Professor Mark J. Perry's Blog for Economics and Finance
What do the companies in these three groups have in common?Group A. American Motors, Studebaker, Eastman Kodak, 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 1959, but not in 2009.All the companies in Group B were in the Fortune 500 in both 1959 and 2009.All the companies in Group C were in the Fortune 500 in 2009, but not 1959.Here's the complete database of the Fortune 500 every year from 1959-2009. Comparing the Fortune 500 in 1959 to 2009, I find that there are only 72 companies that appear in both lists. In other words, only 14% of the Fortune 500 companies in 1959 were still on the list fifty years later in 2009, and 86% of the companies have either gone bankrupt, merged, gone private, or still exist but have fallen from the top 500 companies (ranked by gross revenue). That's a lot of churning and creative destruction, and it's probably safe to say that many of today's Fortune 500 like the ones listed above will be replaced by new companies in new industries by the year 2059. Thanks to Nick Schulz for the idea. The 50 year database is a great resource and I might try some additional analysis, this was just a quick start.
6 Comments: At 2/04/2010 5:54 PM, John Thacker said...I thought that the done thing was to mention John Kenneth Galbraith at this point, but let's not speak ill of the recent dead I suppose.
At 2/04/2010 6:11 PM, Anonymous said...This evidence churning and creative destruction is going to have to be deliberately ignored by those who argue that we have an entrenched corporate elite who control every aspect of our government and are lives. Thankfully, they have lots of practice ignoring evidence that does not support their narrative.
At 2/04/2010 9:07 PM, Anonymous said...This gives the lie to the "stock market always recovers" meme that is fed to stock market investors. Let's pretend I was an 18 year old lad in 1959 with a little bit of an inheritance who invested it the Fortune 500 because the stock market ALWAYS recovers... If I had split my investment evenly amongst all 500 companies, only 14 percent of those companies now remain as I reach my retirement age.Yes, the stock market does ALWAYS recover because those companies that fail are delisted, and the money that was invested in them is cleared from the slate.
At 2/04/2010 9:43 PM, morganovich said...try this in europe. you'll find it's nearly all the same companies.
At 2/04/2010 10:33 PM, Anonymous said...A couple of questions:For the second Anonymous commentor: That only 14% of the companies remain in their original name is unimportant. How did your investment do?And for Morganavich: Why? and Is that a good thing?
At 2/04/2010 11:41 PM, Lyle said...What would be interesting is how many companies vanished by merger during the 50 years and how many went under. In oil it would be mostly mergers, as Gulf, Texaco, Sinclair,Getty, Mobil, Superior and a long list of companies were gobbled up. Also true in tech, and definitly in the Banking sector, look at Bank of America (really NCNB of Charlotte that first gobbled up banks in NC then the southeast, and then gobbled up the Original Bank of America, but kept the name. Another case is Wells Fargo, starting out as Norwest bank of Minneapolis, Or JPMorgan Chase which was Chemical bank gobbled up Texas Commerce, and then Chase and finally Morgan. It would then be interesting to see what a unit trust that bought the 50 in 1959 would be worth today.
Links to this post: See links to this post posted by @ if (typeof BL_addOnLoadEvent == 'function') { BL_addOnLoadEvent(function() { BL_writeBacklinks(); }); }About Me Name: Mark J. Perry Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Perry is currently on sabbatical from the University of Michigan and is a visitor at The American Enterprise Institute in Washington, D.C.
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Previous Posts Physician Compensation Data for 68 Specialties Jobless Claims in Perspective: Adjusted for Workfo... Human Ingenuity and Advances in Engineering Have T... Capitalism Created the Middle Class and They Still... Milton Friedman on Steel Tariffs and Trade in 1978... Disruptive Innovation from the Invasion of the Ret... Up Against Big Sugar, aka the Sugar Cartel on CNBC... Affirmative Action: Costly and Counterproductive Markets in Everything: Student Auctions Virginity Annual Cost Per Sugar Farm Job Saved = $826,000 var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10045229-2"); pageTracker._trackPageview(); } catch(err) {}I thought that the done thing was to mention John Kenneth Galbraith at this point, but let's not speak ill of the recent dead I suppose.
This evidence churning and creative destruction is going to have to be deliberately ignored by those who argue that we have an entrenched corporate elite who control every aspect of our government and are lives. Thankfully, they have lots of practice ignoring evidence that does not support their narrative.
This gives the lie to the "stock market always recovers" meme that is fed to stock market investors. Let's pretend I was an 18 year old lad in 1959 with a little bit of an inheritance who invested it the Fortune 500 because the stock market ALWAYS recovers... If I had split my investment evenly amongst all 500 companies, only 14 percent of those companies now remain as I reach my retirement age.Yes, the stock market does ALWAYS recover because those companies that fail are delisted, and the money that was invested in them is cleared from the slate.
try this in europe. you'll find it's nearly all the same companies.
A couple of questions:For the second Anonymous commentor: That only 14% of the companies remain in their original name is unimportant. How did your investment do?And for Morganavich: Why? and Is that a good thing?
What would be interesting is how many companies vanished by merger during the 50 years and how many went under. In oil it would be mostly mergers, as Gulf, Texaco, Sinclair,Getty, Mobil, Superior and a long list of companies were gobbled up. Also true in tech, and definitly in the Banking sector, look at Bank of America (really NCNB of Charlotte that first gobbled up banks in NC then the southeast, and then gobbled up the Original Bank of America, but kept the name. Another case is Wells Fargo, starting out as Norwest bank of Minneapolis, Or JPMorgan Chase which was Chemical bank gobbled up Texas Commerce, and then Chase and finally Morgan. It would then be interesting to see what a unit trust that bought the 50 in 1959 would be worth today.
About Me Name: Mark J. Perry Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Perry is currently on sabbatical from the University of Michigan and is a visitor at The American Enterprise Institute in Washington, D.C.
View my complete profile
Previous Posts Physician Compensation Data for 68 Specialties Jobless Claims in Perspective: Adjusted for Workfo... Human Ingenuity and Advances in Engineering Have T... Capitalism Created the Middle Class and They Still... Milton Friedman on Steel Tariffs and Trade in 1978... Disruptive Innovation from the Invasion of the Ret... Up Against Big Sugar, aka the Sugar Cartel on CNBC... Affirmative Action: Costly and Counterproductive Markets in Everything: Student Auctions Virginity Annual Cost Per Sugar Farm Job Saved = $826,000 var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-10045229-2"); pageTracker._trackPageview(); } catch(err) {}