Apple Is Not The Most Valuable Company In The History Of The World — IBM Is

http://techcrunch.com/2012/08/20/apple-is-not-the-most-valuable-company-in-the-history-of-the-world-ibm-won-the-prize-in-1967-with-a-value-of-1-3-trillion/

by irunbackwards • 14 years ago

113 76 14 years ago

techcrunch.com

googoobaby• 14 years ago

"But I don’t think Jobs would see much pleasure in winning by such means. I’d instead expect he’d want to win the prize based upon the performance of the company and beat the rest without an asterisk next to the record."

What a load of crap. I fully remember when Jobs tried to define NeXT as a if not the leading workstation company by twiddling the definition of workstation to exclude Sun and HP/Apollo.

CurtHagenlocher• 14 years ago

Why do people even care? Has consumer culture so overtaken our minds that we identify personally with the things that we buy?

madrona• 14 years ago

Yes.

Blara2• 14 years ago

I think it has been like this for a long time.

ryannielsen• 14 years ago

I can only speak for myself, but I find facts such as these interesting.

And perhaps there's something less negative than "consumer culture" at play… humans are generally curious about and interested in extraordinary things. e.g. Olympic athletes, inordinately successful businesses and business people, brilliant artists, robots landing on other planets, etc.

ekianjo2• 14 years ago

When you see people BUYING t-shirts which are blatant advertising of popular brands, then you reach that point where people identify themselves to a brand before all.

That has been the case for a LONG time already.

nitrogen2• 14 years ago

Some people buying branded t-shirts may simply prefer the fit and price of a shirt, and don't care what it says on it.

mdonahoe• 14 years ago

Some people own stock.

Others just like stats. How much of the world's brain matter is used up by sports trivia?

PakG1• 14 years ago

Yet another mandatory XKCD: http://xkcd.com/922/

saraid216• 14 years ago

Derail.

Can you actually tell me why identifying personally with the things we buy is a bad thing?

pedalpete• 14 years ago

There is a difference between identifying with the things you buy, and the things you buy being your identity.

Identifying with Apple because you like x,y,z of their vision/products/services, etc. is one thing. The value of Apple as a public company having an effect on your identity is a completely different monster I think.

I wish I could put it into words why it feels so wrong, but hopefully somebody else here can explain the difference.

tedunangst2• 14 years ago

When are these numbers ever inflation adjusted? Biggest grossing movie of all time inflation adjusted is still Gone With the Wind, but that didn't really stop people from talking about Titanic or Avatar.

tolmasky• 14 years ago

Well, funny enough, if you look at the hacker news thread about Avatar hitting 1B, it is in fact discussed (one of the people mentioning it is me).

I stand by this, just as with movies: it matters. If not these numbers are completely arbitrary and meaningless. It is equivalent to comparing, numerically, the price of one company in Pesos vs the price of another in Dollars, it would make no sense unless they are both converted into the same unit. In this case, we don't even have to go that far back: even Microsoft's market cap in 1999 (adjusted for inflation) was more.

Edit: link http://news.ycombinator.com/item?id=1079716

tedunangst2• 14 years ago

Oh, I kind of agree, but this just seems like "neener, neener, not the biggest."

To take a different angle, computers and electronics have only gotten cheaper since 1967. So maybe Apple should be compared to a deflation adjusted IBM market cap. How would those numbers stack up?

stock_toaster• 14 years ago

"Apple's market capitalization is still well below Microsoft's 1999 record if inflation is taken into account. The $619 billion then becomes $846 billion."

-- http://finance.yahoo.com/news/apple-market-value-hits-600b-1...

note that was from april of this year.

code_duck• 14 years ago

I think the East India Tea Company should factor into this discussion.

reitzensteinm• 14 years ago

>.... [Apple] would have a value of more than $3 trillion by 2020. As the Times points out, that is bigger than the 2011 gross domestic product of France or Brazil.

Comparing an outlandish guess for a 2020 market cap versus a 2012 gross domestic product (a flow of money, not a store) is hand waving, not analysis.

zhoutong2• 14 years ago

It's a [failing] attempt to make sense of hard figures. Pretty much like 3 times the distance between earth and moon.

lloeki• 14 years ago

Also, extrapolating without much explanation means squat.

http://xkcd.com/605/

confluence4• 14 years ago

Applies to teenage prodigies too.

I should write about the dancing monkey problem sometime.

Uchikoma• 14 years ago

Indeed. Makes me wonder what France or Brazil are worth.

Jabbles• 14 years ago

Surely if the journalist actually thought Apple stock would increase in value 6 fold in the next 8 years they'd buy it. (And then put a disclaimer on the article.) If the market shared their opinion then it wouldn't be available to buy at such a low price.

rmc• 14 years ago

Apples and Oranges. The GDP is the income of a country (roughly), the market cap is more than the current annual income of a company. Not at all comparable.

Dn_Ab• 14 years ago

This is worse than hand waving. It is the kind of static typing error one gets when using Astrology to reason about money.

You just cannot compare the value of a projection/guess that doesn't account for inflation with the current instantaneous GDP value (thus completely ignoring the fact that money today is worth more than in 2020) while at the same time not projecting Brazil's current value.

enneff• 14 years ago

It's gross how much of the article is spent postulating on what Steve Jobs would think. He's gone. It's both irrelevant and disrespectful to put thoughts in his head.

artursapek• 14 years ago

Well, it's Techcrunch.

sown2• 14 years ago

What about what ever entities that went after the Spice islands? Or east india company? I guess they were commissioned from the monarchies or parliment themselves so perhaps they don't count.

Perhaps the oil companies of today?

Blara2• 14 years ago

either way it would be interesting to know, if records still exists about their worth.

sown2• 14 years ago

From what I understand, it was the oil, sugar, or gold of its day. Controlling the spice islands was akin to controlling international trade.

ximeng3• 14 years ago

Most valuable publicly traded company perhaps, see Saudi Aramco:

http://blogs.mccombs.utexas.edu/titman/2010/03/01/more-thoug...

mpd• 14 years ago

I'm curious where Standard Oil would stand had it not been broken up.

ximeng3• 14 years ago

$1tn according to Wiki http://en.wikipedia.org/wiki/Standard_Oil#Breakup

chmars4• 14 years ago

PetroChina was actually worth more than one billion USD a few years ago when a-shares became available at the Shanghai Stock Exchange.

henrikschroder• 14 years ago

I get so annoyed when people don't make (or understand) the distinction between the value of a company, public or private, and the market cap of a publicly traded company. They are not the same, not by a long-shot, and the biggest and most "valuable" companies are usually private.

tibbon• 14 years ago

It does bother me how the US media seems to forget about this 'little' company that probably provides half the gas in their cars...

stickfigure2• 14 years ago

How about this alternative way of measuring the 'value' of a company: Net asset value (including retained earnings) plus the sum of all dividends ever issued, minus total investment capital.

zhoutong2• 14 years ago

The dividends issued historically are gone, entirely separate from the company. Assets and liabilities can exist in different forms, including tricky ones like depreciation and intangible assets. If such 'value' is accounted for important uses, manipulating it will be much cheaper and easier than manipulating market cap anyway.

stickfigure2• 14 years ago

Sure, it's hard to measure the value of assets. But look at it this way: In the long run, every company dies, so assets always go to zero. What investors (in aggregate) are left with is the net sum of dividends paid out.

To answer "what is the most valuable company in history" I would look for the company which paid out the most in dividends before it expired. Stock price is largely a measure of which company has managed to attract the most suckers.

JumpCrisscross• 14 years ago

Most companies don't trade at book value because net asset value is a bad measure of market value. Getting a mark-to-market assessment on a firm's entire balance sheet is very expensive and still resorts to estimating market value rather than directly sampling it.

One could do equity value + discounted payouts - discounted invested capital. This includes payments on debt and possibly taxes.

This measure would not be a "value" in an economic sense as valuation is in present terms, incorporating future potential and using the past only to inform assumptions. This measure catalogs a company's time-integrated capital productivity. This could inform a valuation, but taking an extreme case, it would value dearly a shell company that just paid its assets out in a dividend.

With the subjectivity complexities like cross-border activity or M&A introduce the exercise has little value beyond the pedagogical.

nasmorn2• 14 years ago

Actually to really compare the weight the company had in its days it is more meaningful to compare its market cap to GDP. Wolfram Alpha gives me 852 billion for 1967 so IBMs market cap was approx. 22.5% of that. 2012's estimated GPD is 15.6 trillion thus Apple has a mere 4.2% of that. That was how big IBM really felt back then.

hollerith3• 14 years ago

Am curious why someone downvoted this.

huxley• 14 years ago

It's because the linked article double counted inflation: "IBM’s 1967 market cap was not $1.3 trillion in real dollars, it was $192.3 billion"

microtherion• 14 years ago

I didn't downvote it, but the calculation appears wrong: the $852.7B are nominal 1967 GDP; in 2012 dollars, this would correspond to more than $4T, so IBM was less than 5% of GDP even back then.

lostlogin• 14 years ago

That's a great metric. Was trying to measure The East India Company by this metric, but it's surprisingly hard to do so.

hollerith3• 14 years ago

There was a huge error in the OP as explained in http://news.ycombinator.com/item?id=4411478.

If we correct the error, we conclude that in 1967, IBM's market cap was approximately 3.3% of US GDP.

That seems much more reasonable to me. Although IBM owned much more of the market for computers than Apple does, the role of computers in society has expanded drastically. E.g., there was no consumer computer market at all in 1967.

P.S. MSFT’s 1999 high of $620.6 billion represented 6.5% of 1999's US GDP.

nasmorn2• 14 years ago

Thank you I was unaware. I thought it looked quite high but decided not to check. Your explanation also didn't occur to me I rationalized it away with their monopoly position but of course the IBM monopoly must have been worth less than the MSFT monopoly given the enormous expansion in market size.

chmars4• 14 years ago

A few years ago, PetroChina was worth more than one trillion USD at the Shanghai stock exchange:

http://www.marketwatch.com/news/story/story.aspx?guid=%7BA16...

jcampbell1• 14 years ago

The article has wrong facts. The columbia journalism review author double counted inflation. The NYTimes piece he cites has already adjusted for inflation in the 1967 IBM Market cap.

uvdiv• 14 years ago

True:

CORRECTION: Let me rap myself on the knuckles here for the above update, which was flat incorrect. As commenter JD points out, IBM’s 1967 market cap was not $1.3 trillion in real dollars, it was $192.3 billion. The NYT’s data was already adjusted for inflation.

http://www.cjr.org/the_audit/misleading_and_incomplete_cove....

Or, $28 billion nominal.

rauljara• 14 years ago

This is by far the most important comment on the page. Very frustrating that, when I read it, it was nowhere near the top.

giorgiofontana• 14 years ago

I totally agree.

Bro_Merch2• 14 years ago

Agreed

D_Alex2• 14 years ago

Rockefeller's Standard Oil was possibly even more valuable - at the time of it's anti-trust mandated breakup it produced around 90% of USA's oil. The companies it split into became Exxon, Mobil, Chevron, Amoco, Conoco, Unilever (!) and a whole bunch of others.

maxerickson• 14 years ago

I'm playing wiki-facts here, but Unilever bought one of the breakup companies in 1987. The Unilever conglomerate established itself very much without being part of Standard Oil.

D_Alex2• 14 years ago

I checked up and you are quite correct. Unilever bought Ponds which in turn grew out of a vaseline manufacturer previously owned by Standard Oil.

mmariani• 14 years ago

For anyone who wanrs the original story here's the link.

http://www.cjr.org/the_audit/misleading_and_incomplete_cove....

PS: TechCrunch is somewhat pushy on they iPad app. I wonder if it is because the UX on mobile Safari is not that great.

confluence4• 14 years ago

Let me get this out right now: Valuations mean jack shit (companies/houses/startups/humans - whatever). Especially "market caps".

Understand this:

21.91 million shares of Apple were traded yesterday. That is $14,460,600,000 moving around. [1]

Now you must adjust down for HFT traders, market makers, option hedgers, futures guys and anyone else who trades massive amounts of stock each and every day. My rule of thumb is ~10% actually moves hands (rather than just being moved around).

So now we are at $1,460,600,000. Only $1.5 billion dollars actually moved around yesterday. If you had $1.5 billion dollars yesterday you could've controlled the "market cap/valuation" of 1 billion shares and half a trillion in value.

You can control the market cap of anything utilising the fact that valuation uses multiplicative leverage on stuff that doesn't exist yet. [2][3] Indeed - all those teengers you see in college at age 11? Way overvalued - come and check back in 10 years. Fallacy of exponential growth runs rampant through most of finance, and teenage "prodigies". [4]

Basically with only $1.5 billion you could control the value of $500 billion dollars worth of assets - on any one day - that's it. This is how you get bubbles. This is how you can have stock market booms and busts.

Valuation leverage allows you to bid up prices for any stock using less than 2% in actual value, selling to the next tulip buyer whenever they come in trading. [5] If you had to use 100% cash - well there just ain't enough to go around my friends!

Startups?

Invest $20K just like YC does, valuing a company at $1 million - pre-product and sometimes even pre-team! The million dollars just ain't there yet - but everybody - look yonder - valuation and investor interest over the horizon!

Venture Funds?

Instagram received a $50 million cash injection which valued it at a cool $500+ million - pre-revenue. $500 million in cash wasn't actually in the coffers (or on the horizon) but Facebook look - just look - at our valuation/predicted growth - you gotta buy us out (with cash of course). And double the price while you're at it.

~2% of the world's value actually exchanged hands yesterday on the world markets.

~0.5% of market participants actually moved the prices that the rest of the world was priced at.

Hold ~2% of the world - and control it all.

Valuation is bullshit - it's like leverage without the cost of capital.

Sources:

[1] https://www.google.com/finance?client=ob&q=NASDAQ:AAPL

[2] https://en.wikipedia.org/wiki/Valuation_(finance)

[3] https://en.wikipedia.org/wiki/Leverage_(finance)

[4] http://xkcd.com/605/

[5] https://en.wikipedia.org/wiki/Market_capitalization

monkeypizza• 14 years ago

I'm not so sure that temporarily changing the market cap of apple really would count as controlling it.

It's like saying: I can jump on the field at a Yankee game and "control" 50k spectators and 50m viewers. You may influence them for about a second, but the farther you try to bring the situation from the market's desire, the quicker you'll be corrected.

Sinking 1b into selling apple short would make a small, temporary dent in their market cap.

If you think something is overvalued, you should sell it short. If you think ycombinator companies are overvalued, you should contact the investors and give them odds against the ycombinator startups successes, and it would be in their best interest to take you up on it as a hedge.

In general terms, if you claim to have knowledge of a mispriced asset, there always is an implied economic action you should take to make money off of your unique knowledge.

confluence4• 14 years ago

You ignore the effect of feedback loops. You are also making the fallacy of reification (market doesn't want anything).

They key part to this lesson is that valuations are essentially arbitrary (not about market manipulation - although market dynamics are an interesting subject). Take no stock in them (pun intended) - just like you should ignore the predictions of pundits.

The following examples exemplify the meaninglessness of valuations:

If I had a kid, he/she would be worth more to me than anything else in this world. But as much as I'd adore him/her - he/she ain't worth jack to anyone else. If I'm dying of dehydration - the next cup of water is worth most of my future earnings. If I just had a glass - it's worth next to nothing. Dying because a fire is burning and you're running out of air? Oxygen tank would be pretty handy right about now. Got enough oxygen? Pfft don't need your tank.

Valuations are and will continue to be meaningless.

> try to bring the situation from the market's desire

I doubt it - you need regulatory agents to rein it in (security). Also - you are making the fallacy of reification right here.

Otherwise - it's a free for all.

Audiences love that stuff.

PS: Shorting a billion in Apple would seriously depress its price as feedback pulls in (stop losses and latent short orders) - and if you hook it up to another one - like say a debt crisis - well now you have some fun on your hands.

Also your name reminds me of that dancing monkey problem I must write about some day.

rogcg• 14 years ago

"Big Blue still reigns supreme." but.. whatever.. =/

mp99e99• 14 years ago

This is a ridiculous article. Its obvious the world is becoming more competitive (ie there are no modern day John Rockefellers adjusted for inflation). What Apple has accomplished is amazing, and I'm not even an Apple fanboy. Credit where credit is due, and Apple hasn't topped -- yet!

If you're the top market capitalization company, you're doing something right (especially from where Apple came from). Its like winning gold and saying well you didn't beat the world record so you're gold doesn't count.

afterburner• 14 years ago

Keep in mind there are other metrics for comparing how "big" a company is:

http://en.wikipedia.org/wiki/List_of_companies_by_revenue

http://en.wikipedia.org/wiki/List_of_largest_employers#2012_...

Apple Is Not The Most Valuable Company In The History Of The World — IBM Is

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