A Feel For Numbers | Value Research It's a puzzle why whatever instinctive understanding most of us have for numbers in everyday life often doesn't extend to matters of money
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A Feel For Numbers

It's a puzzle why whatever instinctive understanding most of us have for numbers in everyday life often doesn't extend to matters of money

I was having an argument with my doctor about the health of a family member. “The fever is coming down,” he said. “It was 101.4 degrees earlier, now it's only 101.3 degrees.” I thought that was absurd. This tiny change was probably just natural hour-to-hour variation. In any case, how did it matter? 101.4 and 101.3 were both high fever. But he was adamant. No, he said. This showed that the fever had hit rock bottom. The decimal place showed that the trend had changed. It was a new beginning. And then I woke up with a start. I'd fallen asleep while reading the day's newspapers. I'd read so many stories about the consumer inflation falling from 9.64 per cent to 9.52 per cent that I'd dozed off.

What would you say to a doctor who insisted that 101.4 to 101.3 was a reduction of fever? You would know that that such a claim was overwrought because you instinctively know that the difference was inconsequential to the desired outcome. But somehow, in some other domains, people don't have this instinctive understanding. Some time back, I referred to two investment options as equivalent when in the past one returned 11.6 per cent over a period and the other 11.4 per cent. A lot of readers protested. This does means that one made you more money, but as a qualitative difference, specially for the purpose of making a judgment about the future, it really is irrelevant.

If an auto salesman recommended that you buy one car over the other because its fuel consumption was 14.4 kmpl as opposed to 14.2, you would probably laugh it off. It's a puzzle why we often don't extend this common sense to financial and economic numbers.




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