People aren’t very good with big numbers; in fact most people aren’t all that hot with small numbers. Mainly because we weren’t designed with big numbers in mind, we’ve only been living together in big cities and measuring things in millions, billions and trillions for a relatively short part of our history.
For the rest of the time, we lived in small groups and went out and hunted for food, or cultivated it – we didn’t need much in the way of complex mathematics to explain that stuff.
When it comes to small numbers we’re good at pattern recognition even if we don’t understand how to manipulate them very well – if you see 7 ostriches, you’ll be certain (even if takes a few seconds) how many ostriches you can see and as the number of ostriches increases, the harder it is for our brains to figure out how many ostriches there are.
We’ve trained ourselves well to understand bigger numbers in financial terms as they apply to us though – so numbers up to tens or hundreds of thousands make some sort of sense when they’re written down in money terms because we can relate to the purchasing power even if we can’t relate to the number itself so well. So for example we all know that $500,000 will buy us a house in most of the world – but none of us (including me) can really quantify what exactly $500,000 means.
It’s not measured in gold or silver, or units of work – it’s a theoretical concept of value, and it’s only our faith that makes it mean anything at all. After all if it’s in the bank – $500,000 is a few bits of binary data, and if it’s in your hand it’s a stack of paper which has no special intrinsic value.
So essentially money is an abstract concept, and the bigger the number associated with it – the less we really understand it. $1 million = nice house pretty much anywhere, $10 million = bloody nice house, $100 million =? This is where it starts getting harder, it’s 100 nice houses but most of us can’t think of anything individually that represents exactly $100 million and it gets harder as those numbers get bigger.
So when somebody tells you that China’s economy is the second largest in the world, and that means the Chinese are tucking away $5.9 trillion ($1 trillion is $1 million million dollars) dollars a year (at least in 2010 they were – now it’s more) that number is big and scary and doesn’t actually mean very much at all. And it’s the bigness and scariness of that number that we don’t really understand – that allows our own politicians and media to manipulate us into believing that it’s much scarier than it really is.
For others it’s the reason they believe that if there’s that much money in China, some of it must rightfully belong to them. For them a number that big isn’t scary, it’s inspirational. These people have been equally misled just in the opposite direction.
Tomorrow I’m going to take this number and make it into a smaller (and much more relevant) one, and hopefully that will help you understand (as it did for me) why this number isn’t scary and nor is it representing boundless opportunity.