She stood outside the Cafe of the MoMent. It was a pleasant, breezy place, with a spanking new sky-blue awning, and a Mesopotamian-theme decor. The sun was shining brightly, and when Mat Lomen came out, she was pleased to see him.

It wasn't long before they were down at Battery Park, embarking on a Circle Line tour of the island of Manhattan. The breeze off the water was a welcome relief.

"Why do I have this strange feeling?" she said. "It feels like I'm in two places at once. As though I'm seeing two things at once."

"That happens often to twins," he said. "They both have the same thought."

"But I'm not one, so that wouldn't be very interesting to me, now would it?" she said, taking out some some lipstick.

"This boat feature the latest advances," said Mat. "Not like that big old tub sitting out there," he said, and pointed off the starboard side, to a larger boat that was anchored, within sight of the Statue of Liberty. That old girl runs on coal; this one is diesel. She's got six-cylindered triple expansion engines, with a service speed of sixteen knots."

A waiter brought them hors d'oeuvres. "Good afternoon, Mr. Lomen, Sir. And a very pleasant good day to you too, Miss."

The tone of the waiter's address was not just one of deference to a regular (and well-paying) customer, she thought: it sounded more obsequious, as a worker might address a boss.

As if in answer to her thought, Mat took her by the arm and said, "Let me show you below."

On their way downstairs Lorelei Jamison, the prop girl from Diane's show, waved and winked. Diane waved back.

The boiler room was a deep, dark place, with a single porthole. Diane began to feel dizzy. At first she thought she might be seasick, but she then recognized it as the same feeling she'd had on the roof two nights before. The events of that evening came rushing back to her: her fear, and her fall. He pressed close to her, and she began to see a dizzying array of numbers dancing along the wall, like red embers burning into her will from the fire in the belly of the boat.

"From now on, for you," said Mat, speaking slowly and evenly, "the magic number is two. You will always compare things in twos. You are also doomed to see the world only in terms of numbers. You will no longer look at a rose and see a flower; you will see a business and a valuation. All that you do will be to serve me, and to increase my wealth."

He took her to the single porthole and wiped it clean.

See that ship out there? It belongs to the Grand Shipping Line. What do you see?

"I see that it's a larger company," she said.

"What else?"

"Our ship is staffed by a crew of 15; theirs has 30, yet both carry the same number of passengers. Ours has more fuel-efficient engines. And --"

"And what?"

"I see numbers. They look like this:"

      Statement Of Income
      --numbers in 000--
      Circle Grand
      Revenue       5,000 10,000
      Cost of Sales 1,000 4,000
      Gross profit  4,000 6,000

"Now, speak to me as though I'm someone thinking of buying the Circle Line. Persuade me to buy the Grand instead."

"Grand Shipping Lines has double the revenue, and 50% higher gross profit," she said confidently. Why would you even think of buying the smaller company? In addition, Grand is capitalized at two times sales, while Circle is capitalized at only one times sales."

He threw open the oil-burning stove's door, and black roaring shadows danced against the red-lit wall.

Why is Diane's sweetly-told story unpersuasive?

1) Gross margin is higher for the Circle Line, so it's a more efficiently run company

2) Grand is capitalized at two times sales, and that's why it is the better buy

3) Cost of Sales are unimportant for small companies

4) The Circle Line has Smaller Gross Profit Margins

Enter your selection in the field to the lower right, and get immediate feedback on the answer!

The answer is 1) Gross margin is higher for the Circle Line, an important point in its favor.

The Circle Line, one might say, runs a tighter ship. Its owners have invested much more wisely in newer boats, so it only takes half the number of the crew members to run them, and they have more fuel-efficient engines. Both of these -- the salaries and the fuel costs -- are cost savings that are reflected in the Cost of Sales.

Both these companies are in the same business, and do essentially the same thing. But one of them (Grand) has a market capitalization of two times sales, and the other (Circle) has a market cap of only one times sales. This means either that the big company is overvalued, or the smaller one is undervalued.

"Now I'm going to tell you who I am," Mat Lomen said. My name is Mo-Mental, and I am from a place you've never heard of, and a far away time. You've been split in two. You are now a twin -- or rather, half a human. You will not remember this except when I wish you to. You will sometimes experience things which you cannot explain. This is because your other half is experiencing them, and they are being transmitted to you. You will sometimes think yourself insane.

"And now," he continued. "I want you to smile for me."

And smile she did.

Note -- Bust The Tipsters will, from now on in its brand new, serialized form, appear five days a week, Monday through Friday!

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