Fortune 500 Firms in 1955 vs. 2011; 87% Are Gone
What do the companies in these three groups have in common?
Group A. American Motors, Studebaker, Detroit Steel, Maytag and National Sugar Refining.
Group B. Boeing, Campbell Soup, Deere, IBM and Whirlpool.
Group C. Cisco, eBay, McDonald's, Microsoft and Yahoo.
All the companies in Group A were in the Fortune 500 in 1955, but not in 2011.
All the companies in Group B were in the Fortune 500 in both 1955 and 2011.
All the companies in Group C were in the Fortune 500 in 2011, but not 1955.
Comparing the Fortune 500 companies in 1955 and 2011, there are only 67 companies that appear in both lists. In other words, only 13.4% of the Fortune 500 companies in 1955 were still on the list 56 years later in 2011, and almost 87% of the companies have either gone bankrupt, merged, gone private, or still exist but have fallen from the top Fortune 500 companies (ranked by gross revenue). Most of the companies on the list in 1955 are unrecognizable, forgotten companies today. That's a lot of churning and creative destruction, and it's probably safe to say that many of today's Fortune 500 companies will be replaced by new companies in new industries over the next 56 years.
Update: Here's a related article from Steve Denning in Forbes, featuring some insights from Steve Jobs about what causes great companies to decline (power gradually shifts from engineers and designers to the sales staff) and how the life expectancy of firms in the Fortune 500 and S&P500 has been declining over time.
22 Comments:
I noticed this some years ago while leafing through old Fortune magazines in a used book store. Issues from the early '50s were filled with advertising from firms like Pan-American Airways that no longer existed.
There is now a Global Fortune 500. Many on this list are State Owned or State Controlled Enterprises. How many of these enterprises will be gone in fifty years? Look for more SOEs to be added to the Flobal in the next decade.
So much for the top 1%. They have a hard enough time surviving even in a protectionist system of the American type. I don't suppose that you have the EU data handy. The last time I looked the big companies were better protected in Europe and tended to be around much longer. It seems that it is better to be the top 1% in egalitarian Europe rather than in the US.
This does raise questions about long-term equity investing.
Every stock company has a lease on life only as long as they are equal or better than the competition. As opposed to federal agencies, such as the USDA, which will outlive Christianity, probably.
Right-wingers Vigilante and Redleaf say public ownership is weak ownership---management serves itself.
Maybe you are better off opening up a strip bar. The benefits are real anyway. Sort of.
Proof of creative destruction. What was that talk about the 1%?
This is only the beginning, the firm will disappear altogether very soon. The best analysis of the firm was done by Coase almost 75 years ago, where he pointed out that we only have firms because not everybody can do everything so it lowers costs, like marketing or accounting, to specialize and group together, just like any sports team has different positions. However, the new technology of the PC and the internet allows people to work together easily across firms, for example, all the work now outsourced to distant lands like India or China.
As a result, the firm is now an antique and the great trend of this next century will be the complete destruction of the firm, as such a bundling won't be necessary anymore and the subsequent firm-free environment will be much more fluid and innovative. Think of a movie set, where a bunch of specialists such as actors, directors, cinematographers, editors get together for 3-6 months and work on a project, after which they disband and move on to other projects with often completely disparate collaborators. Open source software already uses this model to a large extent. That is the future for most markets, particularly information markets, which already comprise the bulk of our advanced US economy and will soon dominate it completely. :)
Sprewell: claptrap.
We can no more make a living selling each other information than we can taking in each others laundry.
Sooner or later someone has to make something about which to trade information.
Steve Denning in Forbes on Jobs's statement that companies fail because they go from being driven from engineering and product basis to a sales basis is being played out right now at HP. Meg Whitman knows nothing about products or engineering and the new board member (with only a 1% stake) Robert Ryan guts companies for a living. Anyone who thinks there will be a true revival at HP in the manner that the founders would have done is fooling themselves. Maybe the 'bottom line' will look ok for awhile but HP is going to join the ranks of the 87% who don't make it.
Hydra, considering that second graph shows that the creatives make 50% of all US wages, it's already happened, you're just too ignorant to know it. :) Let me translate your last sentence to what somebody would have said a century ago:
"Sooner or later someone has to grow food for us all to eat."
Well, we still have plenty of food, only we pay 1% of wages to 2-3% of our populace to get it, importing the rest. Those who "make something," who you hold in such high regard, have already been largely obsoleted, you just don't know it yet. :D
Outsourced is not obsoleted. You just made my point.
Farmers who made draft animals and used them were replaced by people who make farm machinery, people who make genetic seeds, people who make fertilizer, people who make containers for long distance food transport, people who make freezers for food storage. All those people are assured by information folks who count the beans, balance the books, keep the inventory and the parts lists.
But your food is not made by people who invent bogus information out of nothing as you do. It takes a massive system of folks who pick things up and then put them down again in a more valuable configuration.
Who gets paid the most? Man who grows the grain, man who toasts the grain into cereal, man who makes the cereal box, man who owns the retail store?
Probably the banker who holds their loans.
But as far as breakfast is concerned, one is as important as the other.
"Who gets paid the most? Man who grows the grain, man who toasts the grain into cereal, man who makes the cereal box, man who owns the retail store?
Probably the banker who holds their loans.
But as far as breakfast is concerned, one is as important as the other."
Was there a point here?
You forgot a lot of other contributors: The truck driver who delivers to the store, the man who makes tires for the truck, the cashier at checkout, the cashier's parents who paid for her cashiering degree, the man who makes the ink to print the cereal box...the list is nearly endless.
Each of these contributors, except the parents, was paid an amount that they agreed was worth more to them than the value of their contribution to your breakfast.
Are you suggesting otherwise?
The parents received non monetary rewards worth more to them than than the money they spent on education.
The best part is, that box of cereal appeared in your local store without anyone coordinating all those contributors. It's magic.
"Farmers who made draft animals..."
???
Who knew?
"It takes a massive system of folks who pick things up and then put them down again in a more valuable configuration."
All without any central planning! Ain't it great?
"Farmers who made draft animals and used them were replaced by people who make farm machinery, people who make genetic seeds, people who make fertilizer, people who make containers for long distance food transport, people who make freezers for food storage. All those people are assured by information folks who count the beans, balance the books, keep the inventory and the parts lists."
None of those jobs existed 100 years ago, except bean counter.
You are making an argument for creative destruction, and against those who worried about the loss of farm employment, and those who currently lament the loss of manufacturing jobs.
But your food is not made by people who invent bogus information out of nothing as you do. It takes a massive system of folks who pick things up and then put them down again in a more valuable configuration.
Nobody said that growing food is easy. What is your point?
Who gets paid the most? Man who grows the grain, man who toasts the grain into cereal, man who makes the cereal box, man who owns the retail store?
Probably the banker who holds their loans.
But as far as breakfast is concerned, one is as important as the other.
I am sorry but I missed the point. Are you trying to make one? And if you are, what is it?
Hydra, I can't believe you are arguing this point using agriculture now, when the evidence is so obviously against you, as Ron and Vange point out. Outsourced is obsoleted if we're paying them much less. As my linked graph shows, manufacturing jobs were only getting 20% of wages in 2006 and that keeps going down as we move more and more offshore for cheap Asian labor to do it. The people getting paid the most in the agricultural chain that you lay out are the "people who make genetic seeds," ie information jobs, so you make my point. :) What makes you think I "invent bogus information out of nothing?" I write patches for software, and the software I patch happens to be used by hundreds of millions of people. That's "information," ie the software itself, that they find very valuable, otherwise they wouldn't bother using it.
It does take "a massive system of folks who pick things up and then put them down again" to provide physical necessities like food or chairs but now that we only pay those people less than 20% of all US wages, there's just not much value there. If the banker gets paid the most, obviously he's the most important: you don't just chance across the biggest cut by being easily replaceable. ;) The fact is banking skills have been rare and tough to teach, while I can easily train up many people to grow or toast the grain or make the cereal box. All involved play their role, of course, but those who get paid the most are the most important. If they weren't, they couldn't bargain a better price, ie higher salary, for themselves. Of course, that too is changing nowadays, as banking and finance are fundamentally information businesses and we know what the new tech of the PC and the internet do to information businesses: they destroy them and create something much cheaper in their stead. :)
Let me know when you eat something that comes out of the PC.
Look, if you think that only 20% of wages goes into actually making all the things we use, and That therefore there is not that much value there, the the value of everything else must be almost nil.
What are all those people doing that is of any value whatsoever? Buying and selling each others stock? Running political campaigns? How about the Guy running an infomercial on FOX promoting his book, "4000 ways to get free money from the government"?
I'm quite sure that none of you get it. But look at those lists, all of them make something, except eBay and yahoo. All those information businesses are worth about what all those bytes weigh.
Am I suggesting otheewise?
You betcha. Taking or accepting what you can get as best under the circumstances is a lot different from agreeing that is what you should get.
< I>Each of these contributors, except the parents, was paid an amount that they agreed was worth more to them than the value of their contribution to your breakfast. Are you suggesting otherwise?<\i>
I understand the theory and the argument behind that sentiment, but my observation is that it is bullshit in the real, world, because it smugly omits a lot of information. Yeah, I get that all those people have " Choices"
That they are responsible for themselves, in the end.
I get all that, but it rings false to me because it does not match what I see.
Ok, you patch software. I have done that too. It is used by millions of people. They got sold a pile of crap that needed repair.
I'm sure they all "AGREED" to that.
I eat stuff that comes out of the refrigerator and microwave, and nowadays all these appliances have computer chips, so I already eat stuff coming out of computers. ;) If 80% of wages are going to service and information jobs, that means most of the value is not in agriculture or manufacturing, not sure why you assert 80% somehow equates to nil. Of course there exist fraudsters running ponzi schemes or political campaigns or infomercials, just like there are fraudsters selling crappy food, your point is? The most valuable businesses in the world these days are information businesses, companies like IBM, Microsoft, Google, and Apple, so you're the only one who doesn't "get it." What "does not match what I see" in the "real world?" If you can't articulate it, I'm guessing you aren't really seeing it. :)
"Patching" software refers to any contribution to a large piece of software, not just patches that "fix" things. Since there are so many users for this software, it actually is one of the better ones with very few bugs, that's why so many use it. :) Of course they agreed to it, as they largely got it for free, so the only reason most have it is because they decided to go download it for free. Your arguments are really quite silly, it's almost as though you're mad that these information workers make a lot more money than you, so you just spout off against such work. Well, like it or not, all that matters now is information work. :)
"You betcha. Taking or accepting what you can get as best under the circumstances is a lot different from agreeing that is what you should get."
Is that you, Larry?
I should get $500/hr. No one will agree to pay me that, so I guess there's something wrong with my estimate of my value in the workplace. Maybe bagging groceries doesn't pay as much as I think it should.
The amount I agree to work for, and what someone agrees to pay me, is, by definition what I am worth. If that's too much, I won't long be employed. If it's not enough, others will try to hire me away. What don't you understand about that?
What other point could you be trying to make? Do you think people are generally paid less than they are worth?
Learn some economics.
"I understand the theory and the argument behind that sentiment..."
Sentiment? It's empiriclal data.
"...but my observation is that it is bullshit in the real, world, because it smugly omits a lot of information. Yeah, I get that all those people have " Choices"
That they are responsible for themselves, in the end."
What data is smugly omitted?
If you "get it", what are you arguing?
Is the truck driver who delivers cereal to your grocer not paid what he's worth?
What's your point
You betcha. Taking or accepting what you can get as best under the circumstances is a lot different from agreeing that is what you should get.
You should get what the circumstances dictate. If you don't like it you can go and do something else.
I understand the theory and the argument behind that sentiment, but my observation is that it is bullshit in the real, world, because it smugly omits a lot of information. Yeah, I get that all those people have " Choices"
That they are responsible for themselves, in the end.
Muddled writing is a sign of muddled thinking. Phrases like, "it smugly omits a lot of information," without explanation of what is omitted shows that you don't really have a clear argument. Why am I not surprised?
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