‘Law of Large Numbers’ Claim Chowder

James B. Stewart, writing for The New York Times just under a decade ago:

Here is the rub: Apple is so big, it’s running up against the law of large numbers.

Also known as the golden theorem, with a proof attributed to the 17th-century Swiss mathematician Jacob Bernoulli, the law states that a variable will revert to a mean over a large sample of results. In the case of the largest companies, it suggests that high earnings growth and a rapid rise in share price will slow as those companies grow ever larger.

If Apple’s share price grew even 20 percent a year for the next decade, which is far below its current blistering pace, its $500 billion market capitalization would be more than $3 trillion by 2022. That is bigger than the 2011 gross domestic product of France or Brazil.

To be clear, Stewart never predicted that Apple couldn’t continue growing at that rate — he just posited it as somewhat improbable. But here we are.

(Let’s ignore that this whole thing has absolutely nothing to do with either the actual Law of Large Numbers or the Law of Truly Large Numbers.)

Apple’s market cap as I type this today: $2.94 trillion.

Wednesday, 29 December 2021