Reflecting on the $1 Trillion Company

Lots has been said about the rise of Apple to become the worlds first company to achieve a $1 trillion market capitalisation.

I have 2 interesting observations on this milestone:

 

1 – Is Apple Really The First?

In the strictest sense, this is true, although as with many things, when you dig a little deeper, there is more to the story than meets the eye.

Although Apple, is the first company to reach a $1 trillion valuation in nominal terms, this fascinating article from Time, suggests that there are at least 5 companies in history that would today be worth over $1 trillion if you adjusted for inflation.

In fact, Time suggests that on an inflation-adjusted basis, the largest company that has ever been is the Dutch East India Company, which dates back to the 1600’s, with an inflation adjusted market cap of $8.2 trillion in todays money.

Also of note is the reason for this gargantuan valuation – the Dutch tulip bubble. Many people will be familiar with the Dutch tulip craze, which is the first widely recorded ‘financial bubble’ in history. For some (still unknown reason) people went mad for Dutch tulips in the 1600’s, pushing their prices to completely insane levels.

Until very recently, the Dutch tulip bubble remained the biggest financial bubble in history (when measured by the sharp increase and then even sharper fall in value), although this crown has now been taken by Bitcoin.

Some could draw comparisons with the tech bubble of the early 2000’s, although as I think the world has now realised, technology really is worth a lot and has the power to change the world, unlike Dutch tulips, pretty as they may be.

This is confirmed by the fact that all 5 of the worlds largest companies are now tech giants in the form of Apple, Microsoft, Alphabet (Google), Amazon and Facebook.

 

2 – Do Record Breakers Always Suffer A Fall?

A lot will now be said about the ‘inevitable’ fall of Apple. When a record is broken, we assume that this must be the end of the road.

The same has been said about the stock market over the past 2 years or so. “Now that we have reached a record high, we MUST be due for a crash”.

This is complete nonsense. Records are made to be broken and if the British Olympic teams of recent years have taught us anything, it is that records can be broken again and again by the very same person (read company).

As such, I suggest you also read this article on how Apple could now be on the way to achieve a $2 trillion market cap, before you rush off and sell those shares!

As always, just because a record has been broken, there is nothing to say how long that new record will stand for. In Apple’s case, it only lasted a day or two, as Apple now has a market cap of $1.030 trillion.

The final point of note here, is that $1 trillion is simply a ’round number’ that has significance for us human beings only. Other than being a 1 and 12 zeros, it doesn’t really mean much else in the context of Apple’s rise and rise.

Who knows, perhaps the first $2 trillion company will be here sooner than we think?

 

"The value of investments and the income from them may fall as well as rise. You may get back less than you originally invested"