The Digital Skeptic: Apple's Big Pay Raise Makes Stock a Big Buy
Well, no more. What the collapsing digital age has done is send the business roles we all play to the woodshed. In these hectic "convergenced" days, all of us are owners. All of us invest. All of us manage. And heavens, we all work. You invest not with money you got from your folks, but from the cash you scraped doing something for somebody else. You manage not employees, but email. You do your own websites and accounting. You even do you own media. And in the aggregate, the dollars pooled by today's neo-converged investor/owner/laborers is staggering. According to the quarterly statement from the Government Investment Fund of Japan, the mere pensions from public workers there is roughly $1.3 trillion. That's just the public workers. From one country.
Now, to our credit, Americans have long believed that a company that could afford to pay employees more was worth more. Here's a 1914 press release from Ford(F) about Henry Ford's "$5 a day revolution." In it Ford brags that he will essentially triple wages and shorten the workday. Besides locking down who did what at the factory, he boosted earnings capacity, drove consumer demand for cars, spun up the American middle class -- and, oh, by the way, began the greatest stock market boom the world had ever seen.
Tim Cook = Henry Ford 2.0.
Apple is realizing that the $29 billion or so in cash that sits idle on its balance sheet does nothing for it. So it is betting Cook is a good enough manager to boost productivity and justify pumping more cash into pumping up passionate retail workers. That gives those folks more money to buy yet more Apple equipment, which boosts overall demand for Apple gear -- as well as other goods.
The wisdom of this approach is staggering. Besides the profit in all those MacBooks and iPhones he will sell, it points the rest of America's blue chips in the direction of creating their own markets. Go look at the balance sheets for America's Fortune 1,000: What really is the last thing GE(GE) or IBM(IBM) need right now? More cash. Tens of billions are buried in each of these firms. What's critical today is more customers. And by paying their own people more, yet staying reasonably profitable, these companies create their own demand for their own products.