Firms that burn $1B a year are sexy but statistically doomed
The Economist
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The statistics methodology here is terrible. Your prior is “companies that lose billions of dollars tend to go belly up.” Sure that’s true. But now you’re applying that logic to Amazon, Tesla and Uber. Amazon has been “losing billions of dollars” for over a decade. Despite its gross revenue increasing at a spectacular pace. Doesn’t that piece of information suggest that maybe it’s not correct to lump Amazon in with the rest of the losing pack? Especially when more than half the losers in your pack are energy companies which are categorically different business models from tech? You don’t need to be an expert in statistics to understand “apples to apples” comparisons.

Then you quote proposterous statistics around the fact that 8–33% yearly growth was only achieved by a 0.1% to 25% of American companies since the 1950s. Again doesn’t that set off any red flags? Lumping tech companies with agriculture companies and energy companies. Without any prior assumptions? Companies like Amazon and Facebook could easily achieve those targets (and they have!). Because it sounds like the article is suggesting that it’s closer to 0.1%…

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