In "The Red-Headed League," how are Watson and Holmes different in terms of their powers of observation?

Dr. Watson differs starkly from Sherlock Holmes in his powers of observation. At the beginning of "The Red-Headed League," Watson attempts to study Jabez Wilson carefully, "after the fashion of [his] companion." However, although he observes many details, like the man's clothing, watch chain, hair, and expression, he is unable to come away with any deduction other than that the man is an "average commonplace British tradesman." At the same time, Holmes is observing the man, and with relish he produces five deductions about the man's type of work, habits, social connections, and past travels. Taking a friendly jab at Watson, he states, "beyond the[se] obvious facts ... I can deduce nothing else."

When Watson and Holmes take a quick outing to Wilson's part of town, Watson makes an attempt to guess what Holmes is trying to observe. After Holmes has knocked on the door and spoken briefly with Mr. Wilson's assistant, Watson suggests Holmes knocked on the door merely as a ruse to see the man's face. But Holmes corrects him, telling him he was more interested in the man's knees. Watson does observe the fact that Holmes "beat upon the pavement" outside the house, but he draws no conclusions from the sound that results. Holmes, on the other hand, recognizes that the ground underneath them is solid and hypothesizes that the tunnel must therefore run the other way. As they round the corner, Watson observes the different quality of shops on the abutting street, noticing that they are "fine shops and stately business premises." Holmes, on the other hand, looks specifically at each shop, noting what type of business each is.

Watson is able to make observations, but he tends to focus on the larger picture rather than the small details. Hence he missed the tell-tale signs of snuff on Wilson's person, his Freemasonry pin, and his shiny right cuff. He didn't hear the nuances of sound when Holmes tapped, and he didn't notice that one of the buildings on the street behind Wilson's shop was a bank. Holmes is more observant of minutiae, and he also is able to make deductions based on his observations.

Watson is the first to realize these differences between himself and his friend. He describes it this way:

I trust that I am not more dense than my neighbours, but I was always oppressed with a sense of my own stupidity in my dealings with Sherlock Holmes. Here I had heard what he had heard, I had seen what he had seen, and yet from his words it was evident that he saw clearly not only what had happened but what was about to happen, while to me the whole business was still confused and grotesque.

Watson is the quintessential foil for Sherlock Holmes. By being less keenly observant and less able to form hypotheses and conclusions, he showcases the stellar abilities of the great detective.