Technology Advances Could Have Corporate Lifespans Declining
Was it bound to happen with new technology? The age of automation has been under development for quite sometime and technology is 100% to blame. Right now the average age of an S&P 500 company is under 20 years and this is concerning. This figure is down from 60 years in the 1950’s according to Credit Suisse. Technology has evidently been very disruptive and where it can be a good thing with innovation and that may not necessarily bode well for older companies.
Human employees continue to be at risk when it comes to losing jobs to “more efficient” technology and investors are not immune either. “The average age of a company listed on the S&P 500 has fallen from almost 60 years old in the 1950s to less than 20 years currently,” a team of Credit Suisse analysts led by Eugene Klerk wrote in a note to investors.
Obviously, just outside of technology growth, the warmer climate for mergers and acquisitions has also played a role in decreasing the lifespan of corporations as well. Since the 1980’s, buyout activity has increased. Then again, companies like Amazon, Apple, and Google parent, Alphabet have helped to set a higher pace.
Nothing has been more indicative of the evolutionary trend of technology than the stocks in this industry this year. In some cases shares of tech companies like Alphabet, Apple, Amazon, etc. have tripled during the course of just a few years. A quick look at the Global X Robotics and Artificial Intelligence ETF will show a clear trend of growing technology. The ETF tracks companies that are at the forefront of automation in older industries.
“Personal wealth creation is likely to become ever more challenging, resulting in more polarised societies. The potential fallout raises uncertainty over economic and corporate profit growth,” Credit Suisse said, “[The cloud] is one of the most disruptive technologies.”