The Power of Scale

Numbers are a great way to prove a point. But there’s often a problem. Once a number is sufficiently large, it becomes indistinguishable from other large numbers. We inherently lack a sense of perspective for such things. To our minds, a million, a billion and a trillion all seem like indescribably large numbers, hardly different from each other. I mean, who cares about something that big?

To quote a classic example, I read an article by Michael Lewis that talked about the recent AIG bonus controversy. His argument is a good one. Why is everyone so incensed by AIG giving out bonuses worth $165 million to its employees? What about the $173 billion that they received in bailout money? Basically, it was like a well-financed trip to a casino. Says Lewis,

This incredible act triggered hardly any political backlash. In effect, the U.S. taxpayer had paid off AIG’s gambling debts. But when AIG itself pays out $165 million in bonuses — money it is contractually obliged to pay — the entire political system goes insane. President Barack Obama says he’s going to find a way to abrogate the contracts and take the money back. A U.S. senator says that AIG employees should kill themselves.

He goes on to talk about how, for a normal US citizen and in turn the politicians, big numbers look the same. Be it the millions that AIG handed out, the billions that they actually received, or the trillions that the US owes other countries.

I also found a fascinating article on developing a sense of scale. Sample this and see how the scale increases exponentially:

1 second is 1 second

1 million seconds is 12 days

1 billion seconds is 30 years

1 trillion seconds is 30,000 years!

Another interesting perspective from the article is to shrink things down to our size. And for this we can use the analogy of a normal person versus a rich person. Lets assume that a normal person makes $50,000 a year, and a rich person makes ten times that amount. A laptop for a normal person would cost $1500, the usual price. For a rich person, it would effectively seem like one-tenth that amount. Imagine a laptop for $150.

We can easily use scale to illustrate things of unbelievable magnitude. Did you know that if we average out Bill Gates’ wealth, he has effectively made $3000 per second since Microsoft was created! That means, if he finds a $100 bill on the ground, its literally not worth his time to bend down and pick it up! And of course, there’s the legendary dialogue by an ex-CEO of Coca Cola in the 1996 annual report that reads,

A billion hours ago, human life appeared on earth. A billion minutes ago, Christianity emerged. A billion seconds ago, the Beatles changed music. A billion Coca-Colas ago was yesterday morning.

That’s how much Coke we drink. And more importantly, that’s the power of scale.