Showing posts with label bias in forecasting. Show all posts
Showing posts with label bias in forecasting. Show all posts

Tuesday, September 27, 2011

Forecasting Simplified - Growth Rate Extrapolation

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In generating predictions about the future, one of the mechanical mathematical operations we often use is simple linear extrapolation. This approach is very elegant, very conservative, and is broadly applicable to a myriad of  forecasting situations involving relative (differing) rates of growth. For example, if we are attempting to project what our company's gross profit margin on sales will be in three years, we might collect historical data about our price per unit sold (one variable) and about our direct cost per unit sold (the other variable).

Based upon prior data, we might determine either an average or anticipated rate of growth per year in each of these two "competing" variables. If we simply graph the respective rates of growth in each of these two competitive variables (usually I prefer to use a compound interest growth formula) we can see the difference between the two at any given time by superimposing the graphs.

For an example of this, you might wish to visit my Braintenance Blog post, located at:
http://braintenance.blogspot.com/2011/09/real-economics-lesson-growth-rates.html .

Simply hit the "BACK" button on your browser to return when you've finished.

The reason that this growth rate extrapolation so useful is its simplicity in terms of citing and illustrating trends involving two or more variables. Generally speaking, the greater the difference in annual growth rates, and the greater the passage of time, the larger will be the gap between the two. In some situations the two lines will eventually converge and cross each other -- in others, the two distance between the two lines at any given point on one axis will simply continue to increase, and never converge.

If we now enjoy a gross profit margin of 30% (for illustrative purposes), but our price per unit can only be increased by 3% annually due to competitive or economic concerns while our direct materials supplier is one of the only sources of supply accessible to us, and that company has been consistently (despite our pleas for mercy, and our whining about college tuition for the kids, confiding about Aunt Tillie's desperately-needed life saving surgery, sharing our worst fears about how we'll soon actually be losing money on our sales of our principal product, and the like) raising costs at an average of 7.5% annually, we can estimate the amount of decrease in our margin at any given time in the future during the forecast timeframe, and we can even determine at what point our gross profit margin will simply be too small to continue our manufacturing and sales of that particular product.

The notion and application of differential growth rates is one of the most crucial steps to making any predictive analysis.

This type of procedure is incredibly simple -- the greatest challenge to the prognosticator is determining which growth rates are most appropriate [and sadly, in the real world, they are seldom linear], while the greatest challenges to leadership and management are to monitor these changes and to prepare an actionable agenda to prevent the fulfillment of these prophesies.

In The Global Futurist, we paint scenarios of the future if trends or tendencies are permitted to continue along their current paths. A proactive strategist can change the future by his or her early intervention. Free will and the prospect of precipitous action are the "Human Factor Wild Cards" that can alter the sequence and path of events that lead to the future. The future is never certain, as long as 1) forecasting is not an exacting science, and as long as 2) Human Beings can choose to act upon their expectations of the future and take the initiative to change outcomes.

Douglas E Castle [http://www.linkedin.com/in/douglascastle]

http://SendingSignals.blogspot.com

Wednesday, July 20, 2011

Six Trending Indicators at 7/20/2011 - Evaluate, Extrapolate, Forecast and Prepare.

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These trends and general forecasts have been collected from a variety of sources, but will impact every single aspect of how we Humans, as a species, will live - the economy, the neighborhood, the regulatory proclivities of government, healthcare, aging, housing, quality of life, prevalence of and dependence upon growing technological enhancements, sustainability, the environment, and so many other things. The excerpts presented here are just a small cross-section of what I feel may be worthy of your attention.

Remember: knowledge is power, but only if it is applied.

Remember: vision is the extrapolation of trends enhanced by intuition and imagination - to deny your vision is not only to disrespect yourself, but it is to abdicate your responsibility to yourself and Humankind to mold the future, or to proactively prepare for the future. Letting the future rule you without your ever having cast a single vote is completely leaving your destiny to chance.

6 Trending Indicators at 7/20/2011 - Evaluate, Extrapolate, Forecast and Prepare.

Some article excerpts follow, with a miniscule amount of my input. Position yourself to go through the processes of extrapolation, imagination and be open to intuition. Engage in the exercise of Futurism. You're invited. It is truly an amalgam of art, science and other "mystical processes."



Census Update: What the World Will Look like in 2050
Time.com – Thu, Jun 30, 2011

Here is the world in 2050, as imagined by the U.S. Census Bureau: India will be the most populous nation, surpassing China sometime around 2025. The U.S. will remain exactly where it is now: in third place, with a population of 423 million (up from 308 million in 2010). And declining birth rates in two of the world's most economically and politically influential countries, Japan and Russia, will cause them to fall from their current positions as the 9th and 10th most populous nations, respectively, to 16th and 17th.

The findings are the result of population estimates and projections of 228 countries compiled by the U.S. Census Bureau's International Data Base (IDB). MORE

 

Global leaders call for a major shift to decriminalize drugs

by Liz Goodwin | The Lookout – Wed, Jun 1, 2011


A slew of big-name former politicians are endorsing a report that says the war on drugs is not working and that drug enforcement policy needs to fundamentally change. The Global Commission on Drug Policy will urge a "paradigm shift" that emphasizes public health over criminalization tomorrow at a meeting in New York City, The Guardian reports.

Those backing the report include former Mexican President Ernesto Zedillo, former UN Secretary General Kofi Annan, former U.S. Secretary of State George Shultz and former Fed Chair Paul Volcker. Former elected leaders of Greece, Brazil and Colombia have also signed on. MORE

How to cure aging: One drug can extend life span

By Boonsri Dickinson | July 7, 2011, 9:44 AM PDT - SmartPlanet

Scientists believe they’ve found a drug that can slow down premature aging in mice and could one day be used to extend human life. This is the story of a drug called rapamycin, nicknamed the forever young drug. The key chemical in this drug was discovered in the soil on the famed, remote Easter Island, reports Technology Review.

Previously, the drug’s wonderful fountain of youth effects were seen in only in invertebrates such as fruit flies, yeast and nematode worms, where it helped cells manufacture new proteins and kept bad cells at bay. But now, the scientists are seeing that it has similar effects on the aging process in mammals. MORE


Consumers embrace mobile commerce globally: 91% in UK and 79% in Brazil have used mobile to engage in commerce

Submitted by Paul Skeldon on July 12, 2011 – Internet Retailing

Consumer engagement with mobile commerce has exploded, with as many as 91% of UK consumers having used their mobile device for commerce, to either research or purchase a product. The equivalent figure for Brazil is 79%, while the level did not dip below 72% in any of the markets surveyed.

According to figures in the Global Consumer Survey from MEF, the global community for mobile content and commerce, 82% of UK respondents access the mobile web on a daily basis, slightly less than the 84% that do so in Brazil. The high level of mobile web and commerce activity dovetail with a reduction in fixed-line internet usage: 41% of Brazilians and more than one-third (34%) of UK respondents now access the internet on their PCs less often than 18 months ago. MORE




The Mobile Way to Biz - by Romy Ribitzky Jul 12 2011 - Portfolio.Com
Carrying a smartphone and a tablet is no longer a business luxury, according to a majority of small businesses. It's a must-have for propelling companies forward, pushing revenues, and landing new clients, finds a survey from The Business Journals.
It's hard to imagine a Millennial entrepreneur or startup leader without a smartphone, tablet, or other mobile device lurking near.

Just 28 years after the first IBM personal computer debuted, the business world—and especially the small- and emerging-business sectors—is embracing mobility, with 59 percent saying wireless services are essential to their business, according to a survey conducted by The Business Journals of 2,223 business owners, CEOs, and presidents of companies with fewer than 500 employees. Read MORE: http://www.portfolio.com/business-news/2011/07/12/mobile-professional-trends-for-2011#ixzz1SbJ4uEHz



FDA plans to regulate some mobile phone apps
APAP – 9 hrs ago July 19th

WASHINGTON (AP) — The Food and Drug Administration is taking the first steps toward regulating the rapidly expanding field of medical applications, or apps, for smart phones and other handheld devices.

With the rise of the iPhone, Android and other mobile devices has come a flood of applications designed to help people stay healthy. Industry analysts estimate there are already more than 17,000 medical applications available, ranging from calorie counters to programs that let doctors view medical scans on their phones.

The FDA says it will begin regulating a handful of these programs that pose the greatest risk if they don't work appropriately.

In a draft proposal, the agency says it will regulate applications that combine with medical devices already regulated by the agency, such as heart monitors that transmit to a smartphone. [end of article extracts]

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One hint to be offered is that at least three of the article extracts are somewhat auto-correlative; that is to say that they relate to a similar topic or topics, so when you are reviewing these bits of data, your mind will have a propensity to focus on these as being more highly significant and you may assign them higher "weights." This is a human behavioral propensity that it is important to be aware of -- sometimes it is the the data provider's way of insinuating his or he own opinion into your evaluation, and sometimes it just happens to do with the frequency of a topic in the media. Anyway, give this bias, deliberate or not, due consideration.

My observation is simply this. Doors are opening -- some of them spell opportunity, and a few of them (the ones which ominously creak as they open) would be far better slammed tightly shut and permanently sealed.

You can tell me which is which. Or perhaps there might be an opportunity (for those with comple 360-degree vision) where others see intrusion, exclusion, invasiveness, the "Nanny State," or dangerous dependencies.

Faithfully,

Douglas E Castle
http://theglobalfuturist.blogspot.com/
http://www.tnnwc.com/

Related articles - Choke Back That Nausea! Have A Look. These are additional articles regarding the above content in The Global Futurist.

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