Software eating the Fortune 500 | Hacker News Reader

Software eating the Fortune 500

gabrielweinberg.com

63 pointspathdependent29 comments

This line of analysis looks promising, but the post leaves too many important questions unanswered, including:

* How have mergers and acquisitions affected the rate of churn in the S&P 500? It could very well be that S&P 500 companies are disappearing from the list at a faster rate because they're being merged into or acquired by other companies at a faster rate.

* To what extent does the rate of churn in the S&P 500 reflect declines in specific sectors of the economy unrelated to software? For example, US manufacturing has faced challenging times for several decades, so one would expect to see this trend reflected in the list.

* How did the inflating and bursting of the Housing Bubble impact the companies exposed to that industry in the S&P 500? For example, many home builders and mortgage lenders boomed during the bubble and then went bust when the bubble burst. How is that reflected in the data?

* How did the growth in financial services as a percentage of GDP affect the index prior to the financial crisis? How about after the financial crisis? Think not just about Lehman Brothers's demise, but about all the formerly high-flying financial firms that went bust or whose size is considerably smaller today.

This line of questioning looks promising, but the post leaves a question unanswered:

* Did the questioner notice the article was referring not to the S&P 500, but the Fortune 500?

I think GP comment is worth of discussion if you mentally replace "S&P" with "Fortune". No reason to downvote it.

Yikes. I'm the poster. Unfortunately, I can't edit now :-( Sorry about the mix-up!

"In another 50 years, would you expect Apple or Exxon to still be near the top of the list?". Is that a trick question? Exxon obviously - they make the thing we can't live without.

50? Sure. But Exxon will also need to continue to evolve in order to ensure their relevance whenever the world's oil supply begins to wane. Probably won't be in our lifetime ... but someday something else will be more dominant out of necessity and Exxon won't necessarily be the one leading that charge.

Of course, as the supply of oil dwindles and demand grows, their volume will go down but their profit margin will go up.

Unless it becomes considerably more expensive to obtain, and/or affordable alternatives arise.

Even if they can't evolve, they have ridiculous amounts of cash. They could absorb a piece of whatever new wave comes along (assuming they missed that wave) and incorporate it.

This is hard for product and most services businesses, but in the commodities business it ought to be much more workable.

Yes, but they could just as well burn their money on something that don't pan out.

Ditto. Just wait for a Great Depression, and you'll see what're more expendable

The whole argument came apart right here. Exxon will certainly be near the top in 50 years.

I wouldn't bet either way.

Just because people will be buying x in the future, it doesn't mean that today's top x companies will still be around in 50 years.

The computer market is now much bigger than 50 years ago, but many computer companies of that time went broke. Just like we went from mainframes to personal computers, we'll probably be using much more renewable energy in 50 years, and it's not obvious that any given existing company will adapt to it.

Also, there are mergers. Mobil and Texaco were in the top of the list in 1962, and now neither exists independently (merged into Exxon and Chevron resp.) so arguably they aren't in the list anymore.

For an article about "software eating the world" it would perhaps have been nice to use a list that isn't restricted to US companies.

For example, there is the Forbes Global 2000 - this is just public companies, but Apple isn't even in the top 20 there (it's #22)

http://www.forbes.com/global2000/list/

What is that list ranked by? None of the columns are in any strict ascending/descending order. In particular Apple has the highest market capitalisation out of all the firms of that list, 540+b compared to Exxon (#1)'s 400b.

Good point - they explain it here:

http://www.forbes.com/sites/scottdecarlo/2012/04/18/methodol...

NB I'm not particularly attached to the Global 2000 - just it would be interesting to use a list that isn't only US companies.

In another 50 would you expect Apple or Exxon to still be near the top of the list?

Exxon yes, Apple no. There isn't enough advantage to being the incumbent in Apple's weird combination of fashion and consumer electronics.

What if the world switched primarily to renewables? It is 50 long years...

There will still be a need for hydrocarbon extraction. We use oil and gas as feedstock for all sorts of chemical production from fertilizer to plastics. Plus we'll still be using oil for things like air travel and military operations.

What if no one needed gas anymore? I see solar panels everywhere. And electric cars would most definitely improve their efficiency and soon beat the Gas powered ones in every metric you could possibly imagine.

Love the chart. Another fun thing to plot might be: what's the retrospective half-life of the Fortune 500? (That is, how far back do you have to go from each year for 50% of the companies to be different.)

"In another 50 would you expect Apple or Exxon to still be near the top of the list?"

Well, maybe it depends on who is supplying power to the world, including, e.g., supplying the power to run Apple gadgets and Apple datacenters. Chances are it's still going to be Exxon.

I'm intrigued by the idea of "regulatory capture." I hadn't heard that term before but that economic theory is playing such a prominent role at the moment in the growth of the market I work in, privacy (e.g. EU Data Directive, US Privacy Bill of Rights). We of course saw it clearly working in favor of IT in the US in the last decade with the advent of HIPAA, SOX and GLBA. Whole segments of the IT security business were basically born (re-born) due to this legislation.

I wish Gabriel went into more depth on this point. Specifically I wish he provided some examples. I think we would all benefit from considering what changes legislation will bring and seeing if we can't jump on the opportunities early.

It's a common term. He didn't make it up and I don't think he needs to discuss it.

I didn't imply that he was making it up. I just wish he elaborated on some examples of where that was going to take hold. There is no reason to get defensive.

The margin paragraph is simply too optimistic, margins now are good because there is still small to no competition, when competition will come, margins will drop.

Is software eating programming?

To the extent that it does, it will increase the rate of software eating the world.

In 50 years, Exxon Mobile will be #1 while Apple will be nowhere in the top 50.

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