When 3 plus 4 equals more than 7

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When 3 plus 4 equals more than 7

There is a four-word Chinese phrase, “jo-sam-mo-sa,” which is often quoted in lectures on financial policy. It is the comparison between “three in the morning and four in the evening” and “four in the morning and three in the evening.”

A man in the Song Dynasty during the Warring States Period in China once told his monkeys, “From now I will reduce the number of acorns I give you to three in the morning and four in the evening.” Hearing this, the monkeys got fiercely upset. So the man changed the offer and said, “Fine, I will give you four in the morning and three in the evening.” The monkeys welcomed the change.

Jo-sam-mo-sa means, “A smart man can cheat and ridicule a fool with his cunning wit.”

It is manifest that the sum of the acorns is seven whether it is “three in the morning and four in the evening” or vice versa. Nevertheless, monkeys are foolish enough to pursue more up front with less later.

The Western version of the same story concludes that the monkeys are “smart” on the basis of financial theory. That is, considering the time value of money, four in the morning and three in the evening is more profitable than vice versa.

For example, there is a clear difference between receiving 400 million won ($332,000) today and 300 million a year later and vice versa. If an annual interest rate of 10 percent is applied, the present value of the first payment plan amounts to about 672.7 million won, while the latter is about 663.6 million only.

Of course, smart monkeys will choose the former plan that will pay 9.09 million won more.

As the time span between morning and evening is less than a day and only seven acorns are at stake, people might have slighted the differences.

However, it is difficult to say that the two-dimensional evaluation of the people in the old days, who ridiculed monkeys for over 2,000 years, was right.

Perhaps the monkeys could be praised as smart ones that knew about the healthy dietary habit of eating more in the morning to prepare for activities during the day and eating less before going to sleep in the evening.

In the year since the outbreak of the global financial crisis, there have been many systems and practices that have been challenged by new ones, as was the case with the original story behind jo-sam-mo-sa.

One of them is the “windfall” bonus system of the financial world. The magic of competitiveness is now the main culprit that has brought about the crisis.

Ahead of the G-20 summit meeting scheduled for Thursday in Pittsburgh, the United States, the heads of state emphasize the necessity to regulate the bonus system.

It is reported that the financial community is trying to persuade politicians with the argument that there will be a brain drain in the financial sector if bonuses are limited by the government.

While their argument does not seem very persuasive, it might have some merit when looked at from another angle, just like the monkeys looked wise when Westerners reinterpreted the jo-sam-mo-sa story.

The writer is a deputy business news editor of the JoongAng Ilbo.

By Hoh Kui-seek
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