Economic Leadership Starts with Simple Math

Seth Godin proposed a simple quiz for marketers this morning. To instantly see how quickly statistics get out of hand with a natural bias – also known as fuzzy math, consider his “quiz for smart marketers,” below. It makes a brilliant point. Not feeling mathy today? I put some numbers to it so you can see for yourself how the quiz plays out. Work hard . . .

Let’s say your goal is to reduce gasoline consumption.

And let’s say there are only two kinds of cars in the world. Half of them are Suburbans that get 10 miles to the gallon and half are Priuses that get 50.

If we assume that all the cars drive the same number of miles, which would be a better investment:

  • Get new tires for all the Suburbans and increase their mileage a bit to 13 miles per gallon.
  • Replace all the Priuses and rewire them to get 100 miles per gallon (doubling their average!)

Take a moment to put some numbers behind this. Assume that the cost to rewire is the same as the cost for new tires. Isolate the gasoline consumption.

GasolineReady for the answer?

For the sake of easy numbers, let’s say the cars drive 1300 miles per year.

So each Suburban consumes 130 gallons at 10mpg.

Each Prius consumes 26 gallons at 50mpg.

By improving the mpg of the Suburban a little bit from 10mpg to 13 mpg, gasoline consumption goes from 130 gallons per year to 100 gallons per year saving 30 gallons per year per Suburban.

By improving the Prius a lot from 50mpg to 100mpg, gasoline consumption goes from 26 gallons per year to 13 gallons per year saving 13 gallons per year per Prius.

The answer to the riddle? Putting new tires on the Suburban will save more gasoline than improving the fuel efficiency of the Prius.

Image courtesy of Liz West