Straight Line to Chaos

The problem with forecasting is that it’s done by humans who have a tendency to engage in linear thinking (also known as “this time it’s different”).?Most companies will soon turn their attention to budgeting and may be tempted to assume that the economy’s remarkable growth of late justifies simply projecting revenue with a straight line.

Before you sharpen your pencils, let’s sharpen our focus and take a few lessons about forecasting from ITR Economists Connor Lokar and Tayor St. Germain.

In an ITR Trends talk,?Lokar warns us that the world is not linear.?The economy is cyclical and while in expansion most of the time, there are periods when it is not. He says that despite being in what ITR Calls “Phase B” (the accelerating part of the business cycle),?don’t assume that it’s forever.

Heed his warning about?The Perils of Budgeting in Phase B. Then, check out St. Germain’s short post?Preparing for Slower Growth.?Your budget will thank you!

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