“The market’s reaction Friday to the latest earnings results from Google, Amazon and Microsoft (read Fortune’s coverage here, here and here) got reader Carl Lambert — who posts here as RadarTheKat — thinking about the ‘law of large numbers,’ one of the most abused phrases in business journalism.”
“Here’s the article I wish someone would write,” he says. “And then he proceeded to write it.”
Among the arguments why Apple shares cannot outperform the market or its peers has been the oft repeated law of large numbers; the claim that Apple is too big to meaningfully grow and that its market cap, at nearly $680 billion, is so big that there aren’t enough investment dollars to move the needle. But last night the market unwittingly provided an irrefutable counter argument by taking the combined market caps of Google, Amazon and Microsoft to nearly $1.2 trillion. The market seems to have no trouble adding $70 billion to these three companies, whose combined profits are a fraction of Apple’s, but won’t allow the same for a single company. — Carl Lambert
“I last wrote about the so-called ‘law of large numbers’ a few years ago,” P.E.D. writes, “‘For the record, the law of large numbers—once shortened to ‘LOL numbers’ (as in ‘laugh out loud’) by a wag in our comment stream, was first formulated in the 16th century…'”
Read more in the full article – recommended – here.
MacDailyNews Take: The misused “Law of Large Numbers” is nothing more than a logical fallacy. There is certainly no “law” prohibiting Apple from achieving a market value of $1 trillion and beyond.
What is Apple’s share of the smartphone market? What’s Mac’s share of the PC market? How many hundreds of millions are primed to buy their first tablet, a market that Apple created and dominates with iPad?
Apple’s current size is meaningless because their addressable market is virtually limitless.
Apple: Breaking the law of large numbers and getting away with it – November 3, 2014
Apple and the myth of ‘The Law of Large Numbers’ – April 19, 2012
[Thanks to MacDailyNews Reader “Bill D.” for the heads up.]