Thursday, July 23

Doubling the halves

In today's business section of the Today newspaper, there is a line that states

Morgan Stanley shares have climbed 72 percent this year to close at US$27.56 in New York trading after the stock plunged 70 percent last year.

If you are not very careful reading into this statement, it may appear that that if it drop 70% last year and increase 72% this year, that means there is a nett 72-70 = 2% increase.

For those who know this is not the case, good for you!

But let me give a simple illustration for those who do not get it.

If your pay drops from $2000 --> $1000, it means a 50% drop.
But when your pay increase back from $1000 --> $2000, it means a 100% rise.

In short,
A 50% drop will have to be compensated by a 100% increase to break even.

And that means Morgan Stanley's stock price is still quite some way from 2 years ago.

Anyway, the 50% drop need 100% rise rule is also applicable for real-life events. For example, earning back credibility after you lost it - you have to work doubly hard.


Roxy. said...

I agree with your last part. but unlike money, which is easy to earn back, credibility is not just doubly hard, is more then that. Human trust and material stuff earn differently. hah

foongpc said...

It's going to be tough earning back credibility after you lost it. probably need more than just double hard work!

Shingo T said...

Roxy & foongpc:
Agreed. Need a Godzillion amount of effort to restore what's lost.

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