Financial Literacy

The Edifice Complex: Why the New Apple Headquarters Is a Bad Omen

Apple (Nasdaq: AAPL) is on the move. Next month, it’s opening a new, futuristic-looking building popularly known as the “Spaceship Campus.” Officially known as Apple Park, the giant steel and glass donut will serve as a monument to late founder Steve Jobs. And, of course, it will be the new Apple headquarters.

To Apple fans and less informed tech investors, this might sound like good news. Tech company headquarters are always built with noble intentions. Executives say the aesthetics will increase productivity, the layout will encourage collaboration, and so on.

But these grand designs are often symptoms of a grand problem. The new Apple headquarters may be a sign that the company is developing an edifice complex.

What does that mean? In short, it could mean that Apple has reached its peak. Below, we’re looking at the reasons why building a flashy new headquarters is often a bad omen for companies – and their stocks.

The Edifice Complex

Older readers might recognize the term “edifice complex” from its political meaning. The term was first used to describe Filipino dictator Ferdinand Marcos. He spent crazy amounts of public money building monuments to himself.

Apple isn’t a country. But in terms of economic size, it might as well be one. In fact, its market cap is about twice the nominal GDP of the Philippines. With that in mind, it’s worth considering Apple’s situation in the context of the “Skyscraper Index.”

The Skyscraper Index is a correlation between building height and imminent economic decline. Its underlying theory is that skyscraper construction peaks in a country just before a major downturn. Marcos’ Philippines is the perfect example. Its usually fast economic growth stagnated in the 1980s as the country’s leadership pissed away money on vanity construction projects.


While no one is comparing Apple CEO Tim Cook to a dictator, it’s easy to see how the concept of an edifice complex applies to a company building a flashy new office.

Apple’s management is dropping $5 billion in shareholder money on a new HQ, because, um… the old one wasn’t innovative enough… or something. It’s hard to ignore the vanity behind the decision, especially when you consider these eye-opening facts:

– When completed, Apple’s HQ will be wider than the Pentagon and house 13,000 employees.

– The complex will use more than 6 kilometers of curved glass specifically made for the project. Apple’s chief design officer, Jony Ive, told 60 Minutes that each of the more than 3,000 individual pieces would be the largest pieces of curved glass in the world.

– Apple Park will run 100% on renewable energy, including 700,000 square feet of solar panels and a “natural” ventilation system designed to heat and cool the main building for nine months of the year.

– The campus includes a 60,000-square-foot dining area that can serve more than 2,000 people at once and a 100,000-square-foot fitness center that reportedly costs more than $70 million.

There’s also a well-documented history of companies taking a turn for the worse after projects like this.


Hubris: The Deadliest Sin

At the turn of the millennium, Time Warner (NYSE: TWX) built a gigantic glass skyscraper complex on the edge of Central Park. The project was funded by Time Warner’s capital gains from its many investments in the dot-com boom.

We all know what eventually happened to those investments. And here’s what happened to Time Warner stock over the next few years…


Time Warner developed an edifice complex that became a major embarrassment and a huge money sink. But for many other companies, the condition has been fatal. Bear Stearns built a flashy new headquarters shortly before its untimely demise in the late 2000s.

Similarly, Citigroup (NYSE: C) dropped $20 million on naming rights for a stadium in 2006. It would really need that money a year later, as it was being hammered by subprime mortgage defaults.

In short, the edifice complex tends to reflect an arrogant attitude among corporate management. A company that’s willing to shell out billions on a vanity project thinks it’s invincible. And when things inevitably do go wrong, that company will have a hard time finding the money to get back on track.

Time to Sell Apple?

Apple is the second-highest-valued company on Earth, and this new headquarters isn’t reason enough to dump the stock. The new HQ isn’t a very efficient use of money, but it’s not going to render the company insolvent. Apple had nearly $250 billion in cash at the end of its fiscal first quarter; it would need to make a lot of REALLY dumb decisions to burn through that pile!

However, if Apple starts making a lot of mistakes, this new building could become a symbol of a company that’s lost its way – and a management team that’s taken its eye off the ball. It’s worth considering that possibility, given the unpopular design decisions the company has been making lately.

Suppose Apple keeps trying to kill the headphone jack or building impractically thin MacBooks or producing “smart watches” that nobody really wants – or needs. Over time, those decisions could tarnish the company’s reputation for user-friendly product design. That could lead to falling sales, which could in turn increase the financial burden of the new headquarters.

Apple is likely years away from experiencing a decline on the scale that would make a material impact on its bottom line. But investors would be wise to notice the early warning signs. No company is too big to fail – remember Enron?

And no tech company is too cool to waste money on a tacky vanity project.

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