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The Incomparables

Horace Dediu, 7/17/2016

In a recent tweet I noted that the revenues of Apple’s Watch during the first 12 months on the market were higher than the revenues of Tesla during its 9th year of operation as a carmaker. Tesla revenues in 2015 were $4 billion/yr and my 1st year (mostly 2015) Apple Watch estimate is $6 billion/yr. I thought it was an interesting comparison to note in light of the enthusiasm around Tesla and its valuation ($32 billion market capitalization) and the despondency around Apple and its watch. Maybe these perceptions are wrong.

But maybe the perceptions are right. There are many ways to rationalize the sentiments that exist and one can argue that there is no mis-pricing of assets. Tesla could be changing the world and Apple’s Watch could be just another fleeting amusement. This would be an interesting discussion. I was hoping to spur such a discussion.

But what I learned with the tweet is something else. I did not learn that there are multiple ways of valuing the Tesla or that there is something under-appreciated about Apple. I did not hear any refutation on my methodology for estimating sales of Watch or inquiries around my assumptions for Telsa’s growth.

The overwhelming response was that I was comparing apples and oranges. That these two quantities should not be compared and to do so would be unfair.

I was completely disoriented by this response.

Why should they not be compared? Is there a law of appropriate comparisons that I’m not aware of? Do I need to develop a sense of “fairness” of comparisons?

I seek comparisons that are odd because they point out anomalies. Anomalies are the seeds of discovery. They are the things which seem strange. They are the things which make us say “That’s funny” and yet we don’t laugh. They are the things which compel us to dig further.

Comparing the incomparable has been a lifelong pursuit for me. Throughout my career, I came across many incomparables: A personal computer is not comparable to a mainframe. A mobile phone is not comparable to fixed line phone. A phone is not comparable to a personal computer. A car is not comparable to an app. An iPad is not comparable to a TV. A bank is not software. Money is not an algorithm. Schools are not playgrounds. Health maintenance is not health care.

These are unfair comparisons: The prices are different. The people using them are different. The context where they are used/bought is different. Apples and oranges.

And yet you know what happened. And you know what will happen.

Juxtaposing things which don’t belong together is experimenting with the invisible. You are running experiments. You can obtain a reduction to an absurdity and thus rule out the validity of one or both assertions. You can imagine what is invisible because you’re re-configuring categories. You can then make the breakthrough.

It all begins with comparing the incomparable.

Most importantly however, the idea that one should not make unfair comparisons is an instance of a more powerful idea: That the enemy of any theory isn’t another theory. Indeed, alternate theories, even refutations are its friends. No, the enemy of any theory is the idea that there can be no theory.

There are many who insist that no theory for complex (eg. social) subjects can ever exist. Causal explanations cannot exist when systems are complex. Correlation, not causation, is all you can hope for. Since causation is impossible, any hypothesis must be discarded without examination. We should stop looking for a cause. We must discard the anomalies. We must not compare the incomparable.

Well, we will do it anyway.