Should you know the details? Of course not. You should know which of the items on the list involve wrong comparisons.
Hint: cannot compare stocks and flows. Why? Here is an example: you are going on a trip. The distance you will be driving is 90km. You are driving on a highway and doing 110. What is bigger: the distance you are driving or the speed with which you are driving? (see the hint at the end of this post).
The value (market cap) of Apple is a stock; many things listed on this website are flows. For example:
- US stock market in 1977 - stock, so this is ok
- annual prescription drug sales - flow. Wrong
- 300 years of Irish beer consumption - that is a difficult one. The way I would read it is: the amount of beer the Irish drank between 1714 and 2014, That is a stock, OK. (On the other hand, if the question was: it is worth more than the beer Irish drink over a period of 300 years, that would be a flow (per 300 years) - flow. Wrong)
- Construction of interstate highways - stock,OK
- Worldwide lottery sales - flow. Wrong
- Global coffee industry There are two comparisons here:
The global coffee industry employ some 25 million people and generates $70 billion dollars a year. With a market cap of over $400 billion, Apple is worth more than 5 years of the coffee industry. In addition, Apple’s $46 billion in revenue in the last quarter eclipses the United States coffee industry value, estimated at $19 billion.
The first one compares Apple market cap: $400 bln, which is a stock, with 5 years of coffee sales, which is a flow. Wrong
The second compares Apple revenue - a flow, with the US coffee industry value. If this means the value of coffee sales, it is a flow so the comparison is ok. If that means the value of coffee companies in the US, that is a stock and the comparison is wrong.
The problems are two:
- the one you should avoid: mixing up stock and flows
- imprecise language. When you are driving and doing 110, you are driving 110 km/hour.
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