
The Race to a Trillion - allenleein
https://www.aboveavalon.com/notes/2018/7/11/the-race-to-a-trillion
======
adwn
> _Apple is a design company selling tools that empower people. [...]
> Microsoft is an enterprise-focused services company focused on helping
> people get work done. [...]_

Oh dear, what drivel. By that logic, BP is not an oil and gas company, it's
logistics company helping people and goods get to where they're needed the
most. And Deutsche Bank isn't a bank, it's a charity focused on making
people's and companies' dreams come true (for a small fee).

Please spare me this bullshit.

~~~
doyoulikeworms
I think the sentiment is true, though, that the giant tech companies are a
diverse set of businesses. There’s overlap between them, but they focus on
different things and are successful in (mostly) each their own market.

~~~
nextstep
I agree that the broader point is true: each giant is using software (and
hardware in some cases) to build massive infrastructure businesses (logistics,
cloud, communications, advertising/search, etc.).

But I think this analysis overlooks the ways where these tech companies do
sort of compete: search advertising is a duopoly between Google and Facebook;
search has some (very weak) competition from Microsoft and Amazon; cloud
services are competitive between Google and Amazon... I think the stronger
pattern is Alphabet is in everything and in some way competing with every
other giant.

~~~
jzebedee
Azure is by far the next biggest cloud provider after AWS. GCP is the lame
duck playing catch up.

~~~
lawrenceyan
Is that really what you think? Google Cloud is far and away the best service
for machine learning right now. There's a reason why basically every company
that has ML training needs is switching from AWS to GCP. Not only is
Tensorflow, which is the only production machine learning framework that
anyone uses, basically 100% integrated with GCP, the Google Compute Engine is
the only way you can get access to TPUs.

At my company, we use GCP almost exclusively with preembtible TPUs as our
primary compute for training models. It's not cheap, but you can't beat the
performance and quality. Plus when you compare it with how much the engineers
here are getting paid, it's a drop in the bucket ultimately.

~~~
mooreds
How much of the average compute work load for companies and startups is
machine learning?

~~~
lawrenceyan
Not sure about others, but in my field, it's probably >99%.

~~~
mooreds
Sounds like GCP is a great fit for you, then!

I have worked in a number of industries and rarely needed any ML (though it
may be coming). Most folks need clean data and linear regressions in my
experience.

------
RestlessMind
Due to multiple QEs and low interest rates in developed economies across the
globe, a Trillion won't be what it used to be by the time these companies
reach that milestone.

(Just like a Million ain't what it was anymore at family level[1]).

[1] [https://www.statista.com/statistics/300451/us-millionaire-
ho...](https://www.statista.com/statistics/300451/us-millionaire-households/)

~~~
adventured
> a Trillion won't be what it used to be by the time these companies reach
> that milestone

That's a far fetched premise given several of those companies are likely to
hit that line in the next few years. It's not like Apple is $800b away from
the line. Their stock needs to merely move up 7%. Amazon needs to move 15%.

At a minimum Apple, Amazon, Google, and Microsoft look poised to easily hit a
trillion dollars in the not very distant future, obviously barring a market
crash (and nobody knows when that is coming). A trillion dollars will still be
a trillion dollars, so to speak, in five years.

~~~
dannyw
What GP means is presumably, $1 trillion may be say 0.00x% of the monetary
supply back in 2007.

But today, $1 trillion may only be 0.000x% of the monetary supply today.

It’s true that government measures of inflation has been fairly low. But those
measures (since the 2000s) have been hedonstically adjusted; meaning say a
laptop that’s 10% faster is considered 10% cheaper even if the price is the
same.

------
raphinou
Some expect a correction to happen soon. Isn't the fact that people focus on
that trillion achievement an indication that (some) investors currently don't
focus on the fundamentals? We've seen some very high volatility of Facebook
and Twitter stocks last week, even when fundamentally the news triggering
these drops in value was not dramatic. Is that another indication?

If there's a big correction, these stocks might get back to a point where the
trillion goal is again very far.

Anyone knowledgeable willing to share further insights and opinion?

~~~
wahern
Personal wealth, globally, is nearing USD $300 trillion. See
[https://www.credit-
suisse.com/corporate/en/research/research...](https://www.credit-
suisse.com/corporate/en/research/research-institute/global-wealth-report.html)

That's _personal_ wealth, not including assets held by corporations. The
fundamentals are that there's a surfeit of cash to invest globally. The
predominate driver of growing wealth is the emergence of the developing world,
not QE and other monetary policies. A correction will come, but it won't be so
dramatic as to take the bottom completely out from underneath existing assets
prices (not unless there's some global financial calamity), especially strong
ones like Facebook or Amazon (Twitter is a different story). There's just too
much money and not alot of places to park it with stable markets and/or high
rates of return. The U.S. offers both. I wouldn't be surprised if in the next
downturn stocks like Facebook remain buoyant and its everybody else that
suffers.

~~~
TheSpiceIsLife
> That's personal wealth, not including assets held by corporations.

Are not all assets held by corporations also personal wealth in the form of
shares?

I'm not well versed in corporate finance, so correct me if I'm wrong, thanks.

~~~
whack
You're right. The $100B cash held by Apple is already priced into its market
cap, which is turn included in the personal wealth of all its investors. If
someone were to sum up both personal wealth and corporate assets, they would
be double counting.

That said, I think wahern's general point is still sound.

~~~
wahern
I'm no financial expert, but AFAIU the mechanics of securitization mean that
we can assume some multiplier greater than 1x.

You can borrow against your shares at the same time Apple can borrow against
its cash holdings and, ceteris paribus, the end result will be more debt than
Apple's cash reserves even after considering a reduction in Apple's stock
value. And this debt can be used to buy more assets. (Basically, fractional
reserve isn't just a banking thing. It's inherent to the mechanics of
capitalist finance.)

In addition, the ability to do this enhances capital allocation efficiency,
which adds independent value to the entire system.

So there's not a simple function mapping corporate wealth to personal wealth,
though you certainly can't simply sum corporate-held assets to personal
wealth. I'm happy to be corrected for the implication.

------
_zachs
If you're into this sort of higher-level tech. analysis, my opinion is that
Ben Thompson ([https://stratechery.com](https://stratechery.com)) does a much
better job.

~~~
zeusk
He spews bullshit is all I've seen.

And from what I've heard myself, he says he worked in Windows and understands
technical issues but his linkedin profile says he was a Business Development
Rep ((who're always under the sales org and not a specific product org)).

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geeostation
its strange to Microsoft still in the race after loosing web, search, mobile
and much of the developer mindshare

~~~
Asooka
Windows is still the de-facto standard x86 and x64 OS, powering everything PC-
like from home desktops and office desktops to industrial control PCs, kiosks,
ATMs, cashier systems and so on. I don't see this changing in the next 20
years, unless Microsoft make a concentrated effort to completely break
Windows.

~~~
nwah1
They are a fairly close 2nd in cloud computing, and growing faster than AWS.

And remember that Oracle is an enormous company just by focusing on
enterprise, but MS is way larger just in enterprise. Sharepoint, SQL Server,
etc etc.

And even though they are a very distant second in search, that product alone
produces more revenue than most companies can ever dream of. It is actually a
huge financial success.

------
dkrich
I think the trillion dollar mark is actually a very important psychological
barrier. I've long felt as long as this debate about which one will be the
first to cross that the market is sort of waiting for permission to value a
company at over a trillion. I think it will be Apple and pretty soon, but no
matter which company does it, I think it's important because I think others
will be quick to cross over as well and this will blow the ceiling off the
equities market. A trillion is a lot of money, but it's only about 10% higher
than where Apple trades now, so there's no reason why they can't carry that
valuation and quite a bit higher, especially as inflation continues to rise.

~~~
SomewhatLikely
Pretty soon indeed.

------
rwmj
I wonder when these companies will start offering dividends? I believe only
MSFT (edit: and Apple) have done so far.

~~~
scarface74
Facebook needs a war chest to buy up potential competitors.

Amazon has shown that it can use its money to profitably invest in other
verticals and its a capital intensive business.

Google probably should start paying dividends. They still haven’t shown they
can invest money to diversify from being an ad business into other profitable
verticals.

~~~
wpasc
I was watching a Peter Thiel/Eric Schmidt discussion wherein Peter Thiel
essentially says, "Google can't dare pay a dividend because it would mean they
admit they're done innovating."

Provocative, but sorta true. The company that pretends to be the most
innovative in the world might not do so well if they have the image of paying
out dividends.

~~~
asaph
Counter-example: AAPL pays dividends and is widely viewed as innovative.

~~~
maneesh
I would disagree that Apple is viewed as innovative. Granted, this is
anecdotal based around people I know, but Apple is widely considered as non-
innovative and resting on its iPhone laurels -- at least since Jobs passed
away.

~~~
scarface74
I'm not going to be crazy enough to say that there will never be anything
bigger than the phone, but can you see anything that any company can do in the
next five years that is more ubiquitous than the smart phone?

75% of the world's population has a cell phone
([https://www.rferl.org/a/report-says-75-percent-of-worlds-
pop...](https://www.rferl.org/a/report-says-75-percent-of-worlds-population-
have-mobile-phones/24648234.html)). No matter what any consumer electronic
company introduces in the next 5-10 years, I doubt that it will have more
impact than the consumer smart phone trend the iPhone started.

What company has been innovative in the consumer electronic space in the past
decade? No matter what Apple does, I don't realistically see Apple or any
other company introducing a consumer electronic product that is as successful
(revenue wise) in the next decade.

~~~
maneesh
I'm extremely extremely biased, but I run a company called Pavlok [1], with a
goal to be more ubiquitous than the phone by 2030 (not quite 5 years).

We build technology to help people change habits, with instantaneous positive
and negative feedback, and a digital currency called Volts[2] that rewards and
pays people to do good habits.

Our goal is to sell the product in the initial phases (next 5-7 years), and
eventually give them away to everyone in the world. One of our core products
(unreleased) attaches directly to iphones and android -- I can't give too many
details, but it becomes part of your phone.

Again, I'm extremely biased. But they say the best way to predict the future
is to create it, so ¯\\_(ツ)_/¯

[1] [https://pavlok.com](https://pavlok.com) [2]
[https://pavlok.com/volts](https://pavlok.com/volts)

------
keymone
i wonder what did races to 1, 10 and 100 billion look like?

~~~
sverige
One way to think of it is that Bezos' personal wealth is still short of what
Carnegie or Rockefeller accumulated when adjusted for inflation or viewed as a
percentage of total personal wealth. The Gilded Age was still more excessive
than what we see today -- but not by much.

~~~
mikorym
By "or", do you mean that both options are true?

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jadedhacker
I'm not sure I believe that S&P 500 chart proves his point that we are living
in historically similar times to the 1960s. S&P looks at the top of part of
the distribution, not the whole distribution. If for some reason, there were
more or fewer companies, it would mean something different. I will note that
we did in fact break up Bell Telephone and standard oil. If we act quickly,
maybe we'll never get to 1T.

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titzer
Umm, wat. Alphabet has two classes of shares that trade under different ticker
symbols, GOOG and GOOGL. Together they add up to $1.6t. The fact the author
has overlooked this is astonishing.

[edit: sorry, my mistake: the market cap reported is not actually outstanding
shares times price, pointed out below]

~~~
CamelCaseName
Uhh, what?

You are right that there are two public tickers for Alphabet, GOOG and GOOGL,
however the market cap you see when you search for their ticker is for the
whole company, not the class alone.

Also, Alphabet has 3 classes of shares. A (GOOGL), B (privately held), and C
(GOOG)

I assure you, the market cap is roughly $870B as of this writing.

