We’re at a record high, according to all the indices that spam our computers, phones, and TVs. The S&P closed at 3,389.78 on August 18, 2020. We’re in the middle of an ongoing COVID-19 pandemic in the United States. The pandemic has hit the globe asymmetrically, and it his hit the United States harder than other parts of the world.
As of writing this, 175,617 Americans have died from COVID-19. About 500 to 1,000 Americans die each day, and anywhere from 50,000 to 100,000 new cases spring up alongside those deaths.
Yet, America’s largest companies have grown vastly larger on the other side of this catastrophe.
Starting with tech.
The top 5 companies in the Nasdaq-100 are Apple, Amazon, Microsoft, Facebook, and Alphabet (Google). The weights they carry in that index in order: 13.6%, 11.2%, 10.89%, 4.28%, and 7.2%. They are 47.2% of the performance of the index.
The other 95 companies make up the remaining 52.8%.
These companies also exist in the S&P 500. Their weights in that index in order: 6.7%, 5.7%, 4.95%, 2.25%, and 3.3%. They make up 22.9% of the performance of the S&P 500.
The total market capitalization of these five companies is around $8.05 trillion. From the recent trough, they have cumulatively more than doubled in valuation.
If we look at everything else that isn’t healthcare or tech-related, we’ll note that none have recovered. Whether that is any of the banks, airlines, aerospace, retail, and energy, we find that most companies have a long road ahead to recovery.
The divergence between the immaterial and the material.
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
These were the words of Tom Goodwin in a Techcrunch essay in 2015.
Since then, the technology sphere has supercharged to distant lands. Lands that are mostly non-existent, except for on your phone or extracted from your likes and dislikes.
The advertising game gone rogue.
Wrapped in the cocoon of earnings that the tech behemoths make is a little ugly truth: They own all the data. Recently, the major technology companies’ CEOs testified before Congress.
Some of the remarks and truths were stunning in the unravel:
“You have access to data that far exceeds the sellers on your platform with whom you compete. You can track consumer habits, interests, even what consumers clicked on but then didn’t buy. You have access to the entirety of a seller’s pricing and inventory information past, present, and future. And you dictate the participation of third-party sellers on your platform. So you can set the rules of the game for your competitors but not actually follow those same rules for yourself.” — Congresswoman Jayapal
Whether it is tracking data that seems illegal or using infinite power and reach to kill innovation, the technology hub that’s beginning to lay nest in everyone’s phone and home is getting scary:
“Facebook has used its market power to either purchase or replicate the competition, and Facebook, Facebook Messenger, WhatsApp, Instagram are the most downloaded apps of the last decade. Your company, sir, owns them all. We have a word for that, and that word is monopoly.” — Congressman Neguse
In an environment where the entire advertising channel is controlled by the company that is competing with your product, naturally, the question of conflict of interest arises.
And, for the longest stretch of time now, that conflict of interest is exactly why the Nasdaq and the S&P 500 have been supercharged to newer heights. Because, for so long, nobody has been paying attention to what’s happening behind the scenes of the digital world. For so long, the way these entities have made money hasn’t been a question of ethics and legality.
At least, until now.