The path to the first $10 trillion company
Well, apparently the race is over. As Trevor Noah said on Comedy Central last week after Apple became the first trillion-dollar market-cap company: “One trillion dollars. That’s it, folks. Apple has officially won capitalism. Wrap it up, it’s over.”
There is no longer any doubt that the 21st century will be propelled by companies producing and using data, just as the 20th century was propelled by companies producing and using oil. The analogies are numerous and accurate and all emanate from the core reality: the century-long era of petroleum and the rise of automobiles and aviation is now followed one of data and the rise of computers and robots.
It wasn’t many years ago that Exxon and Apple sequentially swapped the position of the highest valuation. And just ten years ago the stock market contained only three tech firms amongst the top 10 most valued companies; five were oil giants. Today tech accounts for seven of the top 10 with just one oil major still on that list. (Exxon)
That “data is the new oil” is beyond obvious, even if the expression is misused, misunderstood and misattributed.
Clive Humby, a UK mathematician and chief data scientist at Starcount, is generally credited as the first to coin the phrase “data is the new oil.” But, with all due respect, the true credit belongs to Steve Jobs.
Although Jobs’ phrasing was a little less pithy, his idea and analogy were precise and clear enough. In a brilliant and prescient lecture, delivered at Sweden’s Lund University in 1985, Jobs said:
“[W]e’re living in the wake of the last revolution, which was a new source of free energy. That was the free energy of petrochemicals. It completely transformed society, and we’re products of this petrochemical revolution, which we’re still living in the wake of today. We are now entering another revolution of free energy. A Macintosh uses less power than a few of those lightbulbs, yet can save us a few hours a day or give us a whole new experience. It’s free ‘intellectual energy’.” [emphasis added]
In the same lecture, Jobs pointed out that raw data wasn’t the point, or the value, of computing. The essential value resides in refining (Jobs used that word too) raw data into useful information and tools. The value of most Silicon Valley companies thus derives almost entirely from the data each can access and refine – hence the oft-noted and intentional “stickiness” of the universe of data captured within the Apple ecosystem.
Data collection is far from new; ancient Egyptians carefully compiled data about grain storage and much else. Oil wasn’t new before the petroleum age either; it’s use dates to ancient times. But technology at the turn of the 19th to 20th centuries changed all that. So consider how technology changed the character of data now collected. Rather than, say, recording data about a number of hospital visits or a number of cars, one can now access real time data about an individual’s heart rate, or specific location or activity (standing, sleeping, moving, breathing), or the location, speed and operational health of every car, and increasingly, any machine or device.
And then there is data about the data. The quantities, locations, timing and features of data streams can be mined and refined to extract useful information. This metadata, or so-called digital exhaust, is increasingly valuable as the digital systems scale up and reach down into the interstices of everything.
The collective class of data today is as different from what we used to think of as “data” (a bank account number, transactions) as synthetic products (plastics, pharmaceuticals, gasoline) are different from natural products (petroleum, natural gas). The scale and scope of data in use is already unprecedented. In a few years daily data traffic will exceed the annual Internet traffic of the year 2000. But the growth rate in data traffic, far from leveling off, is now accelerating. The aphorism, “quantity has a quality all of its own,” has never been more true than in the digital era.
Up until now nearly all digital traffic has been associated with the virtual world, i.e., with information-centric activities such as phone, mail, news, entertainment, TV, advertising, finance and travel services. Meanwhile, most of the economy and 90% of the GDP are associated with the physical world, such things as food, factories, houses, office buildings, hospitals, energy production, and vehicles. Even though we’re still in early days of digitalization of physical domains, data traffic associated with manufacturing, medicine and consumer “things” is already rivaling traffic associated with multimedia (TV, sports, movies, YouTube, etc.).
A 3rd information era – the first era of telephony gave way to the second, i.e., the ‘old’ Internet -- promises not just bigger Apples, Amazons and Googles, but also the emergence of many more Uber-like and AirBnB-like companies, deploying new types of digital platforms and artificial intelligence. Anything and everything that is produced, lives, moves, and used is now on the digital radar.
The quantity of money deployed globally to install hardware on an infrastructure that acquires, transports, and “refines” data is running at over $3 trillion per year. That number rivals and is growing faster than global capital spending on oil and gas infrastructures. The world is now building far more billion-dollar datacenters than billion-dollar offshore oil platforms.
(As an aside, and subject for another day: it bears noting that while the petroleum age displaced wood and coal, the digital age does the opposite by indirectly consuming hydrocarbons, notably natural gas converted to electricity, and also indirectly increasing oil demand as digital tools create wealth and accelerate trade and travel.)
All of this says something about prospective growth for Apple in particular and the rest of the tech market in general. Before Exxon’s progenitor—Standard Oil—was broken up in 1911, it was also worth close to $1 trillion (in inflation-adjusted terms). From that 1911 stock market pinnacle, world oil demand would go on to increase by one hundred fold. We are similar early days for all things digital.
We will yet see the first $10 trillion company. And who will it be? How soon? After GM became the first $10 billion company in 1955, it would take 40 years to see the first $100 billion valuation (GE, 1995), and then only about 20 years to Apple’s $1 trillion mark. Would anyone bet against someone, perhaps Amazon, pulling ahead of Apple to reach the $10 trillion mark in 10 years?
So, sorry Trevor, capitalism is far from over. There’s lots of growth and money to be made yet and new records to be set.
This piece originally appeared at Forbes
Mark P. Mills is a senior fellow at the Manhattan Institute and a faculty fellow at Northwestern University’s McCormick School of Engineering. In 2016, he was named “Energy Writer of the Year” by the American Energy Society. Follow him on Twitter here.