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This isn't terribly surprising to me. Pulling money out of the ground is a high-margin, low (relative) cost deal. Like selling $1 for $2. I do wonder how many

This isn't terribly surprising to me. Pulling money out of the ground is a high-margin, low (relative) cost deal. Like selling $1 for $2. I do wonder how many people know that the wealthiest companies are private, just like how the wealthiest people/families/syndicates do not publish nor reveal their wealth in any meaningful way. It's like the universe's dark matter. At some point, money becomes power, and power always whispers.

sphinxpy 8y ago
This is a very true statement. And in a very literal way, the dark matter analogy is spot on.
Phlarp 8y ago
Oil extraction has wildly varying costs. Saudi Arabia is lucky in that they have large deposits that are quite shallow. As such Saudi Arabia can produce oil with a very low marginal cost per barrel ($15 or $20). Compare that to tar sands, offshore rigs or shale gas with horizontal drilling, exotic injection techniques, high water usage, deeper oil deposits, saturation divers and royalties on the extraction techniques. North American oil producers have much tighter margins.
- yingw787 8y ago
  Yeah, but many of those are fixed costs, given immutable characteristics of the fields themselves, which means given a certain profitability threshold, you have a very predictable income stream. That given of course varies on the highly variable price of petroleum commodities, but given the oligopolistic nature of the O&G industry, getting subsidies to tide over the bad times and prevent extensive capital depreciation is reasonably easy. Saudis make a lot of crude, and the crude they pump is good quality. Hence, they print money.
  - Phlarp 8y ago
    The fixed low marginal costs of Saudi infrastructure also allows them to keep the higher cost producers on a tight leash. If US domestic production gets too robust for their liking; they can simply enforce a price regime low enough to put other producers out of profitability, and hold it there long enough that even the most cash rich extractors will pack it in and attempt to shift that capital to other ventures.
    - dahdum 8y ago
      OPEC used to have that power, but not really any longer. U.S. / Canada production has steadily lowered production costs, cheap oil will bankrupt OPEC countries before it kills off US production.
      - Phlarp 8y ago
        The glut of domestic oil all comes with higher extraction costs. While it's unlikely an OPEC embargo could affect the United States in the same way it did in the 70s, Saudi Arabia specifically can sell oil at a price that is mildly profitable for them but a loss for US producers. OPEC no longer operates as a perfect cartel; members cheat on the quotas that are set and not all OPEC members can hold the line as well as KSA can. With all that said, the 2015 oil price collapse did lead to significant reductions in domestic production, and it was partially driven by Saudi Arabia.
        martinald 8y ago
        US/Canada is a net oil exporter now, so their power is pretty limited in an embargo style situation. Also, unlike the 1970s Saudi now has a much larger and ridiculously fast growing population - growing anywhere between 2 and 6% per annum since the 1980s. There is an enormous welfare state with very few taxes collected (on the basis the oil wealth pays for everything), but with a population growing so fast it is stretching the budget. This means KSAs power to hold prices low actually probably hurts them more than the US now - the social contract in KSA is that the government looks after you, and if you suddenly stop getting healthcare/housing etc because of a OPEC/US oil, it will start destabilising the country which obviously the royal family as terrified of.
- blattimwind 8y ago
  KSA also has access to very cheap labor (relatively slave like).
  - Phlarp 8y ago
    This is true, but the relatively slave like cheap labor does still require robust social services, which the kingdom pays for with oil revenue.
OldFatCactus 8y ago
what other private companies are known to be significantly more profitable than Apple?
- deleted 8y ago
  [deleted]
- walterbell 8y ago
  What private organizations have assets which compounded in value over centuries?
  - Consultant32452 8y ago
    Is the Catholic Church a private organization in this context? One that surprised me was Fidelity investments. It's huge company held privately by a single family. Not centuries old and probably nowhere near as profitable as Apple though.
  - reaperducer 8y ago
    European insurance companies. The Hudson Bay Company, maybe? There are restaurants in the U.S. that are a couple of centuries old. They might own the building by now.
- yingw787 8y ago
  I don't know. That's the point :)
  - OldFatCactus 8y ago
    > I do wonder how many people know that the wealthiest companies are private Well then this was a misleading thing to say. You don't know that this is true
    - yingw787 8y ago
      You are correct, and I apologize for making such an assertion without any evidence. I think what I meant more was the conflation of wealth and power, and the need to look beyond just the name of a certain corporation. Autocratic rulers don't technically run a corporation nor sit on the board, but I doubt anybody would defy their orders if asked. In that sense, they do "own" the corporation. This is also not mentioning the nature of shell and holding corporations which obfuscate liability and ownership, but operate according to their owner's wishes despite their disjoint legal nature. But no I can't find any proof that any are bigger than the largest publicly traded corporations, so again, sorry.
deleted 8y ago
[deleted]
chadash 8y ago
>> I do wonder how many people know that the wealthiest companies are private Some of the largest companies are state-run. If that's what you mean by "private" companies, then yes this is true. But I think that when people say "private" company, they generally envision wealthy individual or family owners, not state owned entities. If by private, you do mean wealthy individuals/families and not states, then this is doubtful. Apple sold over $200 million iphones last year at a large profit margin, and that is why they are a giant company. Even with exceptionally high revenues per employee, Apple employs over 100,000 people. It's not easy to just disguise what you're doing at that level. There are definitely some very wealthy families out there whose finances are opaque. However, it's doubtful that any of them are secretly running companies anywhere near the scale of Apple.
- BeetleB 8y ago
  By private, he means not public (i.e. no shares that the public can buy). It can still be owned by 100s of people (e.g. "employee owned").
superhuzza 8y ago
"power always whispers" Isn't this exactly the opposite of how power has worked for 99% of human history? In order to establish exactly who's in charge, rulers and those in power have: - Toured their lands - Displayed strength via military - Distributed their likeness (coinage, statues, paintings) - Spread their messages via radio/television - Established themselves as the head of organized religion - Required homage - Positioned themselves as figures of veneration Historically, powerful lobbies such as the church, noble classes and guilds did the same types of things. In modern times, the same thing happens - Putin isn't particularly shy about his degree of power (but I suppose he is deceptive about his wealth).
- yingw787 8y ago
  Power must always be exercised to be retained, yes. But I doubt power must be publicly exercised in order to remain viable. And rulers never rule, they hold court, and they must retain the favor of the court to be viable. See "Rules for Rulers": https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs I believe one example of this was how Napoleon III lost the favor of Alexis de Tocqueville, and hence was toppled as Emperor of France: https://en.wikipedia.org/wiki/Alexis_de_Tocqueville https://en.wikipedia.org/wiki/Alexis_de_Tocqueville
occamrazor 8y ago
Could you name some of these private companies? I can’t think of any private (i.e. neither public or government owned) company comparable to Apple, Walmart, or large oil companies.
- boldslogan 8y ago
  Inter IKEA. iirc they own, among the largest furniture company in the world, a bank, real estate...and so on. And they are very private...
  - dmitriid 8y ago
    IKEA us also Sweden’s largest food exporter (or so I’m told).
  - shmed 8y ago
    I have a hard time believing IKEA is worth anywhere close to what the big tech giants are worth.
  - GCA10 8y ago
    Ikea's annual revenue is about 38 billion Euros. That would rank it about #200 on the Fortune 500 global list, in terms of revenue. By Fortune's tally, at least, all of the top 10 are either state-controlled energy companies, auto companies, WalMart or Berkshire Hathaway. Big, fully private companies are quite fascinating. (I think we're settling on a definition that involves a tight inner circle of ownership, with no stock-market listing and no government control). But they are pretty lightly represented in revenue/size-based lists like the Fortune 500.
- briankelly 8y ago
  There's Cargill and Louis Dreyfus, which control a large amount of the global agriculture trade (and 1/4 of the main cast of Seinfeld ;) - and there's not a whole lot of insight into at least Cargill.

sphinxpy 8y ago

This is a very true statement. And in a very literal way, the dark matter analogy is spot on.

Phlarp 8y ago

Oil extraction has wildly varying costs. Saudi Arabia is lucky in that they have large deposits that are quite shallow. As such Saudi Arabia can produce oil with a very low marginal cost per barrel ($15 or $20). Compare that to tar sands, offshore rigs or shale gas with horizontal drilling, exotic injection techniques, high water usage, deeper oil deposits, saturation divers and royalties on the extraction techniques. North American oil producers have much tighter margins.

yingw787 8y ago
Yeah, but many of those are fixed costs, given immutable characteristics of the fields themselves, which means given a certain profitability threshold, you have a very predictable income stream. That given of course varies on the highly variable price of petroleum commodities, but given the oligopolistic nature of the O&G industry, getting subsidies to tide over the bad times and prevent extensive capital depreciation is reasonably easy. Saudis make a lot of crude, and the crude they pump is good quality. Hence, they print money.
- Phlarp 8y ago
  The fixed low marginal costs of Saudi infrastructure also allows them to keep the higher cost producers on a tight leash. If US domestic production gets too robust for their liking; they can simply enforce a price regime low enough to put other producers out of profitability, and hold it there long enough that even the most cash rich extractors will pack it in and attempt to shift that capital to other ventures.
  - dahdum 8y ago
    OPEC used to have that power, but not really any longer. U.S. / Canada production has steadily lowered production costs, cheap oil will bankrupt OPEC countries before it kills off US production.
    - Phlarp 8y ago
      The glut of domestic oil all comes with higher extraction costs. While it's unlikely an OPEC embargo could affect the United States in the same way it did in the 70s, Saudi Arabia specifically can sell oil at a price that is mildly profitable for them but a loss for US producers. OPEC no longer operates as a perfect cartel; members cheat on the quotas that are set and not all OPEC members can hold the line as well as KSA can. With all that said, the 2015 oil price collapse did lead to significant reductions in domestic production, and it was partially driven by Saudi Arabia.
      - martinald 8y ago
        US/Canada is a net oil exporter now, so their power is pretty limited in an embargo style situation. Also, unlike the 1970s Saudi now has a much larger and ridiculously fast growing population - growing anywhere between 2 and 6% per annum since the 1980s. There is an enormous welfare state with very few taxes collected (on the basis the oil wealth pays for everything), but with a population growing so fast it is stretching the budget. This means KSAs power to hold prices low actually probably hurts them more than the US now - the social contract in KSA is that the government looks after you, and if you suddenly stop getting healthcare/housing etc because of a OPEC/US oil, it will start destabilising the country which obviously the royal family as terrified of.
blattimwind 8y ago
KSA also has access to very cheap labor (relatively slave like).
- Phlarp 8y ago
  This is true, but the relatively slave like cheap labor does still require robust social services, which the kingdom pays for with oil revenue.

OldFatCactus 8y ago

what other private companies are known to be significantly more profitable than Apple?

deleted 8y ago
[deleted]
walterbell 8y ago
What private organizations have assets which compounded in value over centuries?
- Consultant32452 8y ago
  Is the Catholic Church a private organization in this context? One that surprised me was Fidelity investments. It's huge company held privately by a single family. Not centuries old and probably nowhere near as profitable as Apple though.
- reaperducer 8y ago
  European insurance companies. The Hudson Bay Company, maybe? There are restaurants in the U.S. that are a couple of centuries old. They might own the building by now.
yingw787 8y ago
I don't know. That's the point :)
- OldFatCactus 8y ago
  > I do wonder how many people know that the wealthiest companies are private Well then this was a misleading thing to say. You don't know that this is true
  - yingw787 8y ago
    You are correct, and I apologize for making such an assertion without any evidence. I think what I meant more was the conflation of wealth and power, and the need to look beyond just the name of a certain corporation. Autocratic rulers don't technically run a corporation nor sit on the board, but I doubt anybody would defy their orders if asked. In that sense, they do "own" the corporation. This is also not mentioning the nature of shell and holding corporations which obfuscate liability and ownership, but operate according to their owner's wishes despite their disjoint legal nature. But no I can't find any proof that any are bigger than the largest publicly traded corporations, so again, sorry.

deleted 8y ago

[deleted]

chadash 8y ago

>> I do wonder how many people know that the wealthiest companies are private Some of the largest companies are state-run. If that's what you mean by "private" companies, then yes this is true. But I think that when people say "private" company, they generally envision wealthy individual or family owners, not state owned entities. If by private, you do mean wealthy individuals/families and not states, then this is doubtful. Apple sold over $200 million iphones last year at a large profit margin, and that is why they are a giant company. Even with exceptionally high revenues per employee, Apple employs over 100,000 people. It's not easy to just disguise what you're doing at that level. There are definitely some very wealthy families out there whose finances are opaque. However, it's doubtful that any of them are secretly running companies anywhere near the scale of Apple.

BeetleB 8y ago
By private, he means not public (i.e. no shares that the public can buy). It can still be owned by 100s of people (e.g. "employee owned").

superhuzza 8y ago

"power always whispers" Isn't this exactly the opposite of how power has worked for 99% of human history? In order to establish exactly who's in charge, rulers and those in power have: - Toured their lands - Displayed strength via military - Distributed their likeness (coinage, statues, paintings) - Spread their messages via radio/television - Established themselves as the head of organized religion - Required homage - Positioned themselves as figures of veneration Historically, powerful lobbies such as the church, noble classes and guilds did the same types of things. In modern times, the same thing happens - Putin isn't particularly shy about his degree of power (but I suppose he is deceptive about his wealth).

yingw787 8y ago
Power must always be exercised to be retained, yes. But I doubt power must be publicly exercised in order to remain viable. And rulers never rule, they hold court, and they must retain the favor of the court to be viable. See "Rules for Rulers": https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs I believe one example of this was how Napoleon III lost the favor of Alexis de Tocqueville, and hence was toppled as Emperor of France: https://en.wikipedia.org/wiki/Alexis_de_Tocqueville https://en.wikipedia.org/wiki/Alexis_de_Tocqueville

occamrazor 8y ago

Could you name some of these private companies? I can’t think of any private (i.e. neither public or government owned) company comparable to Apple, Walmart, or large oil companies.

boldslogan 8y ago
Inter IKEA. iirc they own, among the largest furniture company in the world, a bank, real estate...and so on. And they are very private...
- dmitriid 8y ago
  IKEA us also Sweden’s largest food exporter (or so I’m told).
- shmed 8y ago
  I have a hard time believing IKEA is worth anywhere close to what the big tech giants are worth.
- GCA10 8y ago
  Ikea's annual revenue is about 38 billion Euros. That would rank it about #200 on the Fortune 500 global list, in terms of revenue. By Fortune's tally, at least, all of the top 10 are either state-controlled energy companies, auto companies, WalMart or Berkshire Hathaway. Big, fully private companies are quite fascinating. (I think we're settling on a definition that involves a tight inner circle of ownership, with no stock-market listing and no government control). But they are pretty lightly represented in revenue/size-based lists like the Fortune 500.
briankelly 8y ago
There's Cargill and Louis Dreyfus, which control a large amount of the global agriculture trade (and 1/4 of the main cast of Seinfeld ;) - and there's not a whole lot of insight into at least Cargill.