In an earlier post we proposed that, in addition to the core associate skills, a business lawyer should be good at mental math, should be able to build basic financial models, and should be good at using tables and formulae. In this post we will look a little more closely at the first of those skills.
First: here are three reasons why you should become very good at doing basic calculations in your head:
The first is comprehension. Business runs on numbers, and you won't be able to follow commercial discussions unless you are able to keep up with the math. Now, to be honest, clients aren't necessarily "doing math" - they are likely navigating their numerical world with the help of a few key ratios, rates and rules of thumb that are standard for their industry. But as a newcomer to that industry, there's no way that you have those intuitions. And so you need to be able to actually do some basic calculations in real time.
A second reason is speed and accuracy, especially when it comes to drafting. Silly transcription errors, for example, are easier to catch if you just know without thinking too hard, that a number is impossibly high or low. Being able to sense check numbers as you go will allow you to proceed with more confidence, and may spare you some embarrassment.
The third reason is more aspirational. Having good core quantitative abilities will allow you to think rigorously and creatively about business. As you gain more experience, and you hopefully will be increasingly responsible for advising on business matters, rather than just solving specific technical queries about the law. That means generating ideas and opportunities, shaping commercial strategies and coming up with creative solutions to financial and operational issues as well as legal ones. Mastering the numbers gives you a lens for doing so with rigour, speed and confidence.
So what constitutes basic commercial math? The good news is that none of the above scenarios require differential equations or matrix methods. I am talking about basic addition, subtraction, multiplication and division, albeit with a couple of business-specific hacks.
Skill 1: Multiplying and dividing by 10, 100 and 1,000
You will find yourself drafting contracts specifying anything from the acceptable concentration of chemical impurities (a few parts per million), to the size of a multinational bank's balance sheet (billions). The zeroes, whether they come before or after the decimal point or comma, are very, very important.
The first step is to understand what the names of the numbers are, and how many zeroes are involved. Here's a handy cheat sheet. The second step is to add and subtract zeroes as required. It seems trivial, even insulting, for me to mention this but I see people stumble often enough that it's worth pointing out.
Skill 2: Multiplying and dividing by 12 and 30
Why? So you can take a monthly rate and understand what the annual expense is. So you can take a monthly cost, and break it down into a daily one. (There are other key multipliers and divisors, but you get the idea.)
Skill 3: Be able to move quickly between fractions and percentages
Memorize the following:
| Fraction | Percentage |
|---|---|
| 1/3 | 33% |
| 1/4 | 25% |
| 1/5 | 20% |
| 1/6 | 16% |
| 1/7 | 14% |
| 1/8 | 12.5% |
| 1/9 | 11% |
Skill 4: Make sensible approximations
Practice rounding up and down to make numbers easier to handle. Some examples:
- 197 + 205 is sort of like adding 200 and 200. The answer will therefore be about 400. (The actual answer is 402.)
- 3,428 times 12 is sort of like 3,500 times 12. And 3,500 times 12 is halfway between 3,000 times 12 (which is 36,000), and 4,000 times 12 (which is 48,000), so probably a bit less than 42,000. (The actual answer is 41,136).
OK, but how do I get there?
Practice. Practice. Practice. There are plenty of resources out there, many of them free. You may need to push yourself at first while learning the various techniques (in my case, I was studying for the GMAT) but once the techniques are embedded, it's a question of time. One helpful habit to cultivate is, when confronted with any kind of math, just try it in in your head first before reaching for the calculator. This will yield huge benefits in the long run.