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There’s no question about it: Apple‘s had an amazing decade. It’s hard to recall, but it’s only been ten years since Apple was just starting to sell a lame MP3 player with no wireless and less space than a nomad and only five years since mainstream tech writers predicted the failure of the iPhone. Today hardly anyone in the press doubts Apple. They’re the largest company on earth by stock value, and seem likely to continue growing until the end of time.

Can they, though? Is the current level of growth sustainable? Probably not. Soon Apple will run into the realities of large numbers, according to a recent New York Times editorial. Basically, the bigger Apple gets, the harder it is to continue growing at the same rate because of the sheer size of the company. Does this mean Apple will fail, or go bankrupt? No. But they’ll probably level off at some point.

Apple: Bigger Than Exxon

As I mentioned, Apple is the biggest company on the planet by market capitalization. Think of any company – Exxon, GE, WalMart – and Apple is bigger than them in terms of stock value. This high stock value is mostly because of Apple’s shocking revenue – their $13 billion in revenue accounted for more than 6 percent of all earnings for the S&P 500 last quarter.

Can this growth keep up for ever? Robert Cihra, a financial expert speaking with The New York Times, said that “if you extrapolate far enough out into the future, to sustain [its] growth Apple would have to sell an iPhone to every man, woman, child, animal and rock on the planet.”

Does that sound absurd? It’s meant to. The point is that the current level of growth simply cannot keep up forever, because there are inherent limits. But let’s play with this theme, shall we?

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To Wolfram-Alpha!

I’m fascinated by this concept, so I decided to play with Wolfram Alpha and see what there is to it. For the unfamiliar, Wolfram Alpha is an amazing math tool. You can ask it almost any question related to mathematics and it will give you an answer. It can understand raw equations, yes, but also plain language, which is why it’s used by Siri to provide answers to math problems.

You can easily learn the GDP of any country, for example, or the current world oil reserves. You can divide, multiple, add or subtract these numbers to your heart’s content. You could copy and paste your Math homework question by question and hypothetically get an answer that shows your work. You can also do some weird things with Wolfram-Alpha 5 Weird & Wonderful Uses For Wolfram Alpha 5 Weird & Wonderful Uses For Wolfram Alpha Read More , such as ask it if you’re drunk.

I’m not going to use it for that, however. I’m going to use it to demonstrate why Apple cannot grow as it has for the next ten years without becoming impossibly large.

Playing With Apple’s Numbers

In 2004 Apple was worth 4 billion dollars. Today its net worth is 90 billion dollars, meaning it grew 2,250 percent in ten years. If the same thing happens, Apple will be worth over two trillion dollars in 2022. It’s a huge number, sure, but what does two trillion mean? Well, let’s assume at that point Apple cashes out, sells every asset and starts playing with the money. They could write a check for $295 for everyone on earth, if they wanted.

Remember, this is fictional money, based on Apple continuing to grow as they did in the past ten years.

Anyway, imagine if in 2022 Apple wanted to buy every mile between here and the sun to build a super space road to it. They could afford to pay $20,000 for every mile and still have almost 160 billion dollars to build toll booths with.

The Hudson’s Bay Company, based in Toronto, once owned 15% of the land in North America. Apple could, by selling off all fictional 2022 assets, afford to buy every square mile on earth for $10,000 and still have $30 billion in the bank left to electronically send out monthly invoices to every man, woman and child.

You can buy a 48 pack of Mars bars on Amazon for $42, or 88 cents a bar. Were Apple to decide to cash out their company and blow it all on Mars bars, they’d have 2,273 trillion Mars Bars and probably diabetes. End to end, that’s 169.5 million miles of Mars bars, meaning these chocolate bars could almost make it to the sun and back.

Or they could, and this is true, pay off one seventh of America’s current debt.

Conclusion

That last one was depressing, but here’s my point – Apple is unlikely to grow as much in the next ten years as it did in the previous ten. Does that mean I think Apple will fail?

Probably not. All I mean to say is that Apple can’t keep growing faster than the world economy forever. There may be some mind-blowing products coming out in the next few years. Barring the release of the iTeleporter, however, I don’t think it’s going to keep up. Apple’s competitors will keep up – Microsoft is (finally) starting to innovate and Google’s already invaded the phone and tablet market in a big way.

Just please don’t link to this article in 2022 when Apple is worth 4 trillion dollars. I’ll be sad.

  1. JG
    April 17, 2012 at 1:28 am

    Sorry, you're an idiot (and pretty obviously know nothing about finance, markets or economics). Whatever though. No doubt you'd feel better if Apple stock split. LOL.

    • Justin Pot
      April 17, 2012 at 3:34 am

      Well, it's pretty clear you know about finance, markets and economics. This comment puts that on display with it's point-by-point refutation of what I said. I really appreciate how you put together something that teaches me why I'm wrong, and how I can be better at what I do for next time.

      What? You called me an idiot and gave no reasons whatsoever? Never mind, then.

  2. muotechguy
    March 15, 2012 at 1:05 pm

    Good timing with publishing this - Apple stock price shot up $546 to $589 / share in the last day or so. Whenever this infinite growth thing is going to stop, it sure isn't going to be anytime soon ;)

    • Justin Pot
      March 15, 2012 at 3:43 pm

      They just announced the new iPad, and sales are crazy. My point isn't that the growth won't keep up in the short term, it's that nothing can grow forever. Nothing.

  3. Bakari Chavanu
    March 15, 2012 at 4:38 am

    Well, the larger question here, Justin, is the concept of infinite growth paradigm which seems to govern the economic system in this country and the rest of the industrialized world. Are there/should there be limits to economic growth? As much I like my iPhone and iPad, for example, I shutter when I think about what it takes to make these items. I shutter to think about the economic and human costs of market competition that influences the creation of more and more stuff. I mean, just to stay in the game, a company like Apple has to keep coming out with slightly upgraded versions of the same product. It has to also convince consumers that we need to shell out another $600-$800 for yet another iPad that solves a problem we didn't realize we had when we purchased the first generation iPad. (I didn't even know what "retina display" was back in April of 2010, but now all of a sudden it's important, though my current iPad works just fine.)

    It all seems like an endless cycle, though we live on what seems like a finite planet. And as wealth constantly moves upward, it makes it difficult for most people  to keep up. Apple is certainly not the only company that shares these problems. It just happens to be the most popular example.

    • Justin Pot
      March 15, 2012 at 4:10 pm

      This is a well thought out response, and I appreciate it. The larger economy can't keep growing forever, even if our civilization is based on the assumption that it can. At some point we run out of large materials.

      Your iPad is perfectly fine, and I'd highly recommend you use it as long as possible. Don't get trapped in the cycle of continually upgrading stuff that's still working. I myself try to buy mostly used technology, assuming I'll like the latest thing just as much three years from now as I will today - at a fraction of the cost. I'm writing this comments on a G5 Power Mac, for example.

      Advertisers are doing all they can to get use always buying the latest and greatest, and Apple's long-term growth is based on the idea that we'll keep updating our devices every other year. There are negative implications to that.

  4. Dennis Hayes
    March 14, 2012 at 6:55 pm

    I realized that the was a natural rule like this when I went to a SciFi movie in the 1950s that featured radioactively gigantic animals. Simply taking a daddy-long-legs spider and making it 200 feet tall will fail at some point. The design of the legs was fine when the spider's body was 1/8 of an inch across. But those simply scaled legs won't support the weight of the 200 ft tall critter.  

    Same thing with business. At some point the business' structure will not be able to support itself. 

    • muotechguy
      March 15, 2012 at 1:06 pm

      At some point... I agree. But in the immediate future, the PC business and China are both theirs for the taking. There's a lot of growth yet before we need to start worrying about intrinsic structural issues.

      • Justin Pot
        March 15, 2012 at 3:57 pm

        No one's disputing they have opportunities. We're just saying the stock will level off or decline at some point, because the world is finite. That's all.

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