THE POPE VERSUS THE PILL
At 11:48 a.m. ET on Thursday, Apple Inc. became the first company with publicly traded shares to achieve a market valuation of US$1 trillion. This is the point at which a columnist is expected to reassure the reader that no one has any good way of visualizing or instinctively understanding the concept of a trillion.
Which is true! But, then, a dollar stopped being a hunk of metal a long time ago. It’s merely one of many possible units of account, and even if we stick to American currency for its fabled soundness and awesome fungibility, the headline could as easily read “Apple is the first 100,000,000,000,000-cent company.” The market capitalization of Apple is not actually a trillion of anything tangible — it is just another abstraction, albeit a usefully familiar, homely one. (Our instinct for what a cent is, or might buy, has probably weakened since I was a kid chomping Mojo candies.)
Perhaps more importantly, the idea of market capitalization itself involves a slightly elusive logic. It’s the spot price of a single share of something, multiplied by the number of shares in existence. It’s the quantified opinion of, literally, the most recent individual buyer of a share, spread out through an incomprehensible mountain of shares that no individual could buy all of.
Yes, the valuation is one person’s assertion that Apple as a whole is in some sense worth a trillion dollars — but that person may not have the intention of holding onto the share and realizing the mite of corporate income it represents, as opposed to hoping that the proverbial “greater fool” will happen along. That’s why financial markets have the concept of a “value investor”: To single out the weirdos.
The presence of the concept of a “trillion” seems to be most useful in flushing out angry leftists. Imagine, Apple being worth a trillion of some unit in a world where children are still being blinded by onchocerciasis! Apple is, of course, just a group of people making stuff, and if you wait 30 seconds, you will catch some of those same haters saying how impressive it is that Norway’s socialized national oil fund holds, er, over US$1 trillion in assets. These funds, of course, include holdings of almost one per cent of Apple Inc. and an estimated 1.4 per cent of all listed corporate stocks in the world.
When you consider the number of persons whose comfortable retirement hangs on a morsel of Apple stock, you begin to think of Apple as rather like a nation without borders — and this is, in fact, the closest thing to a practical meaning that the trillion-dollar odometer rollover has. Apple, like the slightly less well-capitalized Amazon and Google, should be thought of as an entity of the same economic magnitude as a fairly sizable nation-state.
We are, after all, already very accustomed to speaking of our “loyalties” to tech companies. If you are, like me, an Apple person — someone who has constructed a work and media environment from Apple-badged components — you might ask yourself whether your national identity factors into or manifests within your life as much as your technological identity does. Is my consciousness more Apple-shaped, or more Canada-shaped? (Is it Google-shaped? Is anybody’s not?) If I set aside the effects of the Canadian state, as separate from merely social Canadian nationhood, Apple may win this contest. And I don’t even own an iPhone.
The trillion-dollar valuation of Apple Inc. is speculative, as well as being an abstraction: it is an implied claim about the future, rather than a claim that all of Apple could somehow change hands for a trillion dollars in cash today. (Though there are those Norwegians ...) There is a funny duality here. Apple has annual sales over US$200 billion, so there is really nothing too bizarre or bubbly about a trilliondollar market valuation. The company’s price-earnings ratio is in the neighbourhood of 19 — a much less ambitious figure than the 53 for Alphabet Inc., the holding company that owns Google, or the 140-plus for Amazon.
At the same time, even a P/E ratio of 19 implies that Apple will be able to go on selling stuff at the same or greater volume for a long time, and go on sucking up more or less the same margins — which, in the case of Apple, depend to a significant degree on a very strict, even militant attitude toward consumer pricing of new hardware. Buying Google is a bet that Google will continue to be near-irreplaceable in the ordinary life of a wired human, and perhaps that Google will continue to innovate, or at least just remain really good at scooping up elite cognitive talent. Buying Amazon is a bet that we will, one day, buy more or less everything through one manifestation of Amazon or another — something everybody surely suspects, whether approvingly or disapprovingly.
The Apple narrative is more modest, as the P/E numbers hint. The Apple buyer expects Apple to continue to be a peerless leader in tech, and to dominate (I am tempted to use the adverb “morally” here) in the design and sale of new tech products, without necessarily having a controlling or deciding share of any. Apple is, in a significant sense, a fashion company. And, in a numerical sense, it is now demonstrably the world’s most important such company.
YOU BEGIN TO THINK OF APPLE AS RATHER LIKE A NATION WITHOUT BORDERS.