What Is a Hockey Stick Chart?
Let me explain what a hockey stick chart is. It's a price line chart where you see a sharp increase happening suddenly after a short period of quiescence or relative stability. The line connecting the data points ends up looking just like a hockey stick.
You've probably heard hockey stick charts referenced in business, economics, and policy contexts. They serve as a visual tool to illustrate dramatic shifts or explosive growth, such as in corporate earnings, global temperatures, or poverty statistics.
Key Takeaways
- A hockey stick chart is characterized by a sharp increase after a relatively flat and quiet period.
- It is generally observed in scientific research measuring medical results or environmental studies.
- In cases of business sales, a hockey stick chart is represented by a sudden and dramatic increase in sales.
- It is important to analyze whether the sudden increase is a permanent state of affairs or an aberration.
Understanding Hockey Stick Charts
Think of a hockey stick with its blade, a small curve, and a long shaft. In the chart, you have data showing low-level activity on the y-axis over a short time on the x-axis, then a sudden bend that's the inflection point, followed by a long, straight rise at a steep angle.
You often see this chart in science labs, like in medicine or environmental studies. For instance, scientists have plotted global warming data in a way that follows this hockey stick pattern. Social scientists use it too, such as when observing the rate of increase in poverty.
The hockey stick chart grabs your attention right away. When data points shift suddenly from a flat period to this steep rise, it's a clear sign to focus on the causative factors. If the shift happens over a short time, you need to determine if it's just an aberration or a fundamental change.
Business Example of a Hockey Stick Chart
Take Groupon Inc. as an example—it's one of the fastest-growing companies in history to hit $1 billion in sales. It did this in about two-and-a-half years, which is half the time it took tech giants like Amazon and Google. Picture this: sales under $100K in 2008, jumping to $14.5 million in 2009. That's the 'blade' part of the hockey stick.
In 2010, the company reported $312.9 million in sales, marking the upward bend or inflection point. Then in 2011, it hit $1.6 billion. If you plot this on a graph with sales on the y-axis and time on the x-axis, you clearly see the hockey stick pattern. But remember, even with those soaring revenues, the company wasn't profitable—net losses in 2010 were $413 million due to selling and marketing expenses.
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