Eight of the world’s most highly valued companies are technology businesses. The combined market capitalisation of these companies is $4.7tn. That is 30 per cent of the combined market capitalisation of the other 92 companies in the world’s 100 most valuable firms. Of these eight companies, five (Apple, Alphabet, Microsoft, Amazon and Facebook) are from the US, two are Chinese (Alibaba and Tencent) and one is South Korean (Samsung). The most highly valued European tech company, SAP, is the world’s 60th most valued company.
Today’s valuations might be excessive. The market’s relative rankings might also turn out to be wrong. Moreover, the businesses in which these companies are engaged are all different in important respects. Nevertheless, the rise to prominence of these technology groups has to be telling us something important (see charts).
What then are the questions raised by these remarkable numbers? I will not respond by considering the economics of the digital economy itself (interesting and important though this is), except to the extent that it could reshape the wider economy and society. Nor do I focus on the benefits brought by the collapse in the costs of generating and distributing information itself. I focus below on seven wider challenges.