Why Apple's $3 trillion valuation bodes well for us all
Mega-rich companies are a good sign for America
Apple becoming the first public company worth $3 trillion — as it did briefly this week before retreating a bit as part of a sell-off in the sector — was great news for its shareholders, of course. Actually, they've been getting lots of great news for a while now. Apple stock has been on quite a tear, hitting a $1 trillion value in 2018, $2 trillion in 2020, and then climbing another 30 percent in the last year thanks to a pandemic-driven surge in demand for iPhones, iPads, and Macbooks. And unlike many other tech companies, Apple was able to adeptly navigate global supply-chain bottlenecks to deliver those products to consumers.
Now, no company is perfect. In a much-watched lawsuit, developer Epic Games accused Apple of running an illegal monopoly through its App Store. And although a federal judge disagreed with that charge in a decision last September, the ruling also concluded Apple has been engaging in unfair competition under California law and should open up the App Store so developers can more easily avoid paying Apple's commissions. So it would be going too far to say that what's good for Apple is always good for America.
But Apple's success has a meaning beyond fat investment returns. That $3 trillion milestone, though temporary, provides opportunity to consider the wider importance of the achievement.
For starters, it's a sign that something is going right in an economy still struggling with the COVID-19 pandemic. While the stock market is not the same as the economy, its ups and downs do say something important about the economy's broad prospects moving forward. Bad times in the economy typically accompany bad times in the stock market. For example: The nearly two-thirds decline in inflation-adjusted S&P 500 from 1968 through 1982, seemed to anticipate the volatile, stagflationary 1970s where real incomes barely budged. A bad 14 years for labor and capital alike.
Now Apple isn't the whole stock market, but it's a pretty good chunk of it. At that $3 trillion valuation, according to The New York Times, Apple accounted for nearly 7 percent of the total value of the S&P 500, breaking IBM's record of 6.4 percent in 1984. It's not crazy to think the condition of this massive consumer-products company — which also directly employs nearly about 100,000 full-time workers in the U.S. and many multiples more through its suppliers and App Store developers — provides a serviceable shorthand for the state of the U.S. economy. Not the only data point, but hardly an insignificant one.
Second, while Apple generates a growing share of its revenue from subscribers to services such as music streaming and on-demand video, it's also a company that still makes stuff. The iPhone is perhaps the best-selling consumer product in history. It would be kind of deflating if the most valuable company generated by the U.S. economy was, say, a social media company that made its money delivering ads.
But Apple works in atoms as well as bits, designing cool-looking products that work well. This is especially important given Washington's kvetching that what Silicon Valley does is profitable but unimportant. Most people think their phones are pretty important, and one factor driving investor enthusiasm is that Apple could enter the car industry within the next five years or so.
Third, Apple is a good if imperfect model of capitalism, American style. America doesn't really do "national champion" companies, businesses gifted a dominant position in their industry by the government. That's more a European thing, especially back in the 1970s. (Recall it was government-controlled British Air and Air France that joined forces to build the now-scuttled Concorde supersonic airliner.)
But Apple is a national champion of sorts in that it's successful in passing the "market test" by creating value through products and services, which is how companies get big and rich in America. This isn't China or Russia where government favor is essential. Indeed, the entire Washington establishment seems to have it out for Big Tech, these days. Apple is setting records nonetheless.
As the saying goes, markets will fluctuate. Stocks will rise and fall. But when the biggest of them are also the most innovative, it says something good about the American economy.