Compared to what?

June 23, 2015

What I’ve noticed is that the great people always compare things when explaining something.

Today is a good day. Compared to what?
Crime is lower today. Compared to when?
Our company is doing great. Compared to who?

For example, Warren Buffett compares things to percent of GDP and the S&P 500.

Healthcare costs are skyrocketing?
Compared to what & who?
Well USA spends 17% of GDP on healthcare.
While UK spends 9.1%, Germany 11.3%, and France 11.7%.

Berkshire Hathaway had a great year.
Compared to what?
Berkshire’s annual return was 27% in 2014 vs 13.7% for S&P 500.

Are you getting a good return on your investment?
What should you compare it to?
We can compare our returns to USA Three Month Treasury Bill (risk free rate) or Corporate Bonds (higher risk) or real estate market (reits) or the S&P500 (stock market).

Was that person racist?
Compared to who? And when?
Was nearly everyone in his society racist at that time?
Are we talking the 1600s? or 2015?

We need benchmarks to see how we’re doing.

I got this idea from a quote by Martin Luther King, Jr. I think.
When I find it, I’ll put it below.

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Healthcare expenditure by gdp
Berkshire annual letter 2014