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MBA Essentials
JAN 31, 2018

Getting Good with Numbers: What Is the Price of Love? 

By Kenichi Suzuki, Translated by Karl O’Callaghan
iStock photo/erhui1979

A happy couple has an anniversary coming up, and they want to buy gifts for each other. How much should they spend? Can you even find the perfect gift on a budget?

How you do calculate the price of love?

When I do this exercise in the class I teach at GLOBIS, the students come up with lots of ideas: converting gifts and time spent going on dates into money, or somehow working it out from the value of life insurance or the cost of a divorce settlement. Of course, many say that love is priceless and cannot be converted into money.

Let’s look at the analysis of my colleague, Atsushi Nishiguchi, an expert on weddings and matchmaking.

Nishiguchi references a survey conducted by life insurance company AXA. According to the survey, which focused on single Japanese working women aged 25 to 44, the average annual income of the ideal man is 5.52 million yen.

Now imagine one of these women finds her match, a man she loves with all her heart. But she’s practical. She needs to think about her future with this man. What is the lowest income she would settle for to accept his marriage proposal? The answer turns out to be a mere 2.7 million yen. From this, we can determine that the difference, 2.82 million yen, is the price of love for one year.

Source: AXA Japan press release, March 15, 2010 (translated)

What Nishiguchi has accomplished here is working out the price of love, not by asking “how much” directly, but by examining the answers of women when love was a factor, and when it was not. Then he compared them to find the price.

In fact, we carry out this kind of numerical analysis every single day.

Imagine you usually buy milk from a supermarket for $2.00. One morning, you run out of milk for breakfast, so you run to a nearby convenience store. The price is $2.50. This is obviously more than usual, but you decide to buy the milk anyway because the time it will take to get to the supermarket is not worth saving $0.50.

It is not an exaggeration to say that there is no analysis without comparison. Comparison is how we extract meaning from numbers. Most of the time, we do this without even noticing. If, however, we mange to become aware of what we are comparing and why, our analytical skills will sharpen.

The root of the word “analysis” comes from Greek analyein, which means “to break up or loosen into smaller parts.” Oxford Dictionaries defines analysis as the “[d]etailed examination of the elements or structure of something.” It goes further to say it is the “process of separating something into its constituent elements.”

So in addition to comparing, division is important for analysis. That is: divide, then compare.

Why do we analyze in the first place?

The simple answer is, to solve problems. You’ve probably been asked by your boss to explain why you believe a certain action will fix a problem, and why your solution will lead to a specific outcome. Answering this competently requires a firm grasp of the cause-and-effect relationship between an action and its result.

Roughly speaking, analysis in business must answer the following types of questions:
Where is the problem?
Why did the problem occur?

Copyright GLOBIS

When you see numbers, compare them. And as you do, ask yourself what you are comparing. This will help you understand the problem more deeply.