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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?
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, 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.
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.