America loves lists. You can find one on virtually any subject and they are part of our everyday vocabulary. There are so many kinds of them that there are even books that simply list the lists.
As an economist and a businessman, I find some lists very interesting and useful in my work. One of my favorite lists is the Fortune 500 which lists the 500 largest companies in the US. This grouping (I’m trying to avoid using “list” too many times) is compiled by the financial magazine Fortune.
Fortune, founded by Henry R. Luce, hit the newsstands in February 1930, barely four months after the traumatic stock market crash of 1929. Although some of his friends thought a magazine devoted entirely to business would be boring, Luce persisted and the initial list of subscribers totaled more than 30,000. In 1937, the magazine made almost a half million dollars with 460,000 subscribers. Within a decade after the stock market crash, Fortune was almost required reading for US businessmen.
In 1955, the magazine published a list that served as a register of the top-ranking US industrial companies. Known as the Fortune 500, firms were named to the list on the basis of total revenues for the previous year with ranking placement determined by amounts. The next year another list was compiled that included the top non-industrial companies. This second category grew to 500 over the next couple of decades and became known as the Fortune Service 500.
In the 1990s, with industrial companies receiving a significant portion of their revenues from service businesses, it proved difficult identifying whether a corporation was industrial or service. Therefore, in 1995, the listings were combined.
Nowadays, the Fortune 500 not only names the companies with the largest gross revenues, but the list also provides annual performance of the companies in 11 categories, including areas such as profits, assets, growth in earnings, and returns to investors.
Earlier this month, the 2006 Fortune 500 was released based on last year’s revenues. At the top of the list was ExxonMobil which earned its ranking by taking in some $340 billion in revenue.
Many people credit skyrocketing energy prices for ExxonMobil displacing Wal-Mart and earning the top honor. Wal-Mart took the lead in 2002 on revenues of $219.8 billion, and held that position for four consecutive years. While high energy prices are certainly a contributing factor to ExxonMobil’s $36.1 billion in profits, the most ever by any US company, it was not the first time the oil company headed the list.
In fact, in the 51 years since the first Fortune 500 was printed, only three companies have held the top spot. General Motors, the first to hold the honor with $9.82 billion in revenues, has been ranked first 37 times, most recently in 2000 with $189.06 billion in revenues.
ExxonMobil took second place in the 1955 listing behind General Motors with $5.6 billion in revenues. (If you want to get technical about it, it was the Exxon part that actually ranked second, then known as Standard Oil of New Jersey. Mobil, the outgrowth of the old Standard Oil of New York, was also ranked in the top ten. The creation of ExxonMobil a few years ago brought two big pieces of the original Rockefeller company back together.) Since then, the corporation has been runner-up 28 other years. In 1975, ExxonMobil gained the top spot with $42.1 billion (the old Mobil was fifth). It earned this position nine additional times in subsequent years prior to its jump back to number one this year.
While the Fortune 500 is certainly interesting and informative in itself, to me it’s a valuable barometer of the state of the economy for certain periods of time and an excellent tool of measurement of the American entrepreneurial spirit. The entry and exit of firms is a signal of what is advancing and what is declining in our ever-so-dynamic economy.
Last year, our nation faced numerous difficulties including war, high energy costs, monetary uncertainty, global downturn, growing trade imbalance, and budget deficit, plus unprecedented natural disasters. Despite all of these challenges, the “500” was bigger than ever by almost every barometer. You can debate the merits of such lists for hours, but perusing its machinations over the years provides a remarkable perspective on the paths and patterns of the American dream.