“It’s a bit like someone saying ‘My house is worth more than your annual salary so I am better off than you,'” Bikhchandani wrote on social media platform X, dismantling what he called “the fallacy of the inapt analogy.”
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The post was triggered by a tweet claiming Google had surpassed India in size, pointing to Alphabet’s market cap of roughly $4 trillion against India’s GDP of approximately the same figure. The comparison went wide. It was also, according to Bikhchandani, fundamentally wrong.The core of his argument is an Economics 101 distinction that got lost somewhere between the retweets. GDP is a flow variable as it measures national income generated over a period of time. Market capitalisation is a stock variable, for it is the aggregate value of all shares of a company at a given moment. Comparing the two, he says flatly, is apples and oranges.
If you want a genuine like-for-like, Bikhchandani argues, compare Google’s revenue to India’s GDP. Google’s revenue stands at $400 billion, a fraction of its $4 trillion market cap, and a number that reframes the entire debate.
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“If you want to compare Google to India, then compare Google’s revenue to India’s national income. Google’s revenue is USD 400 bill. Its market cap is roughly 10x of that, which is approx. USD 4 trillion. If countries could be listed and have a market cap then applying the same multiple India’s market cap would be USD 40 trillion around 10x of it’s GDP,” he said.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)