Big Picture Math

Nobody Compounds Better

Using elementary math to quickly appraise a situation. Here, the idea is to use numbers to evaluate the big idea in the argument, to see whether or not it makes sense.

A widely used rule of thumb is compounding — Think of 72

Compounding has only half-jokingly been referred to as the eighth wonder of the world.

The rule of ‘72’ provides a handy calculation tool. If $10,000 were invested in an account yielding 7%, it would double about every 10 years (72 divided by 7 equals 10, the doubling period).

So after 20 years, the $10,000 investment will be $40,000.

At 15%, the $10,000 would double about every 5 years (72 divided by 15 equals 5, the doubling period).

Another Big Picture approach, described by Peter Drucker in ‘The Practice of Management’.

Instead of forecasting the future, this method focuses on past events — events which, however, have not yet expressed themselves economically. Instead of attempting to guess economic conditions, this method tries to find the ‘bedrock’ underlying economic conditions.

[For example]… the bedrock underlying the economy, namely, the pattern of family formation and population structure that had emerged in the United States between 1937 and 1943.

Whilst there isn’t a formula set for Big Picture Math, the following examples highlight the methodology of looking for the big part of…