To whom it may concern,

I have noticed that for a long time (but especially recently), you’ve been picking up dirty habits. Considering there is no good system for vetting you, I would like to address these two issues here. Additionally, I’ll give a couple prime examples of your large blunders as well as a current example.

(Source: xkcd)

Extrapolation is Dangerous
Ex. 1: The value of radio stations continued to rise in the 1990’s. Corporate behemoths like Clear Channel saw the growth and thought they could buy up all the stations and have control over the airwaves. Due to the rise of the internet and the changes in the market, radio is dying and Clear Channel’s creditors are trying to force the company into bankruptcy.
Ex. 2: In the late 1990’s, AOL was a media super giant. Its valuation was so high that it allowed it to purchase Time Warner in January of 2000, when the sky was the limit for AOL with subscriber growth through the roof (deal finally closed in January 2001). Since 2002, AOL’s subscriber base has not seen one quarter of growth. Time Warner has announced that AOL will now be split into a separate company by the end of 2009, fully breaking ties with AOL.
Ex. 3: Facebook and Twitter have each seen exponential growth. Facebook recently turned down a valuation of $8 billion, and Twitter was valued at $250 million in January (Facebook tried to purchase it for $500 million).

(Source: Stephen R. Johnson)

Correlation does not imply Causation
Ex. 1: People who drink coffee have health problems. [No, people who drink coffee also often smoke and are workaholics. Those people do have health problems.]
Ex. 2: Eating breakfast is highly correlated with success for students. [No, people who miss breakfast are often absent or tardy students, or parents who make their child's breakfast are more involved in their lives (read: schoolwork, success)]
Ex. 3: As ad spending on a product increases, so do its sales.

Analysis doesn’t just take into account numbers and graphs with lines pointing in one direction or another. A good analyst will look at the other (sometimes hidden) variables and shed some light on whether the data shows mere correlation or actual causation. To that end, an analyst has to keep in mind that there are thousands of variables that will change over a one, two, five year period, which is what makes extrapolation so dangerous. Predicting Facebook’s pageviews in 2013 is no more certain than predicting AOL’s subscriber base or the radio industry’s growth. Just because a pattern exists doesn’t mean that it will last. Or that it isn’t just coincidence. Keep that in mind the next time you write a report.

Please. Friends don’t let friends extrapolate or imply causation. It’s just poor form.

Sincerely,
Jaremy