The Rise of The Trillion-Dollar Company
August 8, 2014
Over the past few years, investors have acclimated to hearing the word "trillion" on a regular basis. We no longer pause when we hear the word or assume it was a mistake. While the size of a trillion anything is almost more than most of us can truly comprehend, investors today are routinely hearing this number.
Investors most often encounter the word "trillion" as it relates to our nation's government debt. But more and more, we are hearing that someday soon a single company will be worth (per the market price of its stock) a trillion dollars. This will be a first when it happens, and the moment it happens will be historic.
The value of a publicly traded company is called its market capitalization. This is a straightforward valuation that is simply the number of outstanding shares of stock multiplied by the current share price. The market generally classifies stocks into three size categories: small, middle and large. Small companies, referred to as "small caps," have less than $1 billion in market capitalization. Mid-cap companies have up to $10 billion in "market cap," while large-cap companies exceed $10 billion.
As of July 31, the largest company was Apple, with a market cap of $579.6 billion. Over the past couple of years, Exxon and Apple have jockeyed between first and second place, with Google, Microsoft and Berkshire Hathaway rounding out the top five largest publicly traded companies.
A trillion-dollar company may once have been far-fetched, but not today. Today, the question is who will be the first and when. The race to a trillion-dollar market cap is no small dash. Only five economies in the world had a GDP exceeding $1 trillion in 2012. A trillion-dollar company would be larger than the economies of Turkey, Indonesia, Switzerland and Saudi Arabia.
One trillion is a very, very big number. It is so big that most of us have trouble comprehending just how big it is.
How big is a trillion?
A trillion is a million millions. It's a thousand billions. It's a one followed by 12 zeroes: 1,000,000,000,000.
One million seconds comes to about 11½ days. A billion seconds is 32 years. And a trillion seconds is almost 32,000 years. NASA calculates it to be exactly 31,688 years, 269 days, 1 hour and 46 minutes.
If you laid 1 trillion dollar bills end to end, you could make a chain that stretches from Earth to the moon and back again 200 times before you ran out of dollar bills.
One trillion dollars would stretch nearly from the earth to the sun.
It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out 1 trillion dollar bills.
Instead of using one-dollar bills, let's consider a thousand-dollar bill. A million-dollar stack of thousand-dollar bills would be about 4 inches thick, and a billion-dollar stack would be about 350 feet high. A solid stack of thousand-dollar bills totaling $1 trillion would be 68 miles high. President Ronald Reagan made this analogy back in 1981 when our country's debt first appeared to be nearing the trillion-dollar mark. Today, our national debt is more than $17.6 trillion.
Investors are certain to hear the word "trillion" more and more frequently as time moves on. Hopefully the more we talk about this number, it will become easier to grasp its size and magnitude.
Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.
