Columbia Journalism Review:
The big market news today is about Apple’s gargantuan market capitalization reaching a new, stunning high. There’s a big problem with all of the headlines: They’re all false.
Apple is not the biggest or most valuable company in history—not by a longshot. That’s because the press is overlooking reality for the apparently irresistible pull of a headline that includes “Apple” and “record” = pageview gold.
Apple’s $622 billion market cap is a nominal record, which means “in name only,” or alternatively, not really. That’s because it’s a record only if you don’t adjust Microsoft’s 1999 market cap for inflation.
Keep this story in mind next time you read of something or other achieving “record” status. Always question the numbers and where they come from.
As Rene Richie said on Twitter, if you accounted for inflation, Gone with the Wind would be the largest money-making movie of all time. No one cares about numbers from 1939 OR 1999.
The point is, look at Microsoft now, and that was the top of a tech bubble. Apple has reached this value through two recessions and both MS and Apple have virtually the same P/E at the moment too.
I would expect this to be especially true for movies. Instead of stating records for revenues, state them in number of tickets sold per 100,000 population. (I know this sounds awkward and geeked out!)
This way, Gone With the Wind or The Wizard of Oz, perhaps the most viewed movies in theaters of all time, match up with Titanic, Avatar, and The Avengers as the most popular movies as measured by gross profits.
We tend to forget how important “adjusted for inflation” is when discussing the cost of just about anything.
My first reaction to the Apple record market cap headline was “Adjusted for inflation?”
My second was to move on to things that might actually be interesting. I spent zero effort checking.