Accurate but useless

Some years back, I read a financial newsletter article that offered a technique for predicting inflation rates six months in advance. It had charts that compared its predictions to actual results, that showed that it was pretty accurate. Not perfect, but more than close enough to be useful for short-term planning.

Then I read the details. Their “technique” was this:

  1. Take the actual inflation for the previous six months.
  2. Double it.

As I say, their technique was pretty accurate. Partially it was accurate because the economy rarely turns on a dime—recent trends tend to continue. But it was more accurate than that, because half the months they were “predicting” had already happened! Even if the next six months were rather different from the previous six months, that would only produce so much change in the full year results.

I think that was the point when I decided to let my subscription to that newsletter expire.

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