I recently read a paper, “The Golden Rule of Forecasting: Be Conservative” by Armstrong, Green and Graefe, that showed empirically the most important principles in making forecasts and predictions. Given the value of accurate forecasting (e.g., for building your business, making investments, choosing between product strategies), by understanding the golden rule you will help optimize your decision making.
What is particularly compelling about this paper is that it is based on extensive research and empirical studies. So while many forecasting and decision-making guidelines are based on hypothesis or observation, The Golden Rule of Forecasting is based on data.
At the heart of the golden rule of forecasting is that you should be conservative; forecasters must seek all knowledge relevant to the problem and use methods that have been validated for the situation.
With “be conservative” as the overarching golden rule, the authors performed extensive research to develop a list of guidelines that help lead to good forecasts and identified practices that generate poor decisions. Continue reading “The heart of good forecasting: Be conservative”