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Forbes made a blunder – Bill Gates is at least sixth… not 31stImagine, what a surprise it would be if the audience should find out that the winner of a beauty contest had been judged simply through weighing ...
Eugene
Potemkin
One of the most established American magazines,
Forbes,
has published
its list of the biggest companies in terms of international economy. The
list represents 2000 firms in 27 economical sectors from 51 countries. There are
also 12 Russian companies on the list.
This rating differs greatly from those in the Financial Times or Fortune, as is based not on one criterion but on four: income, profit, assets, and capitalization. Companies received their ranks on each criterion and were then estimated on the final sum of all received ranks. Steve Kichen, the assistant to managing editor of the Journal, believes this to be the fairest comparison method. Despite having sincere respect for Forbes and the statistical work done, I can’t help noting shortcomings of this method (summarizing several ranks’ figures to one final tally). Summarizing or averaging of ranks based on different criteria is perhaps the simplest but surely not the fairest method for such ranking. Let us consider a purely mathematical problem in easy terms. First of all we must make sure that all four criteria are of the same value for our research. Imagine that you want to find the heaviest man but have only one thing at your disposal – a ledge. You know that the bigger the size of some parts of body, the heavier the person himself, so you have measured the height, feet size, the length of the little finger and the distance between ears of 2000 people. Now you have 4 measure lists. Then you sum up the results. What are the conclusions? The heaviest person is dwarf with long fingers, big head, and oversized feet. Surprising, isn’t it? But it is he, who is the first by three of four criteria (sure his height played false with him). We proceed further. I am not an economist so this might be right: all the four criteria in case with companies’ ranking are of the same value. Thus all our parameters are equal. Let us consider the following situation: one of the companies is the leader on three criteria, but is only 100th on the fourth one. As we can see the same situation is with Microsoft on this list. A company, leading in one sphere, may easily be a looser in some other. In this case such a company gets 103 fine points. If so, then by summarizing this company will look weaker than a company, which is the second on three criteria and 96th on one criterion. Is that fair? I guess not. The above-mentioned example must suffice for proving the fact, that Forbes’ ranking based on summarizing of the four criteria is open to objection. Now, dear reader, let us try to find some other easy way. There a lot of them but not all of them are good enough. If we should be looking for a good big wardrobe, multiplying the width, depth and height of the wardrobe would be justified. The same is justified ranking of companies, but in this case we will be looking for a company with the least ranking product. So, the easiest method is multiplying of ranks. How does it work in our example? The first company will have the following result 1*1*1*100=100. The second one to walk over the first could have the following ranks 2 * 2 * 2 * 12. Don’t you think, dear reader, this is just fair? In this case the second company gives up the first place on three criteria but compensates for it through 88 points on the fourth criterion. It seems that multiplying is a much better solution for finding the biggest company than the summarizing of ranks suggested by Forbes.
However our method has its faults as well. Let us consider the following situation. By some reasons one company has completely screwed up by one criterion or just hides its real indexes. Apparently it gets the 2000th place on this criterion. Consequently this company leading on other three criteria will be left behind by a company, which is only 7th on all criteria. I believe this is wrong. The right decision can be found in the theory of chances. By answering to the question: what are the chances for us to find the biggest company if we take at random one of the criteria and find out that A is higher than B. This is right only in case when all the parameters are of the same value. Otherwise we have a dwarf with oversized feet and big head as the heaviest person. However such great trouble as observation of 2000 world leading companies, leaving alone the companies themselves, which are following the publications of one of the most authoritative magazines in the world with great attention, deserves that the achieved results were handled to the best advantage. One of the possible solutions is presentation of the rating results in accordance with one parameter in the form of matrix of paired comparisons and computation of the companies’ rating. There are lots of methods of computation of the rating based on the matrix. In this case I’ve used e-rating, which is successfully applied to the analysis of the sport achievements. But is it so difficult to compare the competition of the biggest companies to the sport competition? The results of such computation method of the rating of the largest companies of the world are presented below.
It is interesting who is underestimated by Forbes, that uses in its rating the simplest method of summarizing of the rating in comparison with e-rating. The easiest solution to take the difference of ranks in the first and the second ranking is impropriate. Indeed, if we put a company that stands in the first ranking on the 10 place on the first place in the second ranking, because of the difference in ranking we omit nine steps. Following this logic we re-estimate the rank of the company in the same way putting it from 1010 place to 1000. It goes without saying that these are completely different transferences. It is unlikely that someone would be upset removing from 1010 place to 1000 and back. But everybody would notice the motion within the top 10. What is the solution for this problem? Lets follow the patch of least effort, that we rejected at the beginning of the present article. To take into consideration the value of the transference according to the rate of the transferable companies let us just resolve the difference of the ranks on their sum. The reader might find some weak points in this solution. Well, nobody possesses verity. So here are the names of the “offended”
The most “offended” Cheung Kong Hong (Kong/China Diversified financials) is estimated by Forbes as 542 company of the world. . I t seems that change of the rate of such a company with the top 100 wouldn’t have aroused interest neither among adherents nor among contenders. But a leap up for 300 steps does mean something. The second “offended” company- Wells Fargo (United States Banking). From 25-th place it lifts to 12-th. One must admit that it is an essential movement. The third “offended” – the famous bank of America (United States Banking).It is unlikely that its transference from 6 to third place would leave people, who are interested in the rating of the largest companies of the world, indifferent. I guess that the reader will be interested in other movements in the world table of ranks, at least in the changes in the top 10 of the “offended” leaders of the world economics. If there are undeservingly “offended” by Forbes then there must be undeservingly praised companies. Let us see who is fostered by Forbes.
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