Thought of the Day #13/2021
Can you imagine a trillion-dollar?
I have to admit I have some trouble figuring out how much money it is. Here are some Fun Facts:
- The height of a stack of 1,000,000,000,000 (one trillion) one dollar bills measures 67,866 miles. This would reach more than one-fourth the way from the earth to the moon.
- The area covered by 1,000,000,000,000 (one trillion) one dollar bills measures 3,992 square miles. This would cover an area equal to twice the size of the state of Delaware.
- The length of 1,000,000,000,000 (one trillion) one dollar bills laid end-to-end measures 96,906,656 miles. This would exceed the distance from the earth to the sun.
- A shopping spree that spends 20 dollars every second would last 1,585 years.
Valuations in the 90s
The number is so significant that it didn't play many roles in the business world when I got my economics training in the 90s.
Companies back then had valuations of a few billion. I am speaking about the most prominent companies of the world like
- Royal Dutch Shell — 134 billion
- GE — 120 billion
- Exxon Mobile — 98 billion
- Coca-Cola — 97 billion
- Merck — 78 billion
These are the numbers and ranking of November 1995.
The 2000s
Then came the internet and promised infinite growth, which, honestly speaking, nobody believed.
Even in 2000, the biggest company in the world was General Electric, lead by the famous Jack Welch.
After 2001 with the dot.com crash and 9/11, the world's biggest companies started in the new decade with around 300 billion.
The typical market capitalizations in May 2002 were:
- General Electric — 300 bn dollar
- Microsoft — 283 bn dollar
- Exxon Mobile — 255 bn dollar
- Walmart — 248 bn dollar
- Pfizer — 208 bn dollar
2010 and after
Not much happened in the ten years. The biggest companies in the world didn't solely come from Europe and the US anymore, and China joined the gang.
Except for the geopolitical change, valuation wise it was more or less boring:
- Petro China 300 bn dollar
- Exxon Mobil 300 bn dollar
- Microsoft 246 bn dollar
- Apple 219 bn dollar
- ICBC 213 bn dollar
2018 the first trillion-dollar company
I remember this decade in which Apple crossed the one trillion dollar barrier as a time of global prosperity.
One good news after the other hit the media, new business models emerged, the internet leads to a free flow of information, the rise of social media did the same to communication.
The biggest companies in August 2018:
- Apple — 1 trillion-dollar
- Amazon — 815 bn dollar
- Google — 846 bn dollar
- Microsoft — 827 bn dollar
- Berkshire Hathaway — 510 bn dollar
2021: Stock Market Odyssey
Last year the human race got a shocking event
The biggest pandemic since 1918 — the spanish flu
I initially expected a massive valuation reset, leading back to levels of 1995 when the most valuable companies were around 100 billion dollars, but reality did prove me wrong.
Instead of a huge crash and a prolonged recession with high unemployment, the stock market recovered quickly. So far, I haven't read any significant study that laid out the reasons in precise terms; that's why I made up my explanation.
In my opinion, investors and governments quickly realized that the majority of the business world already changed towards a decentralized digital world. The pandemic only helped complete the shift within a couple of weeks instead of a couple of years.
What I saw after March 2020 was probably one of the most impressive uptakes in the stock market history.
The S&P 500 hit 2,237 on March 23, 2020, and today August 24, it is at 4,427. Within 17 months, it doubled its value.
What about the valuations of the biggest companies in the world?
- Apple — 2,5 trillion-dollar
- Microsoft — 2,2 trillion-dollar
- Saudi Aramco — 1,9 trillion-dollar
- Alphabet — 1,8 trillion-dollar
- Amazon — 1,6 trillion-dollar
What a fantastic journey of witnessing the change in valuation and the development of the World's economy. Twenty-seven years ago, the most valuable companies were around 100 billion dollars and the old economy club members.
How will the world look like in 2046?
In 1967 — about 25 years before 1995 — the most valuable company was IBM, with about 35 billion dollar market cap.
In 2021 Tech has fully taken over — except Saudi Aramco, the oil company. What tech and oil have in common are valuations far north of 1,5 trillion dollars.
If the speed and acceleration continue, maybe we see some 50 trillion-dollar companies in the future.
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