A study by McKinsey found that the average life-span of S&P 500 companies has fallen from 61 years in 1958 to less than 18 years today. McKinsey predict that, by 2027, 75% of the companies currently included in the S&P 500 will have disappeared.
A study by the management consulting firm mckinsey found that the average lifespan of companies listed in the s p 500 has fallen from 61 years in 1958 to less than 18 years today mckinsey predicted by 2027 75 of the companies currently included in the s p 500 will have disappeared so what happens to these companies well many will be bought out merged and some
Will even go bankrupt like lehman brothers and worldcom did some companies keep on going general electric exxonmobil and procter and gamble are amongst the oldest large companies listed on the new york stock exchange it’s worth noting though that age does not necessarily make a company any better in fact evidence from the stock market indicates that age is quite
Possibly a hindrance of the companies that have stayed in the s p 500 for more than 60 years only a minority have managed to beat the average over time it’s worth noting that the biggest companies today are quite young companies like apple microsoft amazon alphabet and facebook if the s p 500 was made up only of the companies that were part of the index 60 years
Ago overall index performance would have been around a third lower so what’s happening with these large old companies and how do the companies that disappear differ from the old companies that manage to survive well ef schumacher a british economist asked this very question back in 1973 when he wrote his book small is beautiful in it he exposed the inefficiency
And inflexible nature of large corporations he argued that what characterizes modern industry is its enormous consumption to produce so little these large businesses he argued are inefficient to a degree that goes beyond imagination large companies he claimed spend more time managing themselves than they do creating value for their customers well if it is the case
That companies can be really successful grow to be amongst the biggest in the world only to then find themselves hugely inefficient what do the oldest companies in the world look like well let’s take a look at some of the oldest companies in the world see how they’re structured how big they are and how they differ from other companies that burn brightly only to
Disappear over time japan it turns out is home to many of the oldest companies in the world there are more than 20 000 japanese companies that are over 100 years old and there are seven that are more than a thousand years old congo gumi was the world’s oldest continuously run independent company it stayed in business for over one thousand four hundred years in
2006 after falling on difficult times it was bought out by tcg headquartered in osaka it was a family-owned construction company that built some of the oldest buddhist temples in japan today a japanese hotel founded in the year 705 at 1 316 years old is thought to be the oldest surviving independent company in the world it’s not necessarily surprising that an
Old country with an old economy would be home to so many old businesses many of the oldest japanese companies are family-owned small businesses like sake brewers and inns even before japan became the first non-western country to industrialize in the 1870s it had a well-developed agricultural economy with a rather sophisticated urban population this provided a
Strong and steady customer base for these businesses one reason the japanese companies were able to survive for so long is that they were small mostly family-run and they benefit from a corporate culture that has long avoided the mergers and acquisitions that are common amongst their western counterparties another cultural artifact that allowed companies in japan
To grow so old was that traditionally they were passed on entirely to a single air never being split up this wasn’t necessarily a family member sometimes a family business would hire in a manager eventually adopting the manager as a son to then inherit the business i imagine that’s led to some awkward conversations between successful managers and their parents
Well dad the good news is that work is going well but there’s something we need to talk about when we look around the world the oldest companies tend to be restaurants hotels pubs breweries winemakers and farms the oldest british company is the otterton mill a water mill in devon founded in 1086 the oldest american company is the shirley plantation in virginia
Dating back to 1614. these are small businesses that would never have taken on significant debt while most of these old businesses have remained about the same size through the ages they will have supported their owners and employed thousands of people over time an amazing success other factors that have been important for corporate survival are innovation and
Self-reinvention the world’s oldest limited liability company is a finnish paper and pulp manufacturer stora enso which started out as a copper mining company so that’s quite a transition its corporate history can be traced back to the oldest remaining share certificate in the world issued in 1288. it however is not a small business today it employs around 26
000 people and is the number two forest and paper industry company in the world their business continues to change over time and today they’re looking into expanding into bioenergy and green construction materials areas that they’ve spent years analyzing and developing the video game company nintendo was founded in 1889 as a maker of playing cards they then
Went on to revolutionize at home entertainment with their electronic gaming system back in 1985. nintendo claimed to have stayed in the same business over time the business of how to create fun change and innovation are not always easy for businesses and this possibly explains why the newer companies seem to outperform the old innovation can be particularly
Difficult for large publicly listed companies whose shareholders pound the table for stable quarterly profits and who might not care for expensive r d projects that take years to earn a return in fact it’s possible that some of the reason that young firms can innovate more is that they attract an investor base that respect and seek out innovation rather than steady
Returns one of the oldest large american companies dupont was founded in 1802 it started out as a gunpowder manufacturer going on to develop numerous polymers such as nylon corian teflon kevlar tivec and lycra amongst many others they developed freon for the refrigerant industry and many synthetic pigments for the paint industry as proof of their commitment to
Innovation dupont implemented a rule in 2010 where they aim to earn 30 percent of revenues in each year from innovations developed in the last four years a move designed to reassure investors who might bulk at the company’s multi-billion dollar r d budget there’s no simple rule that can tell us which of today’s companies will last another thousand years as i
Mentioned earlier the oldest company in the world managed to last a thousand four hundred years only to find itself on the rocks in 2006 some companies innovate and succeed and other companies have less success with their transformation as investors we don’t necessarily need to find companies that will last forever and the admiration for longevity can possibly
Have a downside too many of the countries with the oldest companies like japan for example suffer from a sluggish startup scene there are still lessons that we can learn from these businesses though i spoke last week with a friend who runs a fast-growing startup in london he told me that there was no way that he would take money from private equity even though
It’s been offered as he’s better off owning the whole business even if it grows a little bit slower than owning a small slice of a faster growing business that’s so levered that at any economic slowdown he could be taken out if you enjoyed this video check out my other video from a few weeks ago on the best performing stocks since 1900. don’t forget to like and
Subscribe and of course to say hi to stephen in the comments section see you next week bye
Transcribed from video
The Oldest Companies in The World By Patrick Boyle
