Recently I was reading one of my favorite magazines, Fortune. When I was a kid, I used to have a subscription to it (that's right, I was 13 and had my own subscription to Fortune) and my favorite issue was always the Fortune 500 issue in May of each year. The Fortune 500 issue, for those of you who don't know, started in 1955 and chronicles the 500 largest companies in the United States. Nerd that I am, for some reason I love reading the financial stats and attempting to glean interesting facts from them.
Andrew Carnegie, whom many know from his most philanthropic donation, Carnegie Hall, was one of the founders (along with JP Morgan, founder of what is now JP Morgan Chase Bank) of the world's first $1 billion dollar company, U.S. Steel. Although it was called the "first billion dollar company" because its market capitalization (or how much its worth on the stock market) was over $1.4 billion dollars ($33 billion in 2006 dollars), its sales were far less. U.S. Steel's sales didn't actually top $1 billion dollars in sales for a single year until 1916.
While a market cap of $1.4 billion doesn't seem that impressive nowadays since Exxon Mobil is worth over $426 billion dollars, let me put this in the proper perspective for you. At the point that U.S. Steel was created in 1901, its market cap was 7% of the US GDP (Gross Domestic Product, or the total value of all the goods and services created by every individual and company in the entire country). If Exxon was worth 7% of the 2007 US GDP (13.2 trillion dollars), it would be worth $924 billion, or a 116% increase from its actual market cap. No modern company will ever be able compare to the sheer magnitude of the U.S. Steel deal in 1901.
Switching gears for just a second, if you look at the link above (2007 US GDP), you'll notice that the U.S. is listed second but still is in first place. That's because the entire European Union (27 countries in 2007) have a combined GDP of 14.6 trillion, which is barely 10% more than the U.S. by itself. So, let me get this straight. The United States is so awesome that almost the entire continent of Europe put together is still barely better then us. God bless the USA, and God bless capitalism. For any who think that socialism or communism are the ways to go, please board the clue train to your right. Capitalism rules! Sorry for that side track, but I love my country.
So in 1916, U.S. Steel sales surpass $1 billion dollars (or $19 billion in 2006). On a side note, U.S. Steel's sales last year were only $14.45 billion, or a little more then two thirds of what they were 106 years ago. Sadly, even once great companies go the way of the dodo bird. Even today though, $1 billion dollars in sales in a year is impressive, but at the time this was an unbelievable feat.
On toward the future, we didn't see the first company hit $10 billion in sales for a single year until 40 years later (General Motors, 1956). It took a further 31 years to hit $100 billion in sales for a single year (General Motors, 1987), a further 13 to hit $200 billion a year (Exxon Mobil, 2000), and a mere 6 additional years to hit $300 billion (Exxon Mobil, 2006). Every successive increment is getting faster and faster. Part of the reason the yearly sales of major companies are growing exponentially like this is because of inflation and the globalization of many major companies like Exxon, GM, and Walmart to name a few. Still, it is very impressive that companies like Walmart can continue growing at the rates they do. So, how long will it be until a company hits $1 trillion?
Based on that growth rate (10%), Walmart would become the first company in history to have $1 trillion dollars in sales in a single year in only 11 years. At that point, 2018, Walmart will only be a 56-year-old company. They would go from $0 in sales to $1 trillion dollars in 56 years. Say whatever you will about Walmart's labor practices, crushing small businesses, or whatever, but you have to be in awe of that accomplishment.
The real question isn't when an estimate shows them hitting that mark, but rather could a single company actual be that big? Would it be crushed under the weight of its own administration? Would the labor issues of running a company the size of a small country make them a political nightmare? Well, I, for one, think that a company can and will be that large.
Walmart as the largest company in the world, currently sells 9% of all the retail goods in the US. While this is a staggeringly high percentage for a single company, they easily have room to grow in the U.S. for a while. Worldwide, they are barely a footprint in any other country. To put it in concrete math terms, Walmarts total worldwide sales are 6/10ths of 1 percent of the worldwide GDP of ($48.25 trillion dollars in 2006). Lee Scott, the CEO of Walmart once said that he thought Walmart had hit 1% of its global potential, and I for one believe him. With the limitlessness of the products Walmart carries (I mean they have their own bank in most stores now!), they can easily grow for years to come.
To me the question isn't if, but when, and will the price of oil drive Exxon's revenues so high that they'll get there first. If Walmart is the first, they might not look like the store we see today. No one would have guessed 20 years ago when IBM dominated the personal computer market that today they would have completely abandoned that market (since selling their laptop division to Lenovo in 2004), and a $1 trillion dollar Walmart might look different. Well whoever does end up accomplishing it, I'll stand steadfast behind the statement that it's going to happen within 15 years...
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Back to the present. I was reading about Walmart in Fortune. Say whatever you want about them; they are growing an absolutely gargantuan company -- $352 billion in sales in 2006, at an 11% growth rate. As I said in my CompUSA Who? article, Walmart has to gain $106 million dollars a day in new business to keep this growth rate up. I've been watching them for ten years thinking, "They can't possibly grow 10% more this year!," but every year they do it again. Many people have conjectured that Walmart's ultimate growth potential won't be much larger than they are today since so many factors are working against them (anti Walmart protesters, administrative overhead, foreign governments not allowing them into their countries, etc...), but I think that history shows us that they can become a 1 trillion dollar company, meaning that such a feat IS possible. In thinking about Walmart's future of growth, it reminded me of a book I read when I was a kid about Andrew Carnegie and another large company that people said couldn't exist.
Andrew Carnegie, whom many know from his most philanthropic donation, Carnegie Hall, was one of the founders (along with JP Morgan, founder of what is now JP Morgan Chase Bank) of the world's first $1 billion dollar company, U.S. Steel. Although it was called the "first billion dollar company" because its market capitalization (or how much its worth on the stock market) was over $1.4 billion dollars ($33 billion in 2006 dollars), its sales were far less. U.S. Steel's sales didn't actually top $1 billion dollars in sales for a single year until 1916.
While a market cap of $1.4 billion doesn't seem that impressive nowadays since Exxon Mobil is worth over $426 billion dollars, let me put this in the proper perspective for you. At the point that U.S. Steel was created in 1901, its market cap was 7% of the US GDP (Gross Domestic Product, or the total value of all the goods and services created by every individual and company in the entire country). If Exxon was worth 7% of the 2007 US GDP (13.2 trillion dollars), it would be worth $924 billion, or a 116% increase from its actual market cap. No modern company will ever be able compare to the sheer magnitude of the U.S. Steel deal in 1901.
Switching gears for just a second, if you look at the link above (2007 US GDP), you'll notice that the U.S. is listed second but still is in first place. That's because the entire European Union (27 countries in 2007) have a combined GDP of 14.6 trillion, which is barely 10% more than the U.S. by itself. So, let me get this straight. The United States is so awesome that almost the entire continent of Europe put together is still barely better then us. God bless the USA, and God bless capitalism. For any who think that socialism or communism are the ways to go, please board the clue train to your right. Capitalism rules! Sorry for that side track, but I love my country.
So in 1916, U.S. Steel sales surpass $1 billion dollars (or $19 billion in 2006). On a side note, U.S. Steel's sales last year were only $14.45 billion, or a little more then two thirds of what they were 106 years ago. Sadly, even once great companies go the way of the dodo bird. Even today though, $1 billion dollars in sales in a year is impressive, but at the time this was an unbelievable feat.
On toward the future, we didn't see the first company hit $10 billion in sales for a single year until 40 years later (General Motors, 1956). It took a further 31 years to hit $100 billion in sales for a single year (General Motors, 1987), a further 13 to hit $200 billion a year (Exxon Mobil, 2000), and a mere 6 additional years to hit $300 billion (Exxon Mobil, 2006). Every successive increment is getting faster and faster. Part of the reason the yearly sales of major companies are growing exponentially like this is because of inflation and the globalization of many major companies like Exxon, GM, and Walmart to name a few. Still, it is very impressive that companies like Walmart can continue growing at the rates they do. So, how long will it be until a company hits $1 trillion?
Based on that growth rate (10%), Walmart would become the first company in history to have $1 trillion dollars in sales in a single year in only 11 years. At that point, 2018, Walmart will only be a 56-year-old company. They would go from $0 in sales to $1 trillion dollars in 56 years. Say whatever you will about Walmart's labor practices, crushing small businesses, or whatever, but you have to be in awe of that accomplishment.
The real question isn't when an estimate shows them hitting that mark, but rather could a single company actual be that big? Would it be crushed under the weight of its own administration? Would the labor issues of running a company the size of a small country make them a political nightmare? Well, I, for one, think that a company can and will be that large.
Walmart as the largest company in the world, currently sells 9% of all the retail goods in the US. While this is a staggeringly high percentage for a single company, they easily have room to grow in the U.S. for a while. Worldwide, they are barely a footprint in any other country. To put it in concrete math terms, Walmarts total worldwide sales are 6/10ths of 1 percent of the worldwide GDP of ($48.25 trillion dollars in 2006). Lee Scott, the CEO of Walmart once said that he thought Walmart had hit 1% of its global potential, and I for one believe him. With the limitlessness of the products Walmart carries (I mean they have their own bank in most stores now!), they can easily grow for years to come.
To me the question isn't if, but when, and will the price of oil drive Exxon's revenues so high that they'll get there first. If Walmart is the first, they might not look like the store we see today. No one would have guessed 20 years ago when IBM dominated the personal computer market that today they would have completely abandoned that market (since selling their laptop division to Lenovo in 2004), and a $1 trillion dollar Walmart might look different. Well whoever does end up accomplishing it, I'll stand steadfast behind the statement that it's going to happen within 15 years...
Think I'm right? Think I'm wrong? Click here to join the discussion about this post.
