Of Big Mac’s, Economics, and Us

Economists deal with economic systems in both local and global environments. They work to predict the future and explain the past. The work economists do impacts all of us but, like many technological and academic disciplines it is difficult to explain their work in terms understandable to those who are not in their field.

Seeking to make Exchange Rate Theory and the concept of Purchasing Power Parity digestible by comparing the buying power of world currencies “The Economist” magazine created an index listing the price of McDonald’s Big Mac hamburger in U.S. dollars around the world. They picked this iconic sandwich as their common denominator because it is the same product all over the globe so the easily comparable price takes into account land values, construction costs, labor rates, energy costs, and the price of ingredients including, of course, that special sauce. It turns out that a Big Mac in Norway costs $7.73, $3.57 in the United States, and $1.68 in Malaysia. OK, you may not understand all there is to know about Exchange Rate Theory and Purchasing Power Parity but you now understand something about it.

Using “The Big Mac Index” complex economic concepts are easily understood, even by a dolt like me. This is “Creative Metrification” in its most elegant form. They have taken complex comparatives and demonstrated the measurements in terms just about everyone can understand and relate to.

In business we have all sorts of measurements. As an example, consider all the ratios that a banker calculates when looking at a balance sheet. How many of their customers know and understand those critical measures of a businesses financial health. Imagine if the banker were to explain those ratios and other measurement tools in terms the non-financially educated person could easily understand.

Consider using the concept of the “Big Mac Index” when explaining what your business does to a new hire, a customer interested in your process, an investor, a lender, or a prospect. Instead of concentrating hard to “get it” and often not “getting it”, creative metrification will make your message easily understood by all.

Source by Larry Galler