Writing about calculators

Where to start

Read markup is not margin if you sell anything. It is a confusion that costs real money and persists for years, because both numbers are percentages and both feel like they describe the same thing.

Then how compound interest works, which is the mechanism behind both the best and the worst financial outcomes most people experience.

What these pieces have in common

Every piece in this category has the same second half: where the calculation stops telling the truth. A percentage is simple arithmetic, and almost all of the trouble comes from what it is a percentage of. Discounts stack against a shrinking base. Markup and margin divide by different numbers. A nutrition label is accurate per hundred grams and misleading per serving, because somebody chose the serving.

So the writing here tends to spend as long on the caveat as on the formula. What BMI actually measures and what CAGR actually tells you are both about numbers that are quoted far outside the range where they mean anything, and how much to tip by country is about a calculation whose correct answer is entirely social.

Frequently asked questions

What is the difference between markup and margin?

Markup is profit as a percentage of what the item cost you; margin is profit as a percentage of what you sold it for. An item bought at 100 and sold at 150 carries a 50 percent markup and a 33 percent margin. Confusing them means consistently underpricing, and the error grows with the percentage.

Does compounding frequency make much difference?

It matters more the longer the term runs. At 10 percent on 10,000 for twenty years, annual compounding gives about 67,275 and monthly gives about 73,281. The rate is identical; the difference is purely how often interest starts earning interest of its own.

Is BMI a useful measure of health?

For comparing populations it is useful and cheap. For an individual it is weak, because it is only weight divided by height squared and cannot distinguish muscle from fat or account for frame and body composition. Athletes routinely register as overweight by a measure that was never designed to assess one person.