Now, companies from a similarly small region occupy a similarly dominant role in the economy, which has powered economic growth over the last several decades. But a comparison between Detroit’s Big Three and Silicon Valley’s shows how much the economy around any individual company or place has changed.
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Investors now value tech as they once valued automotive (and oil) companies.
It was the IPO of the decade. Thousands of people flocked to brokers hoping to get their hands on some of the paper from one of the century’s most innovative and respected companies. Finally, finally, the common person could share in the wealth generated by the genius of … Ford.
The year was 1956, and Ford, privately held since its inception by the Ford family and (later) the Ford Foundation, was accessing the public markets. More than 10 million shares went on the market and were immediately snatched up by hundreds of thousands of investors at an opening price of $64.50. The Ford Foundation made $642.6 million in the sale.
It was the biggest IPO ever, as befit the automotive industry, which was the biggest in everything around the mid-century. Likewise, at the time Ford went public, the true behemoth of the American economy, General Motors, was the nation’s most valuable stock, running $263.27. And for good reason.
These companies make a ton of money.
In the second (1956) edition of the Fortune 500, Ford held the third slot in revenue and profit. That year, the company made $437 million dollars. General Motors took the top spot by becoming the first company to break $1 billion in profit that year ($1.19 to be exact). Only 16 companies even made $100 million in 1956. Chrysler was the least profitable of those companies, eking into the echelon with $100.1 million in profits.
The only rival the car industry had was the oil industry, which had the number-two company on Fortune’s list, Exxon Mobil, as well as seven others in the top 20 most profitable companies.
All this to say: making cars and fueling them dominated the American profit-making enterprise. Hell, even the two big tire manufacturers were among the top 35 profit-makers of 1956.
Cars were national. Tech is global.
But there are crucial differences between Detroit’s Big Three and Silicon Valley’s. One is that Silicon Valley’s companies are fully global enterprises.
Since 2015, the majority of Facebook’s ad revenue comes from overseas. Apple crossed that threshold in the first quarter of 2010, and now roughly two-thirds of the company’s revenue comes from abroad. Google, too, has long made a majority of its money outside the U.S., though its home country represents nearly half its revenue.
In fact, all the money that these companies are making overseas is one reason why they are valued so highly, Harvard Business School’s Shane Greenstein told me. “Since the election, the markets have factored in a presumed ‘tax holiday’ that allows firms to repatriate their foreign earnings without U.S. taxes,” Greenstein said. “That especially shapes the values of Apple and Google.”