Wealth Creation: Creativity Beats Oil

 By Shlomo Maital


A brilliant long-view analysis of capital markets is provided  by the New York Times (Karl Russell)..   The graph above shows “years publicly traded since 1926” on the X axis, and “total wealth creation since 1926” on the Y axis. The area of the circle shows the annualized stock return (capital gains and dividends). So this lovely graph shows us 3 pieces of information in two dimensions.

   The 90-year old companies are mainly resource-based (oil, e.g. Exxon, Conoco, ), consumer products (Pepsi) and Pharma.

     The newer companies are high-tech and digital.  

     Most striking:   Apple has, in 2017, overtaken Exxon as a wealth creator, even though it is half Exxon’s age. This is because of Apple’s astonishing 30% +   annual return.   And Microsoft has created more wealth than, say, General Electric or IBM, with over 40% annual return.   The tech stocks (the fat circles) have generated much higher annual returns than the traditional old-line companies (fairly slim circles).

       What this means for individuals, companies, small businesses, and whole countries, is simple.   The digital revolution is real. If you haven’t got on board yet, you’ve missed the boat. But maybe it’s not too late.   If your country is still resource-based (oil nations, like Russia, Chad, Gulf States, Iran), you are out to lunch. Your leadership has be asleep.  

       What will this graph look like ten years hence? Fifty years hence?   I’d give a lot to know.