Factoid: Creative Destruction in the Fortune 500

Mark Perry had a post on his Carpe Diem blog the other day in which he compared the Fortune 500 list from 1955 with the list from 2014. He notes that 88% of the companies that were on the list in 1955 are not on the list in 2014 (conversely, only 12% of the companies have remained on the list after 59 years).

He also links to a Forbes article by Steve Denning that makes the point that the life expectancy of firms on the Fortune 500 list has been declining over the years. In the early 20th century, a firm tended to stay on the list for up to 75 years, today they only stay on for 15 years. Denning includes the following graph from Richard Foster's work on creative destruction to illustrate the point:

The point here is that declining longevity at the top of the heap is a sign of dynamism in the economy. As Perry puts it:

That’s a lot of churning and creative destruction, and it’s probably safe to say that almost all of today’s Fortune 500 companies will be replaced by new companies in new industries over the next 59 years, and for that we should be thankful. The constant turnover in the Fortune 500 is a positive sign of the dynamism and innovation that characterizes a vibrant consumer-oriented market economy, and that dynamic turnover is speeding up in today’s hyper-competitive global economy.