The big market news today is about Apple’s gargantuan market capitalization reaching a new, stunning high:
Apple Becomes Biggest Company in History, Passing Microsoft in 1999
Apple is now the most valuable company of all time
The Wall Street Journal’s lede:
Apple is now the most valuable company of all time.
Apple sets record for most valuable company
Insanely Huge: Apple Becomes the Most Valuable Public Company Ever
The Associated Press’s lede:
Apple is the world’s most valuable company, ever.
Reuters:
Apple becomes most valuable company of all time
You get the picture. There’s a big problem with all of these headlines and ledes: They’re all false.
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.
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. See my embarrassing correction below). 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.
It takes $1.38 in today’s dollars to equal the same value as one 1999 dollar. That means Microsoft’s peak market cap in 1999 was actually about $856 billion in constant dollars, $235 billion more than Apple’s current market cap.
Of these pieces, AllThingsD, the WSJ, Reuters, and Bloomberg don’t mention anywhere in their posts that Apple’s is a nominal record and that Microsoft’s inflation-adjusted record still stands.
The others at least nod to the truth (though I’m not sure if this is better or worse, since it shows they at least thought about the value of money), but typically bury it several paragraphs down and with wiggly language that shows them trying to justify their misleading thesis. For instance, USA Today in its sixth graph:
Some might even argue that Apple has a ways to go until it beats all the records. Microsoft’s 1999 high of $620.6 billion nearly 13 years ago would actually be worth $850 billion in inflation-adjusted dollars.
How can you know this and still write a lede that says, “Apple is now the most valuable company the world has ever seen”?
This is one of those unfortunate instances when the press desire for truth bumps into its need for news—and “records” make for better news than non-records.
* CORRECTION: Let me rap myself on the knuckles here for the above update, which was flat incorrect. As commenter JD points out, IBM’s 1967 market cap was not $1.3 trillion in real dollars, it was $192.3 billion. The NYT’s data was already adjusted for inflation.
Just FYI, the referenced NYT article lists companies in 2012 dollars.
#1 Posted by JD, CJR on Tue 21 Aug 2012 at 12:54 AM
Oh man. That's a stupid, stupid error on my part. Many thanks for the catch, JD!
#2 Posted by Ryan Chittum, CJR on Tue 21 Aug 2012 at 03:55 AM
Then there was PetroChina which was valued at more than 1T in its heydays:
http://www.nytimes.com/2007/11/05/business/worldbusiness/05iht-05bubble.8186962.html?pagewanted=all
HONG KONG — PetroChina, the state oil and gas giant, became the world's first company to pass $1 trillion in market capitalization when it debuted on the Shanghai Stock Exchange on Monday.
With PetroChina's share price on the booming mainland market rising as high as 48.62 yuan, or $6.52, it trebled in value on its opening day and surpassed U.S. energy behemoth Exxon Mobil as the world's most valuable company.
PetroChina shares, already traded in New York and Hong Kong, were seized on by a market awash with cash and investors eager for new opportunities. At its intra-day high in Shanghai trading, it was valued at almost $1.2 trillion, compared to Exxon Mobil's market capitalization at Friday's market close of $487 billion. At that level, PetroChina was worth more than the gross national product of Australia.
#3 Posted by Chris, CJR on Tue 21 Aug 2012 at 04:44 AM
Nobody check for Inflation when doing comparison. Was Micrsoft record checked for Inflation at that point in time ?
If someone beats the other one has to accept
#4 Posted by Ashish Shah, CJR on Tue 21 Aug 2012 at 05:50 AM
Of course the South Sea Company beats them all - it peaked at around $74T in adjusted value.
But then we all know what happened next...
#5 Posted by Simon Bisson, CJR on Tue 21 Aug 2012 at 08:23 AM
The Pennsylvania Railroad had a market cap of $900 million in 1902. That comes out to about $22 trillion today. Come on, CJR, why didn't YOU consider inflation?
#6 Posted by Gent, CJR on Tue 21 Aug 2012 at 10:25 AM
The silly thing about all of it is that even if Apple had a value that was the highest, it still doesn't mean crap. Say there was a massive economic breakdown tomorrow, stocks went through the floor, unemployment hit 50%, blah blah blah. What companies are REALLY the "biggest" and "most valuable?" Food. Fuels. Necessities.
The value of luxury items like apple computers is flat NOTHING when people can't afford to buy food, or can't afford to buy gas.
Apple goes from most valuable to "chunks of shiny aluminum" in a matter of days.
#7 Posted by Ryan V, CJR on Tue 21 Aug 2012 at 10:41 AM
Just about every major news outlet this week has been reporting that Apple is the most valuable company in history. But this is true only if you fail to adjust for inflation.
Microsoft holds the record for the highest valuation of any company in history. In 1999, Microsoft was worth $620.6 which, when adjusted for inflation, is worth $856 billion in today's money.
#8 Posted by Serena Ng, CJR on Tue 21 Aug 2012 at 03:08 PM
@Ryan V - if we're measuring value based upon market cap, then if "stocks go through the floor," companies with food, fuels, necessities, or anything else for that matter, aren't any more valuable than companies with cachet. In your scenario, there's something else people won't buy: stocks.
@Gent - most perceptive comment on this story. Well done.
@Ryan Chittum - what provokes a piece like this, anyway? I wouldn't begin to suggest that in a piece like this, you just happen to get a very similar outcome - eyeballs - because "Apple," "stock market," and "record" are mentioned as the source of your intent, so if you're going after some kind of quantitative fairness in comparison, what's next? "Box office records: A farce!" "War and Peace is only 150 pages in 6 point type - who says it's a big book?"
#9 Posted by Tim the Enchanter, CJR on Tue 21 Aug 2012 at 05:14 PM
Tim,
Here's a sampler of my past coverage of non-Apple inflation stories:
— SmartMoney is confused on wages, inflation
— The Press Misleads on a Gold “Record”
— The Real Dow
— The Turkey-Inflation Goblin
— Reporting Commodity Price Swings
—, and here's one on, yes, box office records
#10 Posted by Ryan Chittum, CJR on Tue 21 Aug 2012 at 06:53 PM
Numbers are always fun.
But if the market cap should compare as mentioned. Then Microsoft is now rated half a triilion dollars less than in 1999.
#11 Posted by Kgi111, CJR on Wed 22 Aug 2012 at 02:24 AM
Really ? We are supposed to use 'inflation' - a measure for price increases in goods and services to adjust a 1999 MSFT value to today ?
The NASDAQ Comp was 4070 on the day when MSFT reached that level, that's 25% above today's level ... so ALL tech stocks on average didn't go up since 1999 (as the price of bread, oil and haircuts did - which what inflation is) they went DOWN, so adjusted for that, APPL nominalily surpassing Microsoft is an even BIGGER accomplishment .....
So really, there's nothing to this story....
#12 Posted by JDeflator, CJR on Wed 22 Aug 2012 at 10:09 AM
JDeflator,
I have no idea what you're talking about
#13 Posted by Ryan Chittum, CJR on Wed 22 Aug 2012 at 06:05 PM
This kind of reporting is so pervasive: record-breaking movie receipts, Michael Jackson's sales figures, etc, etc-- I constantly see breathless reporting of all-time high numbers, that are actually... not record-breaking at all in real dollars. Why doesn't the vast majority of the media understand how to use the very simple BLS price deflater? You don't even have to do the calcs yourself; just type, like you do when you take stenography from the presidential candidates.
#14 Posted by kibosh, CJR on Tue 28 Aug 2012 at 12:19 AM
Its more nuanced than mere;y adjusting for inflation. Yes, we should provide inflation adjusted numbers.
However:
1. Boom.Bust: Microsoft hit their record number in 1999 -- right as the tech boom was peaking. Apple hit their peak value 12 years past the Nasdaq peak, while it was still down 40% off its highs of over 5100.
2. What about Secular Bull vs Bear markets? Microsoft topped in year 17 of the Bull market that started in 1982; Apple hit its current peak in the middle of a giant post recession deleveraging era.
3. What about Valuation (P/E multiples) ? Do we care that Apple eclipsing MSFT while the stock is relatively cheap at 15X earnings, while MSFT was pricey at 70X earnings?
#15 Posted by Barry Ritholtz (@ritholtz), CJR on Thu 30 Aug 2012 at 07:42 PM