Implied Dissent

Tuesday, August 22, 2006

Denominators and the Unseen

I think I just figured out the Red Sox's problem. Opponent's strikeouts divided by our home runs is 5.2. I mean, that's terrible. What? Those numbers have almost nothing to do with eachother? Like a company's retirees divided by its current workers? But Gladwell constructed an entire column around this ratio to explain GM's problems! Would current revenues be a better number to compare with the retirees it supports? That's crazy talk!

On a related idea, a lot of people claim that GM (and other US companies) are at a competitive disadvantage because they have to pay for employee benefits while foreign companies don't because their governments pay the costs. This is wrong on a few levels. First, as Jane Galtpoints out, this is often factually incorrect. Second, as she doesn't seem to recognize, even where it's factually true, the analysis is wrong. GM's competitors still have to pay for employee benefits, it just happens indirectly, via higher taxes and such. Costs will almost certainly turn out to be the same in the end, with a small margin of error (and ignoring the different efficiencies of different systems).


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