Companies are More Efficient Than Nations
In an insight that is probably mind-numbingly obvious to any economist, I just realized how much more efficient a company is, in terms of revenue over headcount, than a nation, even like the United States, is. Take Google, for example. Their 2004 annual revenue was $3.19 billion. They have 5680 employees, according to Yahoo Finance. So Google’s revenue / headcount is $561,619.72. Wow.
The GDP (maybe there is a better metric comparable to GDP?) of the U.S . is $11,750,000,000,000 (I left the zeroes for effect). The population of the US at last count was 295,734,134. Revenue / headcount here is $98.88. Double wow.
October 3rd, 2006 at 3:09 pm
This is an interesting stat.
Makes me think of Jacques Ellul’s argument in The Technological Society—efficiency is what’s wrong with the (human) system.
October 3rd, 2006 at 4:29 pm
Especially when you define revenue as your metric.
It does make me wonder how so much economic growth, in the form of produced revenue, can average out to so little per person.
October 3rd, 2006 at 5:31 pm
Yes, interesting stat. What’s the conclusion? Is this a good thing or a bad thing? Now that you have me thinking, I suppose it isn’t an unexpected thing - not every member of a nation is contributing to the GSP/GDP.
So initially, like you, I thought “double wow” but now I’m supposing, “yeh, it is as it should be.”
What did you make of it?
October 3rd, 2006 at 6:01 pm
I don’t have enough of an econ background to say good, bad, or even if it’s as it should be.
Some assumptions can probably be drawn from it, of course, like that there is an incredible amount of wealth being generated by relatively few people, but we didn’t need this metric to tell us that. It also does highlight how even great efficiency can be easily diluted across a broad population.
October 4th, 2006 at 10:32 am
This is so interesting–it makes me think in a different way–like \”who are we serving?\” Where is our focus in our cultures? Can we distinguish business and economics from greater purpose, or does it all flow together? Does economic success and a stronger market and \”headcount\” equal happier citizens? Okay, sorry for all the questions.
Bear
October 5th, 2006 at 6:14 am
It sounds to me that some corporations are more efficient at generating wealth than others. No surprise there. Your example of Google is of a company that has HUGE revenue, but relatively low overhead in terms of capital (they don\’t manufacture physical objects, so they don\’t need large factories, inventories etc…) and they don\’t have large unions that require expensive pension plans and entitlement programs. Thus revenue over head-count is high. Compare this to a corporation like GM or Ford who has just those issues and you will see a different revenue to head count figure.
October 5th, 2006 at 9:33 am
Actually that doesn’t seem to be true, in the case of GM, at least.
GM
2005 Annual Revenue: $192,604,000,000
Employees: 335,000
Revenue per employee: $574,937.31
It’s actually higher than Google.
October 5th, 2006 at 12:35 pm
Whoa. That GM to Google stat seems much more telling than the other ones. It seems to deflate the notion that unionized labor is simply a drag on company revenue. I’m sure someone will argue that it cuts into profit and that profit is all that matters.
Which I’m sure it also does to GM.
But that’s because they’re not really concerned in business practices that benefit everyone, not just a few execs.
October 5th, 2006 at 1:01 pm
Correct - we are just talking about revenue.
GM Gross Profit: $21,571,000,000
Per head: $64,391
* They were actually $10M in the red for net earnings for 2005, largely due to lower revenue than previous years. This decreased their net earnings after interest and taxes, but I have a feeling that executive bonuses were calculated before this took place.
Google Gross Profit: $3,561,472,000
Per head: $627,019
Wow again. In terms of gross profit, at least, and for these two companies, Ron’s basic point was correct. Revenue is a different story, which is still, IMO, an extremely interesting statistic.
Now, how do you measure profit across a nation? Productivity? Standard of living? I don’t see metric similar to GDP… does anyone know?
October 6th, 2006 at 5:13 am
Ray, you are correct, Profit would be what I meant and a silly mistake.
As for a better metric than GDP, I\’m not sure there is one exactly.
I find it interesting that regardless of the huge trade deficits, we still have a net plus GDP.
One problem with GDP is that it probably doesn\’t do a good job of covering under the table deals either. I wonder how a country such as Russia\’s GDP would look if they could calculate all their underworld revenue, vs. the loss incurred due to theft and crime.
Also, another thing to keep in mind is that there is a certain percentage of Americans who do not participate in producing for the economy. Those who don\’t work because of disability, and children to name a couple. It\’s interesting to to realize that GDP is positive in the face of all net consumer-dependants who consume more resources then they return to the economy. This is a good sign.