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An article “Girl Math” caught my attention recently, and whilst I was motivated to pen this article right away I was busy handling the exam season to do this. So here goes:
• Let me reiterate that my article is not meant to start a gender war;
• The focus of the article is not about financial literacy but its important cannot be stressed enough.
• The focus of my article is instead on how the usage of assumptions can get you any conclusion a user seeks, no matter how robust a mathematical or statistical model is.
Essentially, the lady (Content Creator Chloe Liem) justified her purchase of a $3,950 Cartier earrings through:
1. She has a $1,000 cash voucher;
2. So her out of pocket is $2,950.
Assuming she wears them daily for the next four years. it will cost about $1 apiece each time she wears them.
Which she claims is cheap.
Whenever I read a report, I’m not focused on checking the integrity data (important too of course, but too much work). I instead check whether the user is aware of the assumptions (implicit and explicit), how realistic they are and the resultant limitations of the scope of the report.
So, what are the assumptions underlying Ms Chloe Liem’s purchase?
1) That she will wear those earrings daily for the next 4 years;
2) Of course maybe she may choose to skip some days, but that means the timeline gets pushed out;
3) Another assumption is she doesn’t but more earrings, which will push the timeline even further;
4) That her utility perspective of the earrings stays above $1 each apiece for the next fours years (at least).
Realistic assumptions? That’s up to anyone to decide for themselves. Assumption (4) is, however, the one that is usually missing from most people making purchasing decisions. Girl Math assumptions are obviously not restricted to only girls.
I do see Singaporeans using similar assumptions in justifying the relative high prices of car ownership and freehold property.
“The property is yours to own forever, it will generate a yield for you and your family for generations to come, the sky is the limit. Hence there’s no price too high to pay for a freehold property.”
Alvin