“Yay!”
The Girl said. “Oh wait – what’s the catch?”
You know
me well, I said. It will cost you one cent.
“Oh no,”
The Girl said. “You’re trying to get me with exponential growth, and I hate
exponential growth. That pence is cursed with black magic!”
I
laughed. You’re right that exponential growth is something to watch out for, I
said – that’s why interest gets you when you borrow money. If it cost you one
per cent more per day, for example, that would be exponential growth. But this is just a flat amount –
one cent.
“Whew,”
The Girl said. “So what’s the catch?”
Well, I
want to know how much money I’m really giving you.
“You’re
giving me 99 cents,” she said.
Good, I
said. What if I charge you 70 cents for every Euro?
She worked
it out in her head. “I’d really be getting 30 cents,” she said.
Very good
– what if I offered to give you a Euro but charged 99 cents?
“I’d only
get a pence,” she said forlornly. “That’s not even worth it.”
Okay, I
said – what if I gave you 100 Euros but charged you 99 Euros.
“I’d only
get a blasted Euro!” she said, smiling.
And if
I’m charging you more than a Euro for a Euro?
“You’re
not actually giving me anything,” she
said, rolling her eyes.
Excellent,
I said. What I’m demonstrating here is a principle called
Energy-In-Over-Energy-Returned, or EIOER. You can remember it by thinking of
Scooby-Doo asking a question, in his doggie voice – eioer?
“Do you even watch Scooby Doo?” she said sceptically. “He doesn’t sound like that.”
Of course
– I’ve watched it with you. Okay then, make up your own mnemonic.
“I’ll do
the nursery rhyme,” she said, and sang, “Old MacDonald
didn’t-really-get-a-Euro, E-I-O-E-R.”
Excellent,
I said – that’s the spirit. So where this comes in handy is this: let’s say you
want to get some source of energy, like an oil field, and for every Euro it
costs them to drill, they get 100 Euros out. They’ve made 99 Euros, right?
“Well,
they’ll have a good life while it lasts,” The Girl said. “But it might be
short.”
Um – why?
I asked.
“Because
they could poison the place where they live, and change the weather, and do all
kinds of bad things that might make them not live as long,” she said.
Well,
that’s a good point, I said, and that can happen in the long term. For the
moment, though, just focus on more immediate effects. As you get more oil out
of an oil field, though, you get less and less back, because it takes more and
more effort to get it out. At first they could invest a Euro and get a hundred
out, but soon they are only getting 90 Euros out, then 80, then 50, then 10.
“And then
they don’t get anything,” The Girl said.
When they
hit the break-even point – about one-to-one – it’s not worth it to get oil out
no matter how much is there. It’s like when we pick sloes in the autumn – at
first we pick the closest sloes that are the least effort, but the longer we
pick the harder they get to pick, until it’s not worth it anymore, and we give
up. That’s what happens with oil or anything else.
“And then
they would be on the side of the roads begging for money,” she said.
Possibly,
I said. So if someone tells you they have a new plan to get lots of money, or a
new source of energy, or anything else, what should you say?
“Get
lost, weirdo!” she said.
I
laughed. Maybe, I said, but what I’m looking for is a more logical response,
like: How much will it cost?
“Because
if it costs me two Euros for every Euro, making a million Euros isn’t worth
it,” she said. Right, I said – it would be even worse than if you had gone for
some smaller amount, or made no money at all.
“If I
could get just a bit of money, I wouldn’t keep going until everything was gone,”
The Girl said. “I’d just take my bit of money and walk away.”
That’s
the right attitude, I said – good for you. Problem is, everyone starts off
wanting just a bit, and walking away is never easy.
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