October 30, 2025
The Power of Scale
There are currently nine companies in the S&P 500 with market capitalizations exceeding $1 trillion. The largest among them is Nvidia Corp., valued at $4.55 trillion, while the smallest is Berkshire Hathaway Inc. at $1.07 trillion. These top companies (with the exception of Berkshire Hathaway) are primarily software and hardware giants—businesses whose products we use directly or indirectly every day.
You may be most familiar with companies like Microsoft, Apple, Amazon, Meta (parent of Facebook, Instagram and WhatsApp) and Alphabet (parent of Google). Notably, aside from Microsoft and Apple, most of these companies were not part of the S&P 500's top ten two decades ago. Back then, those spots were held by banks, consumer staples, energy and pharmaceutical companies—sectors that no longer play as central a role in our daily lives.
The success of companies like Meta is driven by one key advantage: scale. Meta serves over 3.5 billion people globally through its platforms. Behind the scenes, software and artificial intelligence power this reach, enabling the company to operate efficiently despite its massive user base. Meta employs just 74,000 people—meaning each employee effectively serves about 47,000 users. Through advanced data analytics, Meta can understand user preferences and deliver targeted ads with high effectiveness, all without needing traditional salespeople. Its digital infrastructure allows it to add users and revenue without proportionally increasing headcount.
This kind of scale, however, is rare. Most businesses are limited by physical constraints. Take, for example, a food stand in downtown Toronto’s business district. No matter how popular the stand is, its revenue is capped by two factors: time and labor productivity. It might only be busy during the three-hour lunch rush (11 a.m.–2 p.m.) and even with maximum efficiency—say, serving six lunches per minute—the team can only serve 1,080 lunches a day. With a $5 profit per lunch (after costs like rent, ingredients, and labour), that’s a maximum of $5,400 in daily profit. So even if the business is well-loved and always busy, its value is ultimately limited by its capacity to scale. Hence, it has a long path to trillion-dollar value.
The takeaway? Every individual and business aiming to grow must think critically about scale. If your current model doesn’t naturally scale, you need to find ways—or build systems—that do. Being an investor of companies that do is one way to achieve this.
About the Author
Alfred Lam, Senior Vice President, Co-Head of Multi-Asset, joined CI GAM in 2004. He brings over 23 years of industry experience to his portfolio design, asset allocation, portfolio construction, and risk management responsibilities, which include chairing the multi-asset investment management committee and sizing investment bets to drive added value and manage risk. Alfred holds the CFA designation and an MBA from York University Schulich School of Business. He is a recognized leader in multi-asset investing in Canada. During his tenure, his team has won multiple investment awards, including the Morningstar Best Fund of Funds, and saw assets growing four-fold.
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