When publicly-traded corporations reach record valuations, articles in the media often compare such valuations to the GDPs of countries throughout the world, typically in the form "Company X's valuation of Y is now larger than the GDP of all but Z of the world's countries..."

For example, a Fortune article from Nov. 2014 states:

At this point, Apple’s market cap is higher than the gross domestic product of all but 19 of the world’s countries, coming just behind Saudi Arabia (GDP of \$745 billion) and ahead of Switzerland (\$650 billion), according to data compiled by the World Bank.

This doesn't seem like a meaningful comparison to make, given that GDP and market cap are very different metrics.

Similarly, a Business Insider article compares corporate revenue to countries' GDPs. This is intuitively a better comparison than market cap to GDP, but wouldn't comparing profits to GDP be a more accurate measure?

In summary, what are the best metrics for comparing the performance of companies to the performance of national economies?

  • $\begingroup$ This is an example where I think it would help people think more clearly if gdp was always quoted in \$ /year instead of just in \$. $\endgroup$
    – bdsl
    Jan 20, 2015 at 8:22

1 Answer 1


GDP is a flow (of goods and services) while market capitalization is a stock measure. So I agree, this is not a great comparison. If we want to compare stocks, we'd compare total enterprise value (sum of equity and debt) to national domestic assets. But that's imperfect because much of what makes a country rich is labor income and that's not going to be in domestic assets. So we'd like to add in some measure of human capital. That's going to be imperfect at best. So I prefer to compare flows.

Consider how GDP is a value added measure. If you import steel for 150 and export cars you make out of that steel for 250 the GDP contribution is 100. Some of that 100 went to capital and some to labor. What's the value added of the corporation? Think of the company as "importing" the goods it buys and "exporting" the goods it sells. The difference is paid out to three sources, equity capital, debt capital, and and wages paid to labor. So to make a number comparable to GDP, add together corporate profits, net income expense, and labor costs. This is the value added of the firm and much more analogous to GDP than firm value.

  • 3
    $\begingroup$ Corporate profits are normally measured net of depreciation of capital goods, so an even better comparison might be with NDP (net domestic product), ie GDP less depreciation. $\endgroup$ Jan 21, 2015 at 8:35

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