Big Business Has Been Disrupted In The Past 10 Years
And Not By Tech Companies
For many, particularly those under 40 the financial crisis may be the defining event of our lifetime. Millions of people around the world lost their jobs, lost their homes, lost their retirement. While it hit some groups of people harder than others, the financial crisis had dramatic impacts on individuals across the world.
The financial crisis changed everything, not just for actual people but for the largest corporations in the world. Every year, Fortune releases the largest 500 companies in the world, sorted by revenue. The number of new names on the top 100 of that list from 2008 to 2018 demonstrate the dramatic changes in the global economy since the financial crisis.
43 of the top 100 largest companies in 2008 did not make the same list in 2018. You might be thinking that this makes since given the rise of Facebook, Amazon, Netflix, Google and other tech giants that have been disrupting traditional business giants. For all of the attention that technology companies receive, only 11 of them managed to crack the top 100 and No technology company cracked the top 10.
The tech companies that cracked the top 100
- #11 Apple with $229 billion in revenue
- #12 Samsung with $211 billion in revenue
- #18 Amazon with $178 billion in revenue
- #24 Hon-Hai with $155 billion in revenue
- #52 Alphabet AKA Google with $111 billion in revenue
- #71 Microsoft with $90 billion in revenue
- #72 Huawei with $89 billion in revenue
- #79 Hitachi with $85 billion in revenue
- #92 IBM with $79 billion in revenue
- #97 Sony with $77 billion in revenue
Even more surprising than the lack of representation of tech in the top 10 is the fact that Walmart, which ranked as the largest company in the world in 2008 with $379 billion in revenue, remains at #1 in 2018 with over $500 billion in revenue. So much for the “Death of retail”.
Now that we have covered off what has “not changed” in the past 10 years let's dive into the real disruption in the global economy, the rise of China at the expense of Europe.
Changing Of The Guard
In 2008, only three Chinese companies cracked the list of the 100 largest companies in the world with zero in the top 10. In 2018 there are 21 Chinese companies in the top 100 and three in three in the top 5 . Those three companies being:
- State Grid, which as the name suggests is China’s state owned power company. It is now the second largest company in the world with $348 billion in revenue
- Sinopec group, another state owned energy company specializing in Oil & gas is the third largest company in the world with $327 billion in revenue
- China national petroleum, another Chinese energy company. It is now the fourth largest company in the world with $326 billion in revenue
With the rise of Chinese companies in the top 100, companies from other countries must fall off the list to make room. Europe has seen the largest decline in the number of top global companies in the past decade. In 2008, 52 European companies made the top 100 with three in the top 10. Today, only 25 European countries remain in the top 100.
Big business is rapidly changing. But it is not Facebook or Google but Chinese energy companies that are the new face of the dominating global corporations.
What Can We Learn From This Change?
While it is interesting to examine how the global economy has changed so much in the past 10 years, making “top 100” lists is pointless if we can't learn from how the list has changed.
The big takeaway: We have very little understanding of the global economy, and even less understanding of it will change over the next 10 years, let alone 20 or 30 years.
Take the case of General Electric, the poster child for American business for over 100 years. In 2007 General Electric had $173 billion in revenue and it’s stock was trading at more than $42 per share. Today it’s stock trades at $9 per share.
Very few people in the world could have predicted the fall of General Electric and the rise of Chinese energy companies. We simply don’t know how this list will look in 2028. For all we know General Electric could be back on top and Chinese companies could be replaced by Indian companies.
That is why I am more convinced than ever that for those of us saving for retirement or investing for the long term, picking individual stocks is a fools game. There is a reason the majority of stock pickers can’t beat the returns from the general stock market.
Rather than trying to pick individual stocks it makes much more sense for the majority of us regular people to invest in low-cost Index Funds. Primarily because these funds remove the need to predict which companies will rise and which will fall in the future.
Index funds only seek to track a particular stock market index. For example if you bought an Index Fund that tracks the S&P 500 Index in 2007 you wouldn't need to worry about the fall of General Electric. As General Electric begins to represent less and less of the S&P 500 Index, the fund manager will sell General Electric shares and replace them with the companies that would eventually take its place like Netflix.
If you bought an Index Fund that tracked the global stock market, you wouldn’t need to know which Chinese companies would rise as global power players and which European companies would fade.
Those of us who are smart enough to admit that we have no idea what will happen in the stock market will be better off than those who believe they can predict the future and think they know which companies to bet on over the next decade.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions