We’re bombarded almost daily by Statistics mentioning 10 Billion here, 100 Million there and so on.
These numbers in absolute terms are almost inconceivable to me. So a while ago I started a simple experiment – rather than thinking in terms of the absolute number, I started to think of them as cost per head (or sometimes cost per household, depending on the statistic).
Calculating the Cost to Each of Us
To work out the cost per head, take the number and divide by 50 million (which is a little lower than the UK population, but makes the maths easier). For example, £1 billion becomes £20/head.
To work out the cost per household, take the number and divide by 20 million. So in this case £1 billion becomes £50/household. Again very rough, but it gives a feel for the impact of the number.
An Example
Using this formula, a few numbers start to make sense. To scare people, take our national debt (i.e the total that the UK state is currently borrowing and paying interest on). This is currently almost £1Trillion (£1000 Billion). On our behalf, successive governments have borrowed roughly £20,000 per person, without us ever being asked, as far as I recall. The interest on this in the current year will be approx £43 Billion. That’s about £1000 per year each. Or £ 2,500 per household.
And remember this isn’t borrowing to invest (as in a mortgage), this is mainly borrowing to live a nicer lifestyle. I’m sure it will all go horribly wrong some time…
US Debt Clock in New York
On a more cheerful note, I recently discovered that we spend approximately £500 Million/year on ice cream in the UK. Or about £10/head. Which sounds low to me, although the ice cream eating world is probably broadly divided between frequent consumers (kids and adults like me) and low volume consumers (adults with will-power).
Working Backwards
Another use for this is when estimating market size. For example, there are about 20 million households in the UK. I’ve not researched this, but I suspect that most of them have windows.
And at a guess, on average they will replace their windows once every 20 years. So, as a total guesstimate, there will be approximately 1 Million replacement window jobs this year. Again, guessing at an average of £10K/household (I’ve no idea whether this is even close), there’s about £10 Billion to be collected each year. (Could be £5 Billion or £20 Billion, but it’s certainly going to be in this ball park). A quick look on the Office of National Statistics Web site tells me that the market for timber windows and doors in 2007 was approximately £1.5 Billion, which means my estimate looks roughly right to me. Of course, if you want the real numbers you’ll have to buy a Plimsoll Report, or something similar.
Next time you hear a huge number, convert it and give it the “can this really be right?” test. Give it a go!
[...] while ago I wrote about Making Scary numbers Make sense. So I thought I’d put the two ideas together to work out the “personal burn rate” [...]