If the country likes something, it is measured by numbers and then compare numbers. We divide people into percentage points based on net assets, credit scores, GPA, GDP, IQ, etc. There is an implicit assumption that the entire scale can be understood simply by multiplying by numbers. For example, someone must spend twice the time, or have twice the IQ must be twice the smart.
However, all these numbers are functions of very complex and nonlinear things. Therefore, it doesn't make sense to compare two very different numbers. While it is possible to compare A and B's fee levels, such as $40,000 and $39,000, and to conclude that B's person is slightly better than individual A compared to Money A, it is impossible to compare A and B with someone who only costs $20,000. Here, C people will be qualitatively different and qualitatively different choices. For example, A and B may have two cars, where B will drive a slightly fueled model, while C will not drive a crp. More likely, he wouldn't rely on other modes of transportation to drive his car at all. Therefore, it is impossible to draw any conclusions based solely on comparing numbers.
So how do we compare?
When the two things are scaled differently, the ratio is usually established. No one would think that a stock selling for $30 is twice the price of a stock price, at $15, except for absolute rookies. No, stock prices must be scaled at a certain value. Earnings per share is a very popular expansion factor. Assume that the higher-priced stocks earn $4 per share, while the lower-priced stocks earn $1 per share. Then, the P/E ratios are 30/4 = 7.5 and 15/1 = 15, respectively. All other things are equal, the former is the cheapest. Stocks with high market value are called growth stocks, and stocks with low market value are called value stocks.
If we go back to the automotive example, there are multiple ways to build ratios (constituting ratios seems to be the primary career for stock analysts, by the way). We can divide by the number of cars. This means that people C has an infinite proportion. We can divide by the distance traveled, give some signs of mileage cost, or can divide by the time spent on shipping. One or more of these ratios will show substantial differences.
It's interesting when people compare thrifty versus thrifty budgets or compare food costs. It is very likely that several types of lifestyles are established. Then the comparison should be made in the classroom. For example, it does not require genius to determine that all value inventory is less expensive than growing inventory. But what about a frugal lifestyle? Some people show different forms of thrift. My answer is yes. I have a hard time using the thrifty tips and advice from most personal finance blogs because they are not outside my alliance. I can't afford their advice
In future posts, I hope to be able to develop some ways to classify different personal financial settings. Until then, any suggestions are welcome.
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Originally released 2008-09-05 07:33:12.
