The Most Valuable Company in 2050

Today, the most valuable American companies (by market capitalization) are Apple, Amazon, Alphabet (Google), Microsoft, Berkshire Hathaway, and Facebook. Five of these six companies are technology companies. Of the 5 tech companies, only two of them existed 30 years ago (Apple and Microsoft). Apple dominates high-end consumer technology products and services. Google dominates on-line paid search. Amazon increasingly dominates retail. Facebook has over 2 billion active users. Yet, as inconceivable as it sounds, there is a chance that in 30 years, none of these companies will be among the 5 most valuable American companies. 

The history of American business and companies provides strong evidence that the leading company in 30 years may be none of the companies that are in the top 5 today. The following table shows the most valuable companies in 2018, 1988, and 1968. Of the 5 companies from 30 years ago (1988), only Exxon (ExxonMobile) is in the top 10 today. Looking at the top companies from 50 years ago (1968), two of these companies (GM and Kodak) went bankrupt. GM, with the help of the US government, was able to remain in business. AT&T was forced to break up in the 1980’s by the US government after a long anti-trust trial. Standard Oil of NJ ultimately became ExxonMobile, and is the only one of these companies still among the top 10 most valuable companies today. 

Over time, the US economy has changed and will continue to change. 100 years ago, the most valuable companies were industrial producers, including steel companies, food processing companies, as well as the Standard Oil and AT&T monopolies. US Steel was by far the most valuable company in America. In the 1950’s and 1960’s, the most valuable companies were large corporations and conglomerates. The invention of the semiconductor and integrated circuit in the late 1950’s and 1960’s ultimately led to a computer and information revolution in the late 20th and early 21st centuries. As we look forward 30 years, new industries and companies will rise, aided by artificial intelligence (AI) and dramatic advances in technology, health, and medicine. Innovation will overcome the advantage of size.  

What does this all mean when it comes to investing? First, no one can predict what a particular stock will do over the next 10, 20, or 30 years, no matter how dominant the company might be today. Investing a large chunk of your assets in one company may sometimes be profitable in the short-term but may also underperform over longer periods. This is an important lesson for anyone that holds a large part of their wealth in one company, as many technology workers do today. Looking back, if you had invested all your funds in GM in 1968, you would have lost your entire investment when the company went bankrupt in 2009. IBM, the leading tech company in 1988, has dramatically underperformed owning the Vanguard S&P 500 index fund (VFINX). Compound annual returns for IBM over the last 30 years were less than 7% per year while the S&P 500 fund returned over 10% per year (both including reinvestment of dividends). This underscores the importance of diversifying your investments.    

What will be the most valuable company in 2050? It is impossible to predict, but there is a decent chance that it doesn’t even exist yet.      

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