As has already been said, it becomes false once you change the interpretation of the symbols. At the moment, we're adding two equivalent quantities of size 1 and finding that the result is one equivalent quantity of size 2.
If I instead chose to equate water droplets however, then when I add 2 water droplets, I get 1 water droplet. 1+1=1 in this instance. Of course this is useless however. In the usual system of maths we wouldn't equate the water droplet entity as being 1 quantity but rather the mass or volume of the water droplets.