Matt Levy
speaker
17 appearances
1 recordings
1 series
first heard Jan 2014
last heard Jan 2014
Matt Levy’s voice in public audio — every appearance, attributed to the second.
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Appearances
Rather than doing the compound interest, people try to calculate the simple interest.
So rather than having the 4% interest and then the 4% interest on the 4% interest and keep repeating it, if I put 100 pounds in an account, I'll get 4% this year, 104 pounds.
Next year, I'll get 4%, 108 pounds.
And so rather than doing exponential growth, people do linear growth.
And that's sort of the extreme version.
And then sort of the other extreme would be to do this exactly right.
So we asked...
How much variation is there in how people perceive exponential growth?
And it turns out that there's certainly far more people who do this full linearization than there are people who get it exactly right.
So this is for the U.S.
population, which is probably similar here.
We found something like 10% of the population gets it right.
About a third gets it completely wrong in terms of this linearization.
And most people are somewhere in between.
So you can sort of calibrate this.
And a lot of people fall in between.
They have a sense that it's going to grow quicker than linear, but they just have no idea how much quicker it's going to grow.
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