Apple has a cash reserve larger than the GDP of Slovakia, so no one was terribly surprised by last week’s news that the company intended to pay out dividends and buy back stock, to the tune of $10 billion a year.

Apple’s cash reached nearly $100 billion at the end of last year,” explained the New York Times, “a level that seemed increasingly unjustifiable to many investors, who fret about how little interest Apple earns on the money, estimated at less than 1%. Apple’s cash figure is almost twice the cash balance of the company with the next biggest hoard, Microsoft.”

The reason Apple has kept so much money on hand: Steve Jobs was terrified of seeing a repeat of the late 1990s, when Apple nearly went bankrupt.

Peter Drucker may not have been as compulsive—or mercurial—as Steve Jobs. But Drucker had a healthy respect for the risks of doing business and the need for a rainy-day fund.

Image source: IDF-WikiCommons

The central fact of industrial economics is not ‘profit’ but ‘loss’—not the expectation of ending up with a surplus . . . but the inevitable and real risk of ending up with an impoverishing deficit, and the need, the absolute need, to avoid this loss by providing against the risk,” Drucker wrote in The New Society.

Ford Motor Company offered a sobering example of how fast fortunes can change. In the early 1920s, Ford dominated the automotive world and had $1 billion in cash reserves. “Yet only a few years later, by 1927, this seemingly impregnable business empire was in shambles,” Drucker noted in Management: Tasks, Responsibilities Practices. “It lost money almost every year for 20 years or so.”

Nevertheless, despite the risks, Drucker maintained that, for the good of society, there were clearly times not to keep big piles of cash around—namely, during economic downturns. “We should put a positive reward on the use of such reserves for employment-created investment in depression times,” Drucker wrote in Concept of the Corporation. “At the same time we should penalize heavily the hoarding of these reserves in times of slack employment” by taxing that money.

What do you think: Where’s the line between prudent saving and foolish hoarding?