Mark Gritter (markgritter) wrote,
Mark Gritter

Proofiness at Work

I wish I could give Charles Siefe's book Proofiness a good recommendation, but it's mainly stuff I've heard before. As a collection of anecdotes about math misuse it's a decent read but I felt it really lacked much depth (and as a call to action it was lacking too.) The chapter on the Census was more interesting than most, featuring a Supreme Court outlawing the application of statistical methods, more or less on the basis that they hadn't been invented at the time of the Founders.

I happened to be reading this book on the day the Census results were announced, so I was more than usually skeptical when greeted with a front-page headline of the U.S. population down to nine significant figures, far in excess of the measurement error for such a task...

But, yesterday's paper had a great example too. Wall Street Journal columnist Bret Stephens waxes rhapsodic about the United States' "self-correcting society" and how doomed China is because they can never innovate. The column makes a few questionable assertions, but the part that set me off is the following:

As for the United States, Americans understand that innovation is inherently serendipitous. That was true of Facebook, just as it was true of Apple, Google, and Microsoft. These four companies alone have a combined market valuation that approaches $700 billion --- equivalent to 12 percent of China's GDP.

This is not an apt comparison. They're not even the same units! One is dollars, the other is dollars per year.

A Bloomberg article from July 2009 puts Chinese market capitalization at $3.2 trillion. I'm not sure whether this number counts Chinese companies listed on U.S. exchanges. Stephens' innovative four companies are about 22% of that (or about 6% of the U.S. market cap.) So he could have made the same point using the correct math, and gotten an even better number!

But, the better comparison, I think, is revenue vs. GDP. Stock market prices are notoriously bubble-y, and don't include the value of private companies. Quick and dirty numbers:
* Microsoft, year ending June 30, 2010: $62B
* Google, year ending Dec 31, 2009: $23B
* Apple, year ending Sept 25, 2010: $65B
* Facebook, 2009 revenue: $800M

One of these things is not like the other... let's be very generous and round up to $200B. That's just 3.4% of China's $5.7 trillion GDP for 2010. (And just 1.4% of the U.S. GDP)

P.S. how impressive is that 3.4% compared to China's 9% annual GDP growth over the past decade?
Tags: economics, math
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