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Be sensitive to numbers is what I learnt most from running a business. Numbers have magic power to tell a story more complete, and more vivid than an article, if you know how to read numbers. Without the skill to read numbers (do we call it analytical skills), people just see numbers, instead of the story it tells.
Yahoo! Stock
When we watched the CBN (China Business Network, or in Chinese, called No. 1 Finance) channel for business news, there is a piece about Yahoo! lost 10.5 billion USD in market cap in one day.
I was shocked.
I am happy that I fell shocked. I couldn't feel that before. I will tell you why I felt shocked later.
Too Big, or Too Small Numbers Means Nothing
Many people, including me, feel numbers too big means nothing. People get clear sense of what 1,000 RMB means, but lost the sense of what 10 billion, 200 billion, or even more means. There is no difference.
When people say some company is losing 10 million RMB this quarter, sometimes, I just have no idea. Should I be worried about the business or not? Many times, I found my reaction is different from what the writer of the news feel about.
Back to Yahoo! Numbers
Numbers are valuable only when put into comparison, either vertical comparison or historic comparison.
What does 10.5 billion USD means? If I compare it to my own world, it does not make sense. For example, it may mean 1.05 million cars, or 300 billion ice cream. But what this is tell you? The only thing it tells is, it is a big number. I know that.
I remember Yahoo!'s market cap was something around 50 billion USD (to be exact, 45 B). 10 billion means 25% drop in stock price. What does that mean? Also, it may also mean the market cap now is very similar with eBay... Many things to think about.
Number is One Language
Barry Johnson said:
Before I came to Shanghai, I thought, if I could say Chinese, I can talk about one fourth of people in the world. If I can speak English, I can talk to half of the world. If I know the language of Finance, I can talk to the whole world
Finance he said is pretty much based on numbers.
I would agree, number is a language. It is simpler than English - just has ten to twenty characters:
01234567890.-+%
But it can tell story. The skill to write in number, and to read numbers is an important skill to manage in business world. I am trying hard.
Posted by Jian Shuo Wang at July 20, 2006 11:18 PM
Copyright: You are free to redistribute this work, as long as you keep this disclaimer
and this link: http://home.wangjianshuo.com/archives/20060720_sensitivity_to_numbers.htm
yes indeed, numbers do tell a story and give an a picture of what is happening, provided the numbers are real and not fudged.
Posted by: Shrek7 on July 21, 2006 1:56 AMApple's stock is going up to it's norm & they made 4.37 bllion in USD & THEY SHIPPED 1 Million macs & 8 million iPods in Q3.
Posted by: Qh on July 21, 2006 2:52 AMnumbers do tell a story, though since they can be manipulated at will by others, they may not be a true reflection of the whole story... so take them at face value with a grain of salt... i certainly don't believe any numbers given to me here in China, as such numbers are all too easily manipulated and in my experiences of 3-4yrs here, usually are.
Posted by: Dennis on July 21, 2006 11:53 AMNumbers tell story only when you know the background behind them. The background is either common sense, or experience accumulated in days. Benchmark is also very import in reading numbers. If someone tell you "today I worked 8 hrs", do you think he is happy or not happy. To answer this question, you need to know how long the guy usuarally works for.
Posted by: Chern (external link) on July 21, 2006 4:46 PMHi JS,
Recommend you one book. It is written by a senior people in McKinsey.
The name of the book is called Say it with Charts.
Posted by: Mingyu Guan on July 21, 2006 10:07 PMagree with all the above... all numbers are 'fudged' in some way or another... when asked 'how do our statements look', all self-respecting accountants will reply 'how do you want it to look?'. there are so many different ways to account for numbers that are 'allowed' by the aicpa/cica/isab/etc... that it's really all just a game, learn the rules and you too can play along. the only proper way to read the numbers is to learn how the numbers come about... read financial reports with a grain of salt and never take it at face value. all comes down to doing your homework and not being lazy... like so many people unfortunately are.
Posted by: canadian badass on July 25, 2006 5:46 AMLearnt a lot on numbers from the comments. Thanks.
Posted by: Jian Shuo Wang (external link) on July 29, 2006 12:47 AM