Predictable Biases

For instance, people rarely predict that a business or economic trend will peak then decline. 

In seeing what is happening during a change it is helpful to understand that you will be surrounded by predictable biases in forecasting.  For instance, people rarely predict that a business or economic trend will peak then decline.  If sales of a product are growing rapidly, the forecast will be for continued growth, with the rate of growth gradually declining to "normal" levels. 

Such a prediction may be valid for a frequently purchased product, but it can be far off for a durable good.    For durable products--such as flat-screen television, fax machines, and power mowers--there is an initial rapid expansion of sales when the product is first offered, but after a period of time everyone who is interested has acquired one, and sales can suffer a sharp drop.  After that, sales track population growth and replacement demand.

Predicting the existence of such peaks is not difficult, although the timing cannot be pinned down until the growth rate begins to slow.  The logic of the situation is counter intuitive to many people--the faster the uptake of a durable product, the sooner the market will be saturated.

ACTION POINT: Understand the trends and their limits of products in your business.