Well, it seems to make sense…

But it does not!

At first brush, you see a compelling argument presented well and you would think that it makes a lot of sense. Stop and think even for a moment and you will notice the flaws in the assumptions that are made to craft the argument.

I have picked two examples to present. The examples will lay out the argument and then I will quickly identify the holes in the assumptions behind those arguments.

Example 1: Comparison

One of the recent feature in BusinesInsider was a “chart of the day” related to amount of time spent by people on three websites – Google, Yahoo and Facebook. Here is the chart for your quick reference.

The claim is that Facebook is catching up and in fact recently surpassed Google on this metric.

And, what’s the metric again?

Total time spent on the website.

Think about the comparison for a second. You will quickly notice that the metric chosen does not make sense even if the numbers are correct ( which are not as I will prove in the next one minute )

First, Google is still the leader in the search. If Google continue to be good, people should not spend a lot of time on Google. They should come, find what they want and go there!!!

Second, what Google sites is the chart talking about? The ones that are Google branded? Probably. But what about all those sites that are making money using Google Adsense. They have extended a part of their real estate to Google ( at no big cost to Google ). If you add the time spent by people on all the sites where AdSense is integrated, it would be gigantic.

Example 2: Conclusion

Sumukh was doing some research on Apple and he asked me if I knew about the third co-founder of Apple. I didn’t. I learned that there was indeed a third co-founder of Apple – Ronald Wayne. San Jose Mercury News carried an article recently on Wayne and here is an excerpt from that article:

Wayne designed the company’s original logo, wrote the manual for the Apple I computer, and drafted the fledgling company’s partnership agreement.

That agreement gave him a 10 percent ownership stake in Apple, a position that would be worth about $22 billion today if Wayne had held onto it.

Now think about the statement for a second. While 10% of Apple today would be more than $22 billion ( around $24 billion as of this date ) it would not have been the right number for Wayne by any stretch. Why? Simply because owning 10% of the company when it was formed ( 1976 ) does not guarantee owning the same percentage 34 years later. Founders know that their position gets diluted. 34 years later, I would be surprised if he owned even 1% of the company. At 1% it would still be a healthy $2.4 billion but not $22 billion as the article suggests.

And the point is: However compelling the argument is, check the underlying assumptions. It is worth spending those few extra minutes!!!