At a market cap of $623 billion, is Apple the most valuable company ever? “Yes” says the media, “no” says a criticAugust 20, 2012 2 Email article | Print article
If you have visited a website today that even closely resembles a blog or news outlet, you have likely read about how, at roughly US$666 a share (give or take a few dollars — the price is constantly changing), Apple is now the most valuable company ever with a market capitalization of US$623 billion (give or take a few hundred million — the price is floating as price per share rises
or falls), surpassing Microsoft’s record 1999 market cap of US$620.6 billion. Or is it? A media critic is saying “no”.
In terms of physical dollars, yes, Apple is indeed the most valuable company in the history of modern man (I don’t want to presume against about cavemen capital markets). Ryan Chittum, a media critic that blogs on for the Columbia Journalism Review, is vehemently disagreeing. Chittum is arguing that proclaiming Apple to be the most valuable company is misleading because one must adjust past numbers for inflation before such as comparison is made. According to Chittum, when taking the present value of Microsoft’s 1999 market cap and IBM’s 1967 market cap, Apple is not even close to being the most valuable company. In today’s dollars, Microsoft’s 1999 market cap is US$856 billion while IBM’s 1967 market cap is a staggering US$1.3 trillion.
Apple’s $622 billion market cap is a nominal record, which means “in name only,” or alternatively, not really. That’s because it’s a record only if you don’t adjust Microsoft’s 1999 market cap for inflation (ADDING: Microsoft doesn’t even hold the record, apparently. IBM in 1967 was worth at least $1.3 trillion in today’s money. I’ve updated my subhead to correct that MSFT’s isn’t a record). Sorry, but you have to adjust any number like this that’s that old for inflation—it’s comparing apples to oranges not to do so.
The phenomenon Chittum is talking about is the concept that one dollar today is worth less than a dollar yesterday (because of a variety of factors included but not limited to inflation, human tendencies to want to consume today as opposed to tomorrow, etc.). So, to compare apples to, erm, apples, one must adjust yesterday’s numbers to be reflected in terms of today’s dollars. Of course, if one wants to do a proper comparison, Chittum is absolutely correct and he holds nothing back in attacking major tech/media publications for publishing otherwise:
Apple is not the biggest or most valuable company in history—not by a longshot. That’s because the press is overlooking reality for the apparently irresistible pull of a headline that includes “Apple” and “record”—pageview gold.
Despite Chittum’s disapproval, the jury is still out on if should we adjust numbers for record comparisons or not. As BusinessInsider points out, world records are not always adjusted for inflation, such as how some publications report Hollywood box office sales without regard to present value past records, and rarely do critics, if at all, say anything about that. Plus, as some commentators question, if we are going to present value something, where do we stop? Dutch East India Co. had a value of 62 million guilders in 1780. Present value it and Dutch Eat India Co. may well give Apple, Microsoft, and IBM a run for its money. Indeed even Chittum made the mistake of declaring Microsoft the most valuable company only to go back and correct his mistake after he realized IBM’s 1967 market cap is significantly higher than Microsoft’s 1999 cap in present value terms. So while I understand where he is coming from, I feel Mr. Chittum himself might have had an “irresistible pull” for some “pageview gold”.
Whatever side of the fence you sit on this issue, I don’t think Apple gives a rat’s ass. They are making money hand over fist and are likely to launch what could be the most successful electronic device ever in October. Present value that, Ryan Chittum.