One must not miss the underlying message behind the business world's inevitably headlining event this week. The event was Apple, Inc., becoming the first corporation to break the trillion-dollar threshold in market-value. It happened just after one-century of US Steel becoming the first corporation to break the billion-dollar market-value threshold. It was not by accident that Andrew Carnegie and Piermont Morgan (of JP Morgan fame) would become giant movers and shakers of 20th century Wall Street business transactions, not to mention US transition from its 'nationalist' cocoon into a 'global' player. Nor too was the emergence of Steve Jobs and Tim Cook to take Apple where it has gotten. That critical message, then, becomes: do they symbolise the 21st Century in the way Carnegie and Morgan did the 20th Century?
One must say that innovation and opportunity were common in both cases. Shortly after the poor Scottish weaver left for the United States (1848), Carnegie picked upon the discovery of a more sophisticated person, an engineer, Henry Bessemer, in Sheffield, England, to smelt iron-ore, blend coal, and produce steel. As a pivotal British industry, steel fuelled the Second Industrial Revolution across selected parts of the world, while Carnegie revolutionised US industrialisation. As an employee of Pennsylvania Railroad, Carnegie slowly went on to become the world's largest producer of steel (and its richest person) by the end of the 19th Century. He sold all he had to JP Morgan in 1901 so he could pay society back, but the US Steel Corporation Morgan created as a financier remained one of the top global companies throughout the 20th Century, often ranked among Fortune 500's top-three, until the 1960s. Two other dominant 20th Century industries (automobile and petroleum) became intimately related to the growth of steel; and the three virtually underpinned not just the US but also the global economy.
JP Morgan was born mid-19th Century with a silver-spoon dangling out of his mouth in a banking family. This propelled him to becoming, along with Carnegie, one of the top 'cut-throat' financiers and 'robber-barons' responsible for the US 'gilded age' (1870s-1990). Either as JP Morgan or as JP Morgan and Chase, the corporation remains among the world's top-heavy corporations, and a leading financial institution, even today.
Note some of the underpinnings of 20th Century business. First, a wide variety of 19th Century innovations propelled 20th Century manufacturing to the pedestal. Second, manufacturing diversified, slowly building an intimate relationship with finance. Third, even if manufacturing slackened or became uncompetitive, financiers became part of a new sector increasingly in the 20th Century, better known as 'services', eventually rising to the 21st Century pedestal. Finally, because of all of the above, financiers would remain central with new 21st Century developments (see Scopus of August 03, 2018), especially in the information industry.
Here the cutting-edge person was Apple's Steve Jobs, himself of as modest an origin as Carnegie was over a century ago. Known as the 'Mozart of business' (Shaun Rein, Forbes, April 13, 2010), along with Steven Wozniak, he initiated the micro-computer revolution in the 1970s, from his own garage. Apple's breakthrough on the way to the trillion-dollar landmark (which PetroChina briefly hit in 2007 before collapsing spectacularly), was not Macintosh in 1984 (with desktop and laser printing the next year), nor iPod in 2001, but the iPhone cellular in 2007. By the time he died in 2011 (and Tim Cook took over), Apple Inc.'s shares skyrocketed by 1,000 per cent since 2007, but 50,000 per cent since 1980, with market-value spiralling upwards from $106 billion in 2007 to the trillion-dollar mark today. It is expected to stay here, unlike PetroChina in 2007 (when the Great Recession was set to start, and since when it began its collapse to $250 billion today; even the 2016-17 plummeting petroleum prices indicated the increasingly fragile basis of this as a trillion-dollar market-valued business).
One reason why this Apple-centric optimism is the stupendous competition it is facing, particularly from Amazon (claiming over $900 billion in market value today), as well as Alphabet, Google, and Microsoft (each valued over $800 billion), all in the same software business. Then when we sprinkle in some financiers and other software corporations at a slightly lower threshold (still over $500 billion in market-value), like Facebook, Alibaba, Berkshire Hathaway, Tencent Holdings, and JP Morgan and Chase, then we really have a dynamite sector that this century cannot run away from or run over.
Across a 100-odd-year cycle, we have seen the United States, primarily because of the innovation/opportunities created by the spark-plug (the leading) enterprise and reflected in the very sector that enterprise belongs to, climb to become the world's top industrialised country. Then, when it lost its competitiveness in this arena, the United States built a huge advantage in another (the information technology, or IT industry). Other countries have benefited from coat-tail effects.
Yet, free-riding only goes so far when the size and duration of the underlying infrastructure begins to wane or waver. As the previous article in this series indicated, whereas the assembly-line was the defining infrastructure of the manufacturing society, software behind the IT outburst has displaced that hardware: whereas an assembly-line could be functional competitively for at least one generation (between 20 and 30 years, depending on which country), software barely lasts 2 or 3 years today to be captivating enough.
As competition grows, software carries fewer requirements than hardware: its only sine qua non being upwardly-mobile intellectual skills, whereas for hardware, this list expands to include physical skills, some intellectual engine somewhere, location, physical assets, and capital. It can also be readily replicated: an agrarian society could, and can, not industrialise without some enormous multifaceted reforms, but a farmer can easily become, as anyone else, a skilled software programmer, even without being educated. Jobs epitomised this. In other words, any lonesome resident, say, up in the Sylhet hills, could easily revolutionise some key global industry/sector on-line with some breakthrough software.
This brings us down to why the IT industry is so fickle. It took the mind not only of a genius, but also one with a vision, such as Jobs, to set us on this pathway; but without steady-hands and pragmatism, like Cook's, it would be hard to walk this pathway today without slipping. Therefore, though we might see many companies join Apple in its new trillion-dollar club, their stay is unlikely to remain as long into the 21st Century with as much revenue to command as was true of US Steel or JP Morgan and Chase during the 20th Century with theirs.
That does not necessarily mean another spark-plug change in another sector. The IT and services sectors have ample ammunition for multiple countries to unleash and exploit. With the onset of the Fourth Industrial Revolution, artificial intelligence may push us as the last human-driven and human-coordinated frontier. Both these sectors can take us to that next threshold themselves, by which time some of us will have entered an automated world.
Before getting to that currently chimerical world, one must first come to terms with tectonic changes within this very planet itself. The next article addresses business's shifting geographic fulcrum.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.