Why and how Mathematics is important in Business

Why and how Mathematics is important in Business

Mathematics is a very important subject and the knowledge of math enhances a person’s reasoning, problem-solving skills, and their ability to think.  Math is used in everyday life.  Basic and detailed knowledge of math is needed in jobs such as business consultancy, computer consultancy, airline pilots, company directors and a myriad of other jobs. 

In business, math plays an important role.  Business mathematics is used by commercial enterprises to record and manage day-to-day operations.  Elementary arithmetic (fractions and decimals and percentages), elementary algebra, statistics and probability are typically used in commerce.  The use of advanced mathematics such as calculus, matrix algebra and linear programming can make business management more effective in some cases.

How does math help business consultants and directors?  Business is about selling a product or service to make profit.  All the transactions done in business have to be recorded in the company accounts and often involve huge sums of money.  One needs to be able to estimate the effect of changing numbers in the accounts when figuring out the expected performance of the company for the next fiscal year.  Businesses also rely heavily on percentages; anyone in sales will need to be quick on mental arithmetic, approximation and in working out percentages.  For instance, the more percentage discount you give a customer when you sell them a product, the les profit your company will make (and conversely the sales person will be paid less as well).  So it pays to know your math.

Business Mathematics includes math courses taken an undergraduate level by business students.  They are less difficult and do not get in depth as other math courses geared for people majoring in mathematics or science fields.  The two most common math classes for business students are Business Calculus and Business Statistics.  Real-life problems from the business world are usually used as examples in these courses. Matrix algebra, Linear programming and probability theory are three other math subjects covered in business math. 

Commercial or consumer math is another business math subject.  It includes a group of practical subjects applied in commerce and in everyday life.  Practical applications such as checking accounts, price discounts, markups and markdowns, payroll calculations, simple and compound interests, consumer and business credit, and mortgages are covered.  The emphasis on these courses is on computational skills and their practical application, with the latter predominating.  “For example, while computational formulas are covered in the material on interest and mortgages, the use of prepared tables based on those formulas is also presented and emphasized. Mathematics can provide powerful support for business decisions. In their later business careers, this will motivate them to consult with mathematicians and employ effective quantitative methods. (Role of mathematics in business.  http://www.scribd.com/doc/12243159/Role-of-Mathematics-in-Business , retrieved 4 April, 2011.)”

The world is moving into a new age of numbers. Partnerships between mathematicians and computer scientists are bulling into whole new domains of business and imposing the efficiencies of math. This has happened before. In past decades, the marriage of higher math and computer modeling transformed science and engineering. Quants turned finance upside down a generation ago. And data miners plucked useful nuggets from vast consumer and business databases. But just look at where the mathematicians are now. They’re helping to map out advertising campaigns, they’re changing the nature of research in newsrooms and in biology labs and they’re enabling marketers to forge new one-on-one relationships with customers. As this occurs, more of the economy falls into the realm of numbers. Says James R. Schatz, chief of the mathematics research group at the National Security Agency: “There has never been a better time to be a mathematician.

The rise of mathematics is heating up the job market for luminary quants, especially at the Internet powerhouses where new math grads land with six-figure salaries and rich stock deals. Tom Leighton, an entrepreneur and applied math professor at Massachusetts Institute of Technology, says: “All of my students have standing offers at Yahoo! (YAHOO ) and Google (GOOG ).” Top mathematicians are becoming the new global elite. It’s a force of barely 5,000, by some guesstimates, but every bit as powerful as the armies of Harvard University MBAs who shook up corner suites a generation ago.

Math entrepreneurs, meanwhile, are raking in bonanzas. Fifteen months ago, Neal Goldman of Inform sold his previous math-based startup, a financial analysis company called CapitalIQ, for 5 million to Standard & Poor’s (MHP ) (like BusinessWeek, a division of The McGraw-Hill Companies). And last May two brothers, Amit and Balraj Singh, sold Peribit Networks Inc — a company that developed algorithms for genetic research — to Juniper Networks (JNPR ) for 7 million. (Math will rock your world.  http://www.businessweek.com/magazine/content/06_04/b3968001.htm , retrieved 4 April, 2011.)”

This industrial metamorphosis also has a dark side. The power of mathematicians to make judgment on personal data and to model the behavior of individuals will inevitably continue to intrude into our privacy. Merchants will be in a position to track many of our most intimate purchases, and employers will be able to rank us not only by productivity, but by wasted minutes. What’s more, the rise of math can contribute to a sense that individuals are powerless, a foreboding that mathematics, from our credit rating to our genomic map, spells out our destiny.

Mathematicians need to wrestle with human quirks and mysteries, just as managers and entrepreneurs must struggle with mathematics.  Midcareer managers can delegate the majority of this work to their staff but even they still must have the basic comprehension of math to question the assumptions behind the numbers and to spot opportunities.  It is easy for people to be fooled by bogus arguments through the use of data and graphs.  And as more of the world’s information is shared in mathematics, the realm of numbers becomes an even larger meeting ground.  The role of mathematics in business is indeed a very important one.  Know your math.

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