Friday, March 06, 2009

Drawing straight lines in the real world

In science fiction, it's perfectly acceptable (and often standard practice) to find a trend, extend it as a straight line and think about what happens at the extremes. Rogier van Bakel has a nice collage demonstrating why this does not work in the real world, especially in investing. Check out these books, which seemed improbable when published, and are now laughable. Dow 100,000: Fact or Fiction? We know the answer to that one now. Nassim Nicholas Taleb, author The Black Swan, would be proud.