Bailout

Adventures in information design, WSJ edition

By Felix Salmon

Last week, Justin Lahart presented an interesting thesis in the WSJ:

For American business, it has become a two-track economy.

While global players like industrial conglomerate 3M Co. and burger giant McDonald’s Corp. are getting ever-bigger boosts from their operations in fast-growing economies like China and Brazil, companies dependent on the U.S. market are hemmed in by recession-scarred consumers who are hesitant to spend.

The accompanying chart was one of the most incomprehensible things I’ve ever seen on newsprint:

I doubt that one reader in 20 actually understood, on looking at this chart, the information it was ostensibly trying to get across.

There are three axes here, and two colors, and all manner of confusion. It took me a while to work it out, but I got there in the end: the height of the bars represents a healthy year-on-year increase in projected revenues. They increase in volume the further that number is from zero, so that the smallest bars aren’t the companies with falling revenues, but rather the companies with flat revenues. That’s silly. And because of the 3D effect, the biggest bars have much more volume than the smallest ones, as though the product of the two variables is somehow important. (It isn’t.)

The amount of color in a bar represents the proportion of those revenues that come from outside the US. The main axis we see when we look at the chart — the one marked with a bold black line — doesn’t actually represent anything at all. Oh, and the chart claims to be “an analysis of the 30 companies in the Dow”, but it only features ten stocks.

The weird thing is that Lahart’s thesis would come out loud and clear from a simple scatter chart. Put the change in revenue on one axis, put the percentage of revenue coming from overseas on the other axis, and look for two clusters: one at the top right, with the companies active in fast-growing countries, and one at the bottom left, with the companies hemmed in by recession-scarred consumers.

It took me a while, but I eventually got my hands on the data that Lahart was using. So I decided to plot that scatter chart, to see what it looked like:

I’m not a professional designer, and this could certainly be a lot prettier, especially if I could get my fonts to work and if I remembered to get rid of those silly decimal places on the y-axis. Still, the message of this chart is much clearer, I think, than that of the one in the WSJ. It does show a clear correlation between revenue growth and foreign sales, but I can’t see much of a case that American businesses have diverged onto one of two tracks.

All of my numbers are exactly the same as the ones that the WSJ used — even the 0% of foreign sales for Verizon, which resulted in a correction. (Verizon claims it gets some revenue abroad, although it’s less than 10%.) So I’m puzzled why the WSJ didn’t include Caterpillar as one of the “five companies with largest share of overseas revenue”: it’s up there in fourth place, with 67%, higher than both Hewlett-Packard and McDonald’s.

So, what really happened here? Did Lahart know that a clear chart would somewhat undercut his headline talking about a “two-track economy”, and therefore contrive something messier instead? Or was there just an overenthusiastic new kid at the WSJ who hasn’t read his Tufte? Either way, it would be great to see a stronger emphasis on clear information design at the WSJ. Financial publications have an especial responsibility to do this kind of thing well, given the highly-quantitative nature of what they’re writing about. The NYT has fantastic information designers; let’s hope the WSJ tries hard to compete on that front.

Full post as published by Macroprudential on September 13, 2010 (boomark / email).