Apple looks to break the law of large numbers

“These days, it’s hard to find a superlative that adequately describes Apple. But maybe simplest is best: biggest,” James B. Stewart reports for The New York Times.

“Measured by market capitalization, Apple is the world’s biggest company. This week it solidified its lead over Exxon Mobil, the previous titleholder, as Apple’s shares hit an all-time high of $526.29, which gave it a market capitalization of just under $500 billion,” Stewart reports. “Apple becomes only the 11th company to reach the top spot since 1926, according Howard Silverblatt, a senior index analyst for Standard & Poor’s.”

“Apple is so big, it’s running up against the law of large numbers,” Stewart reports. “Also known as the golden theorem, with a proof attributed to the 17th century Swiss mathematician Jacob Bernoulli, the law states that a variable will revert to a mean over a large sample of results. In the case of the largest companies, it suggests that high earnings growth and a rapid rise in share price will slow as those companies grow ever larger.”

Stewart reports, “If Apple’s share price grows even 20 percent a year for the next decade, which is far below its current blistering pace, its $500 billion market capitalization would be more than $3 trillion by 2022. That is bigger than the 2011 gross domestic product of France, Brazil and all but four countries.”

Much more in the full article here.

MacDailyNews Take: The only number that matters is Apple’s headroom (TAM) and there is plenty of that. How many people are still suffering with Windows PCs and do not own Macs? How many people do not own iPads? Or iPhones? Or Apple TVs? Or possible Apple televisions? Or, yes, even iPods? Billions. In fact, there must be over a billion people that have the means to buy an Apple product that do not have one yet. Until Apple saturates all of its markets and/or stops opening new markets, the only limit is the sky.


  1. Apple is proud of the numbers…
    but I believe as stated – they just want to get back to doing great work.

    all-time high of $526.29 <— cheers
    yet my eyes ain't on the money I enjoy the products

    1. Right on with that. This has been a once-in-a-lifetime experience for me in the stock market where I’ve put my money into a company I truly believe in and have a passion for. Otherwise, the stock market would feel pretty empty, to me anyway.

      1. Same here. That’s why I don’t understand those shareholders that continually claim that Apple is withholding their money from them and are so unsatisfied with how Apple executives are managing everything. As a shareholder, I realize that I was lucky enough to invest in a stock that practically makes all stocks pale in comparison. I only bought stock in 2004 with my dad just because I always liked using Apple products and figured the stock might go up a bit more. We never dreamed the stock would double or triple.

        I’m really grateful for what Apple has done so far and it makes no sense for me to berate the company merely for not giving a dividend. It’s a great company and they’re doing a lot for consumers and a couple of industries. In all fairness, how can I complain about that.

        Apple has surpassed so many companies in wealth starting basically in the heart of an economic meltdown and has ended on top by a fairly wide margin. How could anyone say that Apple doesn’t know how to handle its money properly? There are far too many armchair critics trying to manage a company that may exist just once in a lifetime of investment. I guess greed really blinds people.

    1. Exactly! The law of large numbers is usually what people think about when referring to the “law of probability”, always mixing them up. It just does not apply in a case like this, where there is a rational cause for the event.

      Now, if it were an upward spike in Dell’s stock price, THEN you might suspect a random fluctuation…

  2. Apples success depends on them making products that no one else can. The copy cats don’t even come close.
    Usually an innovation gets copied very quickly Google have come closest with android. But in that case the market is new and subsidies hide the original price so that apple can still generate high margins.

  3. The law of large numbers applies to any given industry Apple is in. But it doesn’t apply to Apple. Apple’s repetitive growth comes from disrupting new (to Apple) industries. As long as there are billion-dollar industries for Apple to go after, Apple’s growth rates can continue unabated.

  4. What you state about existing markets and products is true. And ANY market Apple wants next is theirs to take. What you leave out is the endless limits of Apple’s innovation. If they need another market to dominate, they can make that market with their own innovation and product and service development. Limits? What limits!

  5. The law of big numbers is real. Exponential growth does have it’s limits. What the “Analysts” are missing is that the “BIG NUMBER” for Apple is far far bigger than where they are now.

    IMHO, Apple has it right by not focusing on the numbers, but focusing on creating truly incredible products.

    1. There is also an upgrade cycle in which those of us with Apple products do occasionally buy a new product every year (iPhone, iPad) or four (Mac). Apple would have far less growth with those of us dumb enough to buy a new iToy each year.

  6. Apple is making to much money! They should be taxed more because they have more than me. They should have to buy everybody else gasoline because of the “big oil companies” screwing us over like Apple.

  7. PEOPLE the Law is the Law ….. And eventually it will work itself out, but in what Century is the question ……

    Seriously Apple has a ton of room to grow in various markets and probably ones we haven’t even thought of …. How long to reach the Law …… I’d say 7 years it should start to average out …..

    Until then we got plenty of room to run …..

  8. The TAM number is a bit misleading, IMHO. There are upwards of seven billion people on the planet. More than four billion of them live on less than $2 per day. They are not going to be buying any current Apple products any time soon. Even the total number of Windows machines sold aren’t all available, at least not soon. Apple products remain aspirational for many, but there is room for growth, to be sure, until the next available customer down the food chain just can’t afford it.

  9. Apple still has long ways to go. It’s a wonder that more people don’t see this. A couple of years ago CNN/Money had an article asking if Apple would ever catch up with Exxon in market value. The overwhelming majority of the readers responded saying, “No way. Apple has ‘saturated’ the market and it makes unnecessary toys.” Blah-blah-blah…

    What Apple is accomplishing right now is so unprecedented that people just can’t rely on past metrics to predict how Apple will do in the future. So the only axiom that they’re going by is: “What goes up must come down” and they keep thinking it can’t possibly go higher or things will slow down at this size of $100 billion+ in annual revenues.

    Apple is still not even close to attaining dominant market share in the handset and notebook/desktop (traditional PC) market. There is still a lot of room to grow there. The tablet (or iPad) market is still at the front end of the bell curve. Apple is only beginning to make its presence felt in the enterprise market. And then there is the TV market and I’m sure there are other content markets that Apple is eyeing as well to continue expanding the most complete and seamless ecosystem on the market.

    The projected numbers down the road (5~10 years) seem pretty mind-boggling at the current growth rates. Seriously, 5 years ago could *ANYONE* have predicted that Apple would be a $100 billion+ company raking in net profits at 28% rate? Even at a reduced revenue growth rate of 50%, Apple will reach nearly $550 billion in revenues in fiscal 2015 – well larger than even Walmart and Exxon. At the same growth rate Apple will easily surpass $1 trillion by 2017. Pretty insane…

    Can it be done? Surely, Apple must have their own internal projections about how much they could grow and how they’re going to mobilize their supply chain to meet the demands of such growth throughout the world. 50% revenue growth over the next 5 years *does* sound far fetched but the last quarter’s numbers were well beyond what people have always thought of as far-fetched or undoable.

    But as Tim Cook pointed out, Apple’s current numbers are still pretty small when looking at the broad global market. I think when Apple attains market share of around 35~40% in the handset market and roughly the same amount in the PC market while maintaining the majority (50~60%) in the tablet market is when it reaches the saturation point with its core products. In the meantime the overall market will also continue to grow – especially when the economy picks up again.

    By then, Apple should have broken into and pioneered new markets that we don’t yet know about. I’m sure Apple (under the guidance and tutelage of Jobs) has a good vision about the long-term future – probably as far out as 25 years or more based on the projected advancements of technology in general.

    Apple still has some catching up to do in the cloud arena and they’ll continue to have fierce competition from Google and Microsoft there and that’s a good thing. Making the iCloud feature-rich, reliable, secure and seamless seems to be something that Apple must achieve to keep growing. It really will be what holds everything together moving forward.

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