“Steve,” Economic Bellwether
Want to know the latest economic and business trends?
You could read widely (The NY Times, Wall St. Journal, etc.), conduct lots of surveys, or have keen powers of perception.
Or, you could just observe a long-time friend of mine (I’ll call him “Steve” for purposes of this post).
A decade ago, Steve was bragging about the latest Internet IPO he’d bought into .
Five years ago, he was bragging about how much his home had appreciated.
We caught a bite to eat, and Steve was bragging about all the discounts he got on the new printer he just bought.
After totaling up all the in-store rebates, mail-in coupons, etc., apparently he paid $30 for an HP printer that retails for almost $200 (tantalizingly close to the bargain hunters’ promised land: having them pay you to buy something).
There you have it: Steve, a one man economic bellwether.
Hmmm . . . I wonder if he knows why I keep treating him to lunch every six months or so.
P.S.: the one thing I remember from my one college statistics class is the coefficient of correlation. Two things that are perfectly correlated are a +1.0; inversely correlated, -1.0. Two things that are absolutely unrelated have a coefficient of correlation of “0.”
What difference does any of that make?
When it comes to investments, most people look for experts whose coefficient of correlation predicting winners is quite high (ideally 1.0). However, as my professor pointed out, always wrong is just as valuable as always right — you just do the opposite! (Seinfeld devotees will recognize this as the principle underlying “Opposite George.”)
In fact, that’s how I pick the movies I want to see: I just ask my sister what she’s seen lately that she really, really hated.