The Times Are Changing
by Donald R. Chambers
As our economy continues to transition from a manufacturing-dominated economy to an information economy, the list of the biggest corporations in the US continues to shift. In 1970 the twelve biggest U.S. firms according to Forbes included the following:
1970: 3 Auto Companies, 4 Oil Companies, 5 Non-Auto Manufacturers, 0 Financials
In 2019 the ten biggest U.S. firms (by market capitalization) included the following:
2019: 0 Auto Companies, 1 Oil Company, 2 “Physical” Manufacturers, 4 Financials
The two manufacturers now (Apple and Johnson and Johnson) are both quite high-tech compared with the 1970 non-auto manufacturers (that included US Steel and ITT Industries). The 2019 list includes two retailers: Walmart (mostly still brick and mortar) and Amazon (web-based). Facebook, Google (Alphabet) and Microsoft are now on the list – none of which have principle sources of value that could have been imagined back in 1970.
It is not enough to have a good idea about the general types of changes that the future will bring – such as more computer technology and quicker obsolescence of firms unable or unwilling to respond to change. The key is predicting those changes better than leading experts. What does this suggest for ordinary investors? The answer is simple: now more than ever investors need to broadly diversify their equity exposures.