Can’t Stop Won’t Stop
"This is roughly true, but I think Apple, Microsoft, Amazon, Facebook and Google are 22% of the S&P 500's earnings. There are 500 companies in the S&P. Five of them are 22% of the earnings and similar percent of the market cap. And also, I think there's probably no one who comes to this call, myself included, who doesn't have fairly rosy outlooks for those companies. I think the consensus is they're all going to grow 15% a year. Microsoft's at 20% grower. Amazon's a 20% grower. Facebook has so much monetization left, yada, yada, yada. But if you assume that they all grow that quickly, if you assume that the S&P 500, I think we would all agree, is not going to compound it 15 to 20% a year over the next decade. But if these companies do, not only are they 22% of S&P 500 earnings now, but they're going to be 75% of S&P 500 earnings." - Carl Kawaja (Emphasis mine)
An excellent interview of Carl Kawaja on the Invest Like the Best podcast. Generally, we can think of the end. Our death, a company losing its ability to allocate capital in an effective way, a phone’s battery life. But yet we have these dominant ever spinning US big tech companies like the above 5 that seem to reject that finality. Plenty of R&D spending, competent leadership, ever present in everyday lives.
But yet we all have an inclination that surely there must be a crack eventually. But are these 5 the same companies that existed in the past? Microsoft is drastically different compared to Exxon Mobil, or at least that’s what I would like to think. But are they? I don’t have the answer, I certainly wouldn’t want to prognosticate on such, and I really don’t want to say “This time it’s different”. But maybe it is. Maybe these 5 will become 75% of S&P 500 earnings. I truly don’t know what to make of this, as nothing lasts forever, and there must come a time when the party ends. But these guys are the communication tool to let people know about the party, how the drinks got there, and how we’ll remember it. And it’s hard to see that entrenchment going away. Admittedly perhaps teh easiest thing is to just say at some point they’ll be broken up through antitrust, which at 75% of S&P 500 earnings seems plausible enough. But the thought experiment still stands, the ever prescient could they, and will they. Luckily enough, we’ll see the answer ourselves in the coming years.