>“Apple’s $1 trillion cap is equal to about 5 percent of the total gross domestic product of the United States in 2018,” said David Kass, professor of finance at the University of Maryland. “That puts this company in perspective.”
The comparison would be Apple net income (~$50B) vs. GDP, not market cap (which has units of USD) vs. GDP (which has units of USD per year).
Yeah, that was a real howler. I really hope he was somehow misquoted, because the comparison literally does the opposite of put something in perspective.
The comparison is still valid even if the units don't quite match. For example, if you flip the comparison you get "The US's total gross domestic product for 2018 is equal to 20 times the Apple's total market cap" which is a pretty reasonable statement. If you want to talk about Apple's net income per year, that is a totally different statistic.
When I worked at Apple in the mid-90's (BS before Steve) they lost $1B while I was there. I left and moved away because I didn't want to be there when it was sold or went out of business. Exactly one year later Steve came back. Oh well. Being there at the time not one person would have ever thought Apple could be viable much less worth $1T.
I went to grad school with a guy who, the day Apple stock hit $14 a share, decided to spend $500 of his grad student stipend to buy some. He figured Apple's cash on hand was worth more than $14 a share.
In the early 2000s I spent $1800 on a set of 18in chrome rims for an early 90s Accord, the wheels were almost half the value of the car. I use to do the calculations for if I had spent that money on AAPL instead of something so incredibly wasteful. It's easy to beat yourself up looking back in retrospect at dumb decisions.
Repeating (for the second time) a comment I made here in 2010: "Back in Macworld Boston 1996, I bought one share of Apple stock at $16 and got a framed commemorative stock certificate. It went into a box when I moved later that year and I completely forgot about until I found it a couple of weeks ago. It's worth almost $1,000 now!"
In the meanwhile, I sold off some of it, but a good chunk of it went into the downpayment for my house last year.
He was just quoting what the best market researchers had told him. We were given a LOT of market research papers with in-depth customer surveys where lots of people said, repeatedly, that they would "never pay money for a phone". If you think back to then, phones were "free" with a 2 year contract.
The idea of getting someone who was used to free to switch over to $600 overnight was, by any reasonable accounts, not going to happen. The market researchers did the safe thing and said that the status quo would continue.
Of course they were horribly wrong, but again, in the moment, trusting literally every expert in the field is not the worst position to take.
After all that I learned to be wary of market researchers.
He was right. Hardly anyone did buy a $600 phone. Apple had to reduce the price within 6 months, the next year Apple and AT&T did the standard subsidization model.
I think about such a large number this is and I really am not surprised. Apple has created a product that I use all throughout the day. I won’t leave home without it and I’ll drive back if I forget it. It’s so addictive that I have to take active steps against using it too often around my wife or kids.
Besides my family there are 5 possessions I get mildly depressed if I don't have. My iPhone, my Bragi dash, my Tesla, my house, my Bitcoin. Maybe 2/3 of these I can see being usurped by something better - I'll leave it to the reader to guess.
Is this supposed to be good news? I see lots of excitement in this thread, but isn't having a single company worth so much money a sign that we are, as a society, failing to create an economy that is truly competitive and fair?
We've already got banks that are too big to fail, soon we might have private companies that are humongous to the point of having the same status.
This is just some sort of milestone that's being published and discussed widely.
On the point of a single company being worth so much money, here's a different perspective. One of the many measures of how valuable a company's stock is, is the P/E ratio (price divided by earnings). It just says what multiple of the earnings a buyer of the stock is willing to pay. For Apple, this is now around 20. Take a look at another stock, say Amazon. As of now, it trades at a P/E multiple of 145 and has a market cap just shy of $1 trillion (where Apple is), at $895 billion. If Apple were treated the same as Amazon by the stock market, it would have a market cap of over $7.2 trillion today. If Amazon were treated the same as Apple, its market cap would have to be about $124 billion. Yet, this is where we are.
From the "too big to fail" angle, a simplistic analysis based on the above numbers alone would say that Amazon is a lot more leveraged and riskier than Apple is (the latter also has a huge cash pile of more than a couple of hundred billion dollars).
So the issue here is not that Apple has reached $1 trillion in valuation, because that's well deserved for a company that makes so much money. The issues exist everywhere in what companies do as larger contributions to society and how they're rewarded by the stock market.
Reminds me of the email Steve Jobs sent after Apple's market cap passed Dell:
> Team, it turned out that Michael Dell wasn't perfect at predicting the future. Based on today's stock market close, Apple is worth more than Dell. Stocks go up and down, and things may be different tomorrow, but I thought it was worth a moment of reflection today. Steve.
I dislike market cap as a measure of a company, as clearly a company can be wildly overvalued or undervalued. It is a not as if the "wisdom of crowds" has calculated the true value of a company.
During some of the pre-crash days early in the century, publications would trot out companies ranked by market cap, as if that really meant something. All I remember is various of these companies going under in the crash, despite their pre-crash valuation.
Revenue is a big deal. And profit too, although Amazon has shown you can keep that close to zero by reinvesting in growth, and that can work too.
How much is my desk worth on the market? However much somebody is willing to pay for it.
As the article states, Apple's "value" as a company comes from, in part, the fact that it's a good investment. Some may argue that "the fundamentals" of the balance sheets and whatnot doesn't justify a $1T valuation, but they would be missing the intangible parts of the business which cause it to be worth exactly that much.
I have to say this is an impressive achievement for Apple. Good on them. Although I am sad that an insane amount of wealth is being accrued by the few. The top 6 US companies (all of them tech) are worth more than 5 trillion. That's almost 30% of US GDP.
In the last few years there's been an unprecedented rise in wealth yet as both a nation, and a part of a global civilization, we are moving back in some aspects. Even locally, housing is a shit show in the valley and trillion dollar valuations makes it worse for the service class.
Extreme poverty in US is on the rise, tons of people are dying of preventable health conditions. Healthcare and education are getting more expensive. Global warming and pollution aren't really turning back.
I guess the only mega billionaire I respect is Bill Gates because he's truly putting his money where it matters. Funding all sorts of moon shots like clean nuclear energy, wiping malaria e.t.c
I'm not saying its Apple's job to fix it. It really isn't anyone's job to fix the big problems. BUT with the insane amount of cash the big tech cos have, that's hellova resources that could be invested towards bringing the entire human civilization forward to a peaceful, clean, educated and a healthy planet where everyone has the basics and we're not dying because of very preventable issues.
Today, 5% of the company is 50 bilion. Jobs became de facto chief after then-CEO Gil Amelio was ousted in July 1997 (wiki). So that would make an annualized AAPL gain of 17.3 percent, excluding dividends. Even more impressive.
As an OEM, Samsung has a much more vulnerable moat. What happens when Apple starts to make those components on their own? They already started doing it with processors. What about memory? They buy a ton of memory from Samsung.
Samsung's consumer electronics division isn't anywhere near as defensible as Apple's - they have little differentiation from other Android device makers which can be seen in the constantly fluctuating leaderboards of Android manufacturers (see Oppo and Huawei jumping 40% YoY).
If Samsung had their own OS + software technologies that differentiated them from any other electronics manufacturer, and offered their own services on top of that that made billions, and had a large developer base that was all-in on building software on their platform to further differentiate them from others, they might have a stronger business. As it stands, Samsung is just treading water in a zero sum smartphone business.
It's listed in the South Korean market so it's harder for small investors to access. Also, South Korean stock market is undervalued in general because of the North Korea risk.
Also, Samsung is under tight family control through complicated loopholes and cyclic ownership structure so it'll be hard to gain any significant control of the company away from the family, which makes it less appealing to investors I guess?
It’s more about how likely those profits are to continue in the eyes of the market, not what they currently are.
In this case, you’re comparing a company with a massive consumer moat (and massive cash reserves to defend it), where people will continue to buy the iPhone regardless of the suppliers Apple uses, versus a company largely without such a moat. Not saying it’s correct, but I am guessing the brand and moat it provides is a large part of the difference in valuations.
I like to think that between AAPL dividends and Apple hardware resale value (not even counting the value of the stock I’m holding on to) my spending on iPhones and MacBooks and Apple Watches has all been free.
Also, I sometimes I buy put options before a big product reveal in advance of the frequent stock price drop when all the analysts say “Is that what all the hype was about? That’ll never sell!”. Of course the stock prices pops back up again after Apple can’t keep up with demand.
Market cap is number of shares times share price.
Is this equivalent to total amount of money that went into AAPL? Did investors put in 1 trillion dollars?
I don't think so. All of the money put into to AAPL (via the public stock market) is all the stocks issued via public offerings * the price of the offering, no? After that they have just been traded without Apple seeing any of that money. Stocks given as compensation also contribute in some way, if we expand on "money" as to include forgone income by the employees.
No - imagine if you had bought 100% of Apple shares for $1 at incorporation, and then sold 1 share for $207. That would make the market cap $1T and the total investment would be only $208.
It's more that the investments into Apple + the amount of money made by shareholders equals $1T.
[+] [-] pliny|7 years ago|reply
The comparison would be Apple net income (~$50B) vs. GDP, not market cap (which has units of USD) vs. GDP (which has units of USD per year).
[+] [-] rayiner|7 years ago|reply
[+] [-] crazygringo|7 years ago|reply
[+] [-] maym86|7 years ago|reply
[+] [-] drexlspivey|7 years ago|reply
[+] [-] Tactic|7 years ago|reply
[+] [-] trentmb|7 years ago|reply
[+] [-] spuz|7 years ago|reply
[+] [-] coldcode|7 years ago|reply
[+] [-] GlenTheMachine|7 years ago|reply
I thought he was nuts. I was an idiot.
[+] [-] southphillyman|7 years ago|reply
[+] [-] Fomite|7 years ago|reply
Apple stock was the downpayment on my house.
[+] [-] Anechoic|7 years ago|reply
In the meanwhile, I sold off some of it, but a good chunk of it went into the downpayment for my house last year.
[+] [-] paulpauper|7 years ago|reply
[+] [-] meritt|7 years ago|reply
[+] [-] weavie|7 years ago|reply
[+] [-] ancorevard|7 years ago|reply
I would like to see Amazon attempt that.
[+] [-] KaoruAoiShiho|7 years ago|reply
[+] [-] tonyedgecombe|7 years ago|reply
[+] [-] mikekij|7 years ago|reply
[+] [-] com2kid|7 years ago|reply
He was just quoting what the best market researchers had told him. We were given a LOT of market research papers with in-depth customer surveys where lots of people said, repeatedly, that they would "never pay money for a phone". If you think back to then, phones were "free" with a 2 year contract.
The idea of getting someone who was used to free to switch over to $600 overnight was, by any reasonable accounts, not going to happen. The market researchers did the safe thing and said that the status quo would continue.
Of course they were horribly wrong, but again, in the moment, trusting literally every expert in the field is not the worst position to take.
After all that I learned to be wary of market researchers.
[+] [-] scarface74|7 years ago|reply
Now even Apple offers a payment plan.
[+] [-] antris|7 years ago|reply
[+] [-] Analemma_|7 years ago|reply
[+] [-] pastor_elm|7 years ago|reply
[+] [-] donohoe|7 years ago|reply
https://www.theguardian.com/business/2007/nov/06/china
[+] [-] dev_dull|7 years ago|reply
[+] [-] hndamien|7 years ago|reply
[+] [-] _pferreir_|7 years ago|reply
[+] [-] newscracker|7 years ago|reply
On the point of a single company being worth so much money, here's a different perspective. One of the many measures of how valuable a company's stock is, is the P/E ratio (price divided by earnings). It just says what multiple of the earnings a buyer of the stock is willing to pay. For Apple, this is now around 20. Take a look at another stock, say Amazon. As of now, it trades at a P/E multiple of 145 and has a market cap just shy of $1 trillion (where Apple is), at $895 billion. If Apple were treated the same as Amazon by the stock market, it would have a market cap of over $7.2 trillion today. If Amazon were treated the same as Apple, its market cap would have to be about $124 billion. Yet, this is where we are.
From the "too big to fail" angle, a simplistic analysis based on the above numbers alone would say that Amazon is a lot more leveraged and riskier than Apple is (the latter also has a huge cash pile of more than a couple of hundred billion dollars).
So the issue here is not that Apple has reached $1 trillion in valuation, because that's well deserved for a company that makes so much money. The issues exist everywhere in what companies do as larger contributions to society and how they're rewarded by the stock market.
[+] [-] coryfklein|7 years ago|reply
Do you think the majority of Apple's $1T valuation is attributable to abuse of government regulation or patents?
[+] [-] snowwrestler|7 years ago|reply
> Team, it turned out that Michael Dell wasn't perfect at predicting the future. Based on today's stock market close, Apple is worth more than Dell. Stocks go up and down, and things may be different tomorrow, but I thought it was worth a moment of reflection today. Steve.
https://www.nytimes.com/2006/01/16/technology/michael-dell-s...
That market cap was $72.13 billion in 2006, by the way. What an amazing run Apple has made.
[+] [-] Isamu|7 years ago|reply
During some of the pre-crash days early in the century, publications would trot out companies ranked by market cap, as if that really meant something. All I remember is various of these companies going under in the crash, despite their pre-crash valuation.
Revenue is a big deal. And profit too, although Amazon has shown you can keep that close to zero by reinvesting in growth, and that can work too.
[+] [-] coryfklein|7 years ago|reply
As the article states, Apple's "value" as a company comes from, in part, the fact that it's a good investment. Some may argue that "the fundamentals" of the balance sheets and whatnot doesn't justify a $1T valuation, but they would be missing the intangible parts of the business which cause it to be worth exactly that much.
[+] [-] almost_usual|7 years ago|reply
That doesn't seem too bad considering the risk involved investing in a single stock.
[+] [-] throwaway5752|7 years ago|reply
[+] [-] donohoe|7 years ago|reply
Apple is the first trillion-dollar company in the United States, though.
https://www.theguardian.com/business/2007/nov/06/china
[+] [-] nojvek|7 years ago|reply
In the last few years there's been an unprecedented rise in wealth yet as both a nation, and a part of a global civilization, we are moving back in some aspects. Even locally, housing is a shit show in the valley and trillion dollar valuations makes it worse for the service class.
Extreme poverty in US is on the rise, tons of people are dying of preventable health conditions. Healthcare and education are getting more expensive. Global warming and pollution aren't really turning back.
I guess the only mega billionaire I respect is Bill Gates because he's truly putting his money where it matters. Funding all sorts of moon shots like clean nuclear energy, wiping malaria e.t.c
I'm not saying its Apple's job to fix it. It really isn't anyone's job to fix the big problems. BUT with the insane amount of cash the big tech cos have, that's hellova resources that could be invested towards bringing the entire human civilization forward to a peaceful, clean, educated and a healthy planet where everyone has the basics and we're not dying because of very preventable issues.
[+] [-] harias|7 years ago|reply
[+] [-] haaen|7 years ago|reply
It would have been a good deal for Apple's board to give Steve 95% of the company.
Market cap when he came back: 1.73b.
5% now: 33b.
https://twitter.com/paulg/status/674760647767285761
Today, 5% of the company is 50 bilion. Jobs became de facto chief after then-CEO Gil Amelio was ousted in July 1997 (wiki). So that would make an annualized AAPL gain of 17.3 percent, excluding dividends. Even more impressive.
[+] [-] mkaziz|7 years ago|reply
[+] [-] KaoruAoiShiho|7 years ago|reply
[+] [-] temuze|7 years ago|reply
Reason #1: Apple has 243.7B in cash right now. That'll already push them to nearly Samsung's valuation.
Reason #2: Samsung's business is more vulnerable. Most of their profits came from the chips division:
https://money.cnn.com/2017/07/27/technology/samsung-profit-a...
Samsung sells components to many companies, including Apple. In fact, Samsung makes more money from iPhone than they do from the Galaxy S8:
https://www.theverge.com/circuitbreaker/2017/10/2/16404430/s...
As an OEM, Samsung has a much more vulnerable moat. What happens when Apple starts to make those components on their own? They already started doing it with processors. What about memory? They buy a ton of memory from Samsung.
Reason #3: reality distortion field :)
[+] [-] npunt|7 years ago|reply
If Samsung had their own OS + software technologies that differentiated them from any other electronics manufacturer, and offered their own services on top of that that made billions, and had a large developer base that was all-in on building software on their platform to further differentiate them from others, they might have a stronger business. As it stands, Samsung is just treading water in a zero sum smartphone business.
[+] [-] httpz|7 years ago|reply
Also, Samsung is under tight family control through complicated loopholes and cyclic ownership structure so it'll be hard to gain any significant control of the company away from the family, which makes it less appealing to investors I guess?
[+] [-] mattnewton|7 years ago|reply
[+] [-] tensecondflash|7 years ago|reply
Also, I sometimes I buy put options before a big product reveal in advance of the frequent stock price drop when all the analysts say “Is that what all the hype was about? That’ll never sell!”. Of course the stock prices pops back up again after Apple can’t keep up with demand.
[+] [-] leptoniscool|7 years ago|reply
[+] [-] filleokus|7 years ago|reply
[+] [-] jjmorrison|7 years ago|reply
It's more that the investments into Apple + the amount of money made by shareholders equals $1T.