The Fallacy of Extrapolation

‘If the current trend continues …’

How often have you heard someone say that when talking about the future? ‘If oil reserves continue to be depleted at the current rate …’ ‘If housing prices keep going up …’ ‘If our business keeps growing by double-digits …’

Extrapolation. Extending a past trend into the future. We seem to have a default assumption that things will keep going in the direction they’re going. The problem is in most cases they don’t. New oil reserves get discovered. The housing market gets overheated. Businesses get knocked down.

Assuming the extrapolation of a trend ignores the importance of context. Sure, oil reserves will continue to be depleted … unless new discoveries and better technology help to replenish them. Yes, housing prices will keep going up … unless too many homeowners assume too much risk or new buyers can’t afford to get into the market. And of course your business will keep growing by double-digits … unless competitors take action, technology evolves, markets change and the economy fluctuates.

Trends are not guarantees. They’re often not even the best predictors.

When assessing and forecasting for your business, don’t assume the extrapolation of trends. Ask yourself which contextual factors have supported or inhibited the trends and how could they change.

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