Monday, July 16, 2012

The power of incrementality

Small things make a big difference. But sometimes, they dont. Size does matter, calories do matter, but sometimes they dont. 

The rainy season always brings in more troubles and issues, and consequently, newer solutions. The most common NEW solution amongst all is the LONGER-BUT-HAS-LESS-TRAFFIC-AND-IS-LESS-TROUBLING-ROAD that we take to avoid peak traffic jams in the rains.Essentially, we opt for the longer route because it will have less traffic, less potholes and therefore will be a better ride. And in doing that, inevitably, we think about how much EXTRA fuel we consume and how it affects our budget for that month..Don't tell me we dont think about it coz we do. In doing so, and in fretting about the extra fuel, we forget a couple of things. First, the amount of  extra (INCREMENTAL) fuel that we spend, is too negligible when compared to the total fuel we have spent in the entire trip. Yes it costs us a little more, but just a LITTLE more. Secondly, and more importantly, we forget the peace of mind it gives us in avoiding all the traffic, potholes, and in reaching the destination on time. Small may not make a big difference after all.

Take another instance when  EXTRA, MORE, or LESS hardly matter. Those who are regulars at the gym know that obsession with the treadmill and handling that obsession well is the single biggest factor in determining  the effectiveness of the workout. A treadmill of about 20 mins helps us shed around 250 cals. Now, I know people who fret over the extra 1 minute or the less 5 calories. If such a person tread for 19 mins, he is bound to fret about the fact that he will lose less calories. Less how many? Lets find out. When we hope on the treadmill, the first and last minute lose less calories, since the body is either warming up or is cooling down, respecively. Typicall, one loses about 7 calories in each of these 2 minutes, and about 230 calories in the next 18 minutes, a little over 12 calories per minute. Therefore, by not working in the last minute, the person saves only 7 calories, or about 3% of the total 250 calories!! Why fret for the one minute  when you have burnt 243 calories anyway??? Why fret for 3%??

Now, let us take look at situations when small indeed is big..

The best example of small things giving rise to big ones is the case of a savings bank account or of a recurring deposit. With small amounts deducted each month, a recurring deposit hardly does any harm for the time period. However, at the time of maturity, the big lumsum comes as a pleasant surprise, much like an oasis in a desert,  or as a wave of fresh air in a crowded place. Good example of small things making a difference.

In another instance, consider the case of income tax. When you dont pay taxes on time, and delay them, you incur a fine. If for some reason tax is not deducted at source, but if you are eligible to pay tax, then you will have to pay it all at once, at the end of the year. This is so much worse than paying much smaller TDS amounts every month. The same holds true for credit card and other bills. This is a classic case of size mattering.

So whats the point? Incrementality matters. Even when it does not matter, incrementality matters. There is much power in breaking down values into smaller increments, and then comparing these increments with the overall value. Doing so helps us make a better and informed decesion, and in all likelihood, reduces the pain of that decesion if it has to hit us hard. There is much value in analyzing the power of incrementality.

Tuesday, July 10, 2012


 It wasnt raining so much today. Yet, there was toooo much traffic on the road. I did leave later than usual, but not so late so as to be stuck in a bad traffic jam, that caused me to reach office by almost half an hour!! And as Murphy's law said, once something goes wrong, others will too. Sure enuf, today hasnt been a good day at office either...lts just end it there :(

On my way back from office, after a terrible day that began late and ended late, I was once again stuck in traffic. This time, at a long signal, i kept wondering why life was being so unfair. And thats when, something struck me. Just before leaving office this morning, I DID NOT say bye bye to mom. I was in too much hurry and rushed out of the door 20 mins later than usual. Saying bye to mom is something i do everyday. Would there be any relation, AT ALL, between that and the terrible day today?

Naah. Its just a coincidence that on the one day i dont say bye to mom, i have a bad day in a long time. I mean, how does the traffic on the road have anything to do with my mom? Even if i had said bye to her, there would have been as many cars on the road, and the traffic would have been as bad. Things at work would have been as bad as they were. They are independent from what happens at home.

Or are they?

I always wonder how we commonly follow some things under the pretext of belief, rather than of superstition- fasting on certain days, avoiding non-vegetarian on some days, going to the place of worship, praying every morning, following some particular trait that in the hindight, make no sense. I must be honest, every time I see a cat walk across me, i exclaim SOMETHING. I either curse the cat, or i cringe with a "Damn!!" or I do something else that indicates negativity around it. And yet, nothing good or bad has happened before or after that. I also wonder, what would happen if we FAIL to do one or more of the above. How about eating not fasting this time? not praying on a certain day? How about taking it HEAD-ON. See what happens?????

I know I have tried and found it pretty DIFFICULT. Its just too hard to not exclaim or even THINK when a cat crosses by. As educated as i am, i am always aware of the cat. As educated as someone else is, they continue to do their routine. I am not judging or indicating that these are bad or unnecessary things. A lot of people do it our of respect, out of habit or simply because they've been told that that is what is to be done.

But at the hear of it all, isnt it all really superstition? Would terrible things really happen if we didnt do these things once? Would the respect come down in any manner? Would the Gods be affected in any manner if we didnt fast for a day? I know i say bye to mom not out of superstition, but out of personal liking. Is murphys law actually a science-loving-belief-hating version of what is truely superstition? or is superstition a belief-loving-science-hating version of what is actually murphy's law? i.e- whats gonna happen, WILL happen.