Saturday, June 9, 2007

Applying Trend Analysis Principles with Brilliant Effect

Buying a camera at a fair price is not particularly earth-shaking activity, especially compared to trying to figure out whether our actions in Iraq are helping or hurting.

Nevertheless, here is a simple and striking example of the power of applying the essential principles of trend analysis to the task. did a brilliant job on this in my opinion.

The red trend line represents the high price, the blue the average price, and the green the low price. Each tick mark on the X axis represents one week's time and the chart covers the period from 9/11/2006 through 6/4/2007

What did do right
  1. they identified the most important factors (in this case the minimum, average, maximum price for the Canon PowerShot AS710 IS camera.
  2. they collected the raw data each week of the price of this item from a range of sources
  3. rather than showing the raw data, they created calculated values of High, Average, Low price for each period
  4. They selected a reasonable reporting rate that fit with the data (1 week in this case) and the resulting trend lines are relatively smooth while still giving us enough data points to have confidence in our understanding of the trends we see developing. A total of approximately 38 data points are plotted for each factor.
  5. their Y axis scaling fits the data and makes it possible to see the trends in all three indicators that they displayed. The scale values are also easy to read.
  6. they are reporting their data in near real time. The most recent data point is only 5 days ago.
  7. They showed the entire time period ( I am guessing from product introduction right up through last Monday)
And of course, they visualized this data for us rather than telling us about it or showing us a table of 100+ numbers.

Armed with this easy to read chart, anyone interested in purchasing the Canon PowerShot AS710 camera in the next week or so will know whether the offering price is within a reasonable range and can then get on to evaluating the other factors that might impact their buying decision.

This example stands in stark contrast to the most approaches to other important areas of our lives as exemplified in yesterday's Iraq Forecast post. There are no mushy metrics or imprecise quantification or flowery metaphors. There's no postponing the moment of truth cop-outs saying we don't know exactly what the future will bring. Of course we don't know exactly. We never do.

They don't say: "we can't really tell you whether the price of this item is going to become more affordable by September".

There's just the relevant facts that help deal with the specific situation.

My two cents: the better we learn how to apply this kind of approach to the most important problems in our lives, the quicker we will begin to gain control of what's happening.

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