At a speech in London last month, the economist and scholar John Kay used Apple, the largest company in the world in terms of market capitalization, as a typical example of a fast-moving modern business: The company has very few assets and a full-time global labor force of only 123,000—i.e. not that many, given its market reach and influence. It is what Kay calls a “hallow” corporation, and one in which the only thing that shareholders actually own is the stock certificate itself. “I wish we could stop calling it Capitalism,” he said, continuing:
“…and what of Apple’s $800 billion market capitalization? So wedded are we to the idea that capital is critical to business, so much in thrall to the word, that we have invented new concepts such as social and intellectual capital to try to explain phenomena that are perhaps more clearly and certainly more simply described in ordinary language.”
For stocks that dominate the market today—Apple, Amazon, Facebook, Google, Netflix, and Microsoft—the capital deployed to actually produce the product does so at a great remove from the company. If there is real estate involved, it might be owned by a sovereign wealth fund located on a different continent. Employees who touch the product, if the company manufactures at all, are contractors in an equally remote location. The need for fresh capital is modest to non-existent. Companies that go public today, like Spotify, are doing it for one basic reason: to allow the venture capitalists and early round investors to exit.
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