Many years ago, a friend commented that “hair grow faster immediately after they are cut and their growth rate reduces as they grow longer”.
While it may seem funny, this argument looks convincing when taken at face value. This is because the growth is being measured in percent, rather than in absolute terms. Using this example, the question to ask is ‘does measuring growth in percent terms make sense after a certain threshold’?
If we consider the length of hair to be 10 cm and the rate of growth is 2 cm per day, the growth rate on day 1 is 20%. On day 2, the rate is XXX and so on. As is clear from the graph, the rate of growth – when measured in percent – reduces each day. It is not that hair is growing at lesser rate, but each day, we are measuring it against a bigger target.
The same can be said for business and the reporting of its growth numbers. Many a time, I have seen the Mac growth being compared with Windows growth. So Mac growth is stated at 100%, while Windows growth is stated at 1%. While these figures look great, it paints a different picture when we look at the absolute numbers.
The same used to be true with Intel when compared to Mac. Macs were showing 100% and more growth, while Intel was showing 1% growth a few
years ago, when Macs were not on Intel platform. While these figures lead us to believe that the Mac was beating Intel, the absolute numbers told a different story. For a company that was shipping 100K machines each year, moving up to ship 200K machines, though not an easy task, is relatively easier, when compared to a company that ships 1 billion chips each year, having to ship 2 billion chips each year.
Moral of the story – a picture can be painted in many ways using the same set of numbers. Neither of the pictures painted is completely accurate or completely inaccurate. It depends on the interpretation and the angle we are looking from.