Section 06 · 3 entries
Compounding
Arithmetic that defeats intuition.
Three entries on repeated multiplication, and on the reliable ways in which it gets read as repeated addition.
Price in one column, quantity in the next. The two answer different questions and were kept apart long before either was electronic.
Photo: Matvei / PexelsThe entries
- 06 · 1
Multiply, do not add
Growth compounds as a product of factors, not a sum of percentages, which is why intuition about it is reliably wrong.
- 06 · 2
The mean of factors
The average that describes compound growth is geometric, and it is always lower than the arithmetic one.
- 06 · 3
A fall needs a bigger rise
Down a half, then up a half, leaves you down a quarter.