I had a pretty interesting conversation today. As I was walking back from class, I met Mike (a.k.a HK dude, remember him?). So we do the casual small talk, I asked him:
Paul: So where were you from?
Mike: Lunch at the union.
Paul: I didn’t know you had lunch here, didn’t you have breakfast this morning.
Mike: No, woke up at 9.
Paul: Dude, you got to eat your breakfast, that’s 5 dollars down the drain man.
Mike: No, it is not! In business terms…have you heard of “sunk cost”…
Mike then proceeds to fill me in on the concept and implications of basic economics and this mysterious thing called “sunk cost”. Yada yada yada…was a fairly long conversation, would not go into too much detail. But in a nutshell, “sunk cost”, apparently is cost that cannot be recovered, or something like that…read the following….
Paul: So what you’re trying to say is that since you paid your fees in advance (i.e. a full semester)…that means you won’t experience a loss, because whether you go for breakfast or not, that money can never be recovered…hence, it would not affect your decision on having breakfast or not…thus rendering the idea of having breakfast or not irrelevant in terms of cost…HOWEVER, if you were to pay your fees in a daily basis, and somehow not choose to go for breakfast (after paying that particular day’s fee of cause)…that would be a sunk cost…which in terms equate into a loss…hence making ones decision to skip breakfast more relevant…
Mike nods…which means…I nailed the idea of sunk cost dead on…I don’t know about you…but something fishy is going on if that really translate into modern economics… I wonder…
He proceeds to ask me what does a profit mean?
Paul: When you record a turnover in your business…i.e., recover the losses from your previous expenditure of setting up the business (including on going expenditure)… passing the point of sustainability.
Mike: Wrong, it means, if you want to earn 10 dollars, and in fact you do, you have no profit. But, if you earn 20, you have a 10 dollar profit…
That smells even more fishy...someone in the business field…enlighten me on this subject…
Anyway, as my title head suggest, I have 2 recommendations this weeks (not that it’s going to be a weekly basis thing)
“Enron: The Smartest People in the Room”…This documentary is based on the book of the same title…it chronicles the rise and fall of one of history’s biggest corporate scandals…I was always fascinated by this subject ever since I saw the Hallmark movie about the same subject. This documentary reveals some shocking revelation about the scandal in detail. The ambition, greed, deception and lies of a few men (maybe more)…I highly recommend this documentary to people in the business sector…or those who are just interested in the subject. Might be hard to get your hands on a copy though (especially in Malaysia…I think)
“Factor Four: Doubling Wealth, Halving Resource Use”, by E. Von Weizsäcker, A.B Lovins, L.H Lovins. This book is truly a gem. Its the “unofficial” text we use for our PHIL3910 course…we don’t have to read it, but it’s recommended. At first I was skeptical, probably because I didn’t really want to bite more than I could chew… but I was really taken by surprise, this book is really interesting…the gist of the author’s idea is that, quote “Resource productivity can-and should-grow fourfold. The amount of wealth extracted from one unit of natural resources can quadruple. Thus we can live twice as well-yet use half as much”…one of the key topics is energy and resource efficiency…a lot of examples are given for the construction sector…I highly recommend it to engineering (generally most), especially those in the construction field (reasons as stated above)…and also urban planners and designers…Sam, I think you should give this one a shot…could be useful information, it does touch in the subject about sustainable architecture. I know you have a lot of reading loads…but still I think this one is worth while…some things are very technical, but you’re a smart boy, you should get around that one easily…and Dad, I think this book would might be of high value to you, especially since you have so much experience in this field…you will definitely find this book relevant and possibly a revelation…at worse, would be very interesting to read about, and have a few debatable points…though this book could be hard to get your hands on in KK…but if you could…
Anyway, that’s about it…long post No.2.
Paul: So where were you from?
Mike: Lunch at the union.
Paul: I didn’t know you had lunch here, didn’t you have breakfast this morning.
Mike: No, woke up at 9.
Paul: Dude, you got to eat your breakfast, that’s 5 dollars down the drain man.
Mike: No, it is not! In business terms…have you heard of “sunk cost”…
Mike then proceeds to fill me in on the concept and implications of basic economics and this mysterious thing called “sunk cost”. Yada yada yada…was a fairly long conversation, would not go into too much detail. But in a nutshell, “sunk cost”, apparently is cost that cannot be recovered, or something like that…read the following….
Paul: So what you’re trying to say is that since you paid your fees in advance (i.e. a full semester)…that means you won’t experience a loss, because whether you go for breakfast or not, that money can never be recovered…hence, it would not affect your decision on having breakfast or not…thus rendering the idea of having breakfast or not irrelevant in terms of cost…HOWEVER, if you were to pay your fees in a daily basis, and somehow not choose to go for breakfast (after paying that particular day’s fee of cause)…that would be a sunk cost…which in terms equate into a loss…hence making ones decision to skip breakfast more relevant…
Mike nods…which means…I nailed the idea of sunk cost dead on…I don’t know about you…but something fishy is going on if that really translate into modern economics… I wonder…
He proceeds to ask me what does a profit mean?
Paul: When you record a turnover in your business…i.e., recover the losses from your previous expenditure of setting up the business (including on going expenditure)… passing the point of sustainability.
Mike: Wrong, it means, if you want to earn 10 dollars, and in fact you do, you have no profit. But, if you earn 20, you have a 10 dollar profit…
That smells even more fishy...someone in the business field…enlighten me on this subject…
Anyway, as my title head suggest, I have 2 recommendations this weeks (not that it’s going to be a weekly basis thing)
“Enron: The Smartest People in the Room”…This documentary is based on the book of the same title…it chronicles the rise and fall of one of history’s biggest corporate scandals…I was always fascinated by this subject ever since I saw the Hallmark movie about the same subject. This documentary reveals some shocking revelation about the scandal in detail. The ambition, greed, deception and lies of a few men (maybe more)…I highly recommend this documentary to people in the business sector…or those who are just interested in the subject. Might be hard to get your hands on a copy though (especially in Malaysia…I think)
“Factor Four: Doubling Wealth, Halving Resource Use”, by E. Von Weizsäcker, A.B Lovins, L.H Lovins. This book is truly a gem. Its the “unofficial” text we use for our PHIL3910 course…we don’t have to read it, but it’s recommended. At first I was skeptical, probably because I didn’t really want to bite more than I could chew… but I was really taken by surprise, this book is really interesting…the gist of the author’s idea is that, quote “Resource productivity can-and should-grow fourfold. The amount of wealth extracted from one unit of natural resources can quadruple. Thus we can live twice as well-yet use half as much”…one of the key topics is energy and resource efficiency…a lot of examples are given for the construction sector…I highly recommend it to engineering (generally most), especially those in the construction field (reasons as stated above)…and also urban planners and designers…Sam, I think you should give this one a shot…could be useful information, it does touch in the subject about sustainable architecture. I know you have a lot of reading loads…but still I think this one is worth while…some things are very technical, but you’re a smart boy, you should get around that one easily…and Dad, I think this book would might be of high value to you, especially since you have so much experience in this field…you will definitely find this book relevant and possibly a revelation…at worse, would be very interesting to read about, and have a few debatable points…though this book could be hard to get your hands on in KK…but if you could…
Anyway, that’s about it…long post No.2.
2 comments:
My lecturer at uni used to say: "Accounting is not science, it's an art!"
Will keep an eye for the book !
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