Apples and Oranges

by Sydney P. Levine, President, Shipping Intelligence, Inc., New York, NY

A recent article in the March Lloyds Shipping Economist reminded me that a common error in analysis – of almost anything – is comparing two things that are not comparable. Comparing “apples and oranges,” like dividing by zero, can lead to strange and wonderful conclusions that may be interesting, but may also be far from correct.

The article, How To Recognize True Value For Money by Thomas Mayr, is concerned with the value of secondhand ships, and, I suspect, is motivated by the overheated tanker resale market.

There are several errors of the “apples and oranges” type in the article. The first is that the author treats the entire tanker (or bulker) fleet as a homogeneous whole, neglecting the fundamental division of the fleet into industrial carriers and tramp ships. To an industrial carrier, a ship is one of a number of inputs to a complex business process. To a tramp owner, a ship is the business. Industrial carriers and tramp owners have different hopes and expectations about the freight and resale markets, and they think and act differently in the same situation. For example, does anyone really believe that the industrial carriers and tramp owners feel the same way about freight rates? Tramp owners, naturally, prefer high rates – the higher the better; the industrial carriers prefer rates that are high enough to guarantee the continuance of the tramp fleet, but no higher.

This is only an excerpt of Apples and Oranges

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