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than without the flexibility.

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There's two references on it
that I could share with you.

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The first one is this
book of a few years

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back by the MIT Press.

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It's Flexibility in Engineering
Design, which I co-authored

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with my colleague Stefan
Scholtes at Cambridge

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University in the UK.

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And the second one is coming
out in 2018, very soon now.

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Or maybe, when you listen to
that, it's already come out.

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And it is published
by Wiley in the UK.

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And it's Flexibility and
Real Estate Valuation

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Under Uncertainty.

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And it's a practical
guide for developers,

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that is, in it, we look
not just at the principles.

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But it includes all kinds
of Excel spreadsheets

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and softwares that look at
the various conditions that

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may occur before designers.

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So it's a roadmap of how to
apply this in the real estate

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world.

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