Applying Futurist Methodologies to Empower AI-Enhanced Due Diligence
Advanced Methodologies for Resilient Forecasting in the Three Futures Test
This is a continuation of a series of posts that began with “Why Being Late Can Still Mean Capturing 90% of the Upside”. The series aims to share some of the future forecasting methodologies being applied as a new stage-gate of our Due Diligence framework.
Listen to our AI Narrated commentary overview of the post (it’s not exactly a summary that covers all the details, but adds a colorful discussion around the concepts).
Futurist thinking has been a core part of my journey, shaped by experiences that span my past public and private engagements across dynamic ecosystems. As an alumnus of Dubai Future Accelerators in two distinct roles, a research contributor on the Dubai Future Research’s inaugural carbon economy report, and previous participant in the Dubai Future Council, I’ve been part of various private-public futurist exchanges that workshop, strategize, and anticipate major trends.
These experiences at the intersection of visionary policy and actionable innovation have underscored the value of structured, multi-layered forecasting to navigate complex and uncertain futures.
At Cool Climate Collective, we bring a similarly futurist layered approach to venture capital, using the Three Futures Test to create resilient scenario forecasting. This methodology isn’t just about imagining diverse outcomes; it’s about grounding each future in next-order effects, industry-specific signals, and dynamic feedback loops.
In this post, I’ll share the methodologies we use to build this structure—scenario planning, systems thinking, Black Swan and Gray Rhino analysis, weak signal detection, and S-Curve insights. Together, they guide our AI-enhanced workflow, helping us explore the viability of a market today, in the near future, and beyond.
Scenario Planning: Expanding Beyond Simple Futures
In the Three Futures Test, scenario planning is more than a contrast between positive, neutral, and negative outcomes. Instead, we focus on next-order consequences:
• First Future: A trend that’s already unfolding, based on early signals hinting at foundational shifts.
• Second Future: This scenario explores second-order effects, where the initial trend’s evolution creates unexpected ripple effects, leading to new challenges and opportunities.
• Third Future: A mix of extremes, with elements of breakthrough innovations and the impacts of Black Swan and Gray Rhino events that push boundaries.
Example: For a climate tech startup focused on coastal resilience, our scenarios could include:
• First Future: Regulatory pressure on coastal development increases, driving demand for climate adaptation solutions.
• Second Future: Investment flows into the sector, boosting competitiveness but also creating environmental tensions, which lead to new regulations.
• Third Future: A sudden Black Swan event—a major coastal disaster—disrupts both demand and policy, creating both risk and opportunity for companies ready to pivot.
This approach gives structure to the Three Futures Test by showing how each future scenario evolves, layering in new factors and highlighting adaptive strategies for resilience.
Systems Thinking: Mapping Interconnected Drivers
Systems thinking adds depth by showing how different parts of a system—technological, regulatory, and market—interact and influence each other. It helps us anticipate cascading effects, revealing where small changes create outsized impacts.
Example: For an electric vehicle (EV) infrastructure startup, systems thinking might reveal:
• Positive Feedback Loop: Growing consumer demand for EVs incentivizes government subsidies, which in turn accelerate adoption.
• Negative Feedback Loop: Battery material shortages increase costs, creating barriers to adoption despite demand.
• Leverage Points: Investing in low-cost battery technology could counterbalance material shortages, turning a potential constraint into a competitive advantage.
Systems thinking deepens our Three Futures Test by exposing underlying connections, so we’re not only forecasting market direction but identifying resilience points and strategic leverage.
Black Swan and Gray Rhino: Preparing for the Unpredictable and the Ignored
Black Swans (rare, high-impact events) and Gray Rhinos (obvious but often overlooked risks) are critical in stress-testing resilience. The Three Futures Test includes these scenarios to help manage volatility and uncertainty.
Example: For a company focused on sustainable urban water systems:
• Gray Rhino: Aging infrastructure and increased droughts create predictable challenges that increase demand for robust solutions.
• Black Swan: A major contamination crisis in an urban area creates an urgent, unexpected demand for water tech, requiring an agile response.
By factoring in Black Swans and Gray Rhinos, the Three Futures Test becomes a framework that adapts not only to planned events but to transformative disruptions, strengthening the robustness of our foresight.
Weak Signal Detection: Recognizing Early Indicators of Change
Weak signal detection involves spotting emerging trends before they escalate, allowing us to refine scenarios as new signals arise. These indicators help adjust the Three Futures Test in real time, creating scenarios that are both flexible and forward-looking.
Example: For a sustainable materials startup, weak signals might include:
• An increase in academic research on biodegradable materials, indicating a shift toward environmental priorities.
• New survey data showing a change in consumer sentiment favoring low-impact products.
Detecting these signals early can shift our scenario planning by highlighting where the market might shift suddenly, whether toward growth, regulation, or adoption, depending on what indicators surface.
The S-Curve: Timing Trends and Innovations
The S-Curve offers insight into the lifecycle of trends and technologies, moving from slow growth to rapid acceleration and finally plateauing. In the Three Futures Test, S-Curve thinking helps us understand when trends might speed up, stabilize, or even reverse.
Example: For an EV startup:
• First Future: Initial adoption grows as early adopters and urban users embrace EVs.
• Second Future: Rapid acceleration as infrastructure improves, battery costs decline, and mass adoption takes hold.
• Third Future: Market saturation and emerging competitors stabilize growth, but unforeseen events like a battery supply crisis (a Black Swan) could reshape dynamics.
The S-Curve model helps inform timing in the Three Futures Test, guiding decisions on market entry, investment, and scaling.
The Cool Climate Collective Approach to Resilient Scenario Forecasting
At Cool Climate Collective, we bring together these methodologies with a range of data inputs—from reports and proprietary data to our own catalytic circles explorations—into our Three Futures Test.
We’re experimenting with a mix of high-level trends and industry-specific signals, allowing us to identify not only immediate market viability but also the mid- and long-term future of industries we invest in.
I recommend making this a continuous practice, with monthly updates and occasional ad-hoc additions whenever you encounter a report that offers fresh insights or a new perspective to enhance your forecasting.
A Cool Climate Collective LP recently asked if this model could be shared with other investors. Our model and workflow, however, are highly tailored to our specific needs, with knowledge base inputs carefully aligned to our thesis and approach. That’s why I’m sharing insights into how we developed our AI-enhanced workflow—so others might benefit from adapting this approach to fit their own thesis.
One might ask, why do you include the US Army’s Climate Strategy Implementation Plan? Well, it offers a unique perspective as to how military and defense view climate & energy opportunities from a NatSec perspective.
However, all this being said, I know that scenario planning alone doesn’t mitigate execution risk. That’s where our network of operators and asset owners comes in, providing tactical support for the companies we back in order to help shape the future to the impact outcomes we want to achieve.
For us, the Three Futures Test is a market exploration tool:
Is there a viable market today?
What’s the trajectory for the near future?
And what could that market look like in the long term?
I believe the metrics guiding these futures—whether financial or impact-driven—differ depending on who wields the Three Futures Test.
At Cool Climate Collective, our approach blends financial potential with societal co-benefits, aligning investments with our mission to drive resilient, transformative change.
Other parts of this series:
Part 1: Why Being Late Can Still Mean Capturing 90% of the Upside
Part 2: The Three Futures Test
Part 4: The Blueprint: AI Workflow, Prompt Mastery, and Knowledge Base Curation (Coming Soon)