Sixty years have passed since the first publication of the Fortune 500, which ranks the largest publicly held companies in the U.S. The list has become the iconic measure of business success. Companies flaunt their Fortune 500 rankings the way baseball players boast batting averages.
Much has changed in the intervening six decades, and at times we’ve changed with it. The globalization of business led us, in 1990, to launch the Fortune Global 500, which will be published in our August issue. And the rise of the service economy caused us, in 1995, to add service companies to the list of industrials.
Today’s business environment raises new questions and highlights some old ones. With growing criticism of public markets, should we consider all privately held companies (Dell, Uber, Mars) for the list? Are profits or market capitalization better metrics of size (No. 1 = Apple (aapl)) than revenues (No. 1 = Walmart (wmt))? Should the Global 500 replace the Fortune 500 as our flagship? And at a meta level, has technology made “bigness” the wrong goal?
We’re pondering all those questions. But for now, we’ve kept the Fortune 500 in classic form. And we offer the following five facts, some of which—pardon us for saying so—may surprise you:
Fortune 500 companies are more important to the economy than ever before.
We live in the age of startups, right? Silicon Valley is the source of business dynamism, while “big” companies are bureaucratic, entrenched, obsolete.
But here’s a fact: Fortune 500 companies had revenues last year that equaled 71.9% of U.S. GDP—up from 58.4% two decades ago, and 35% in 1955. To be sure, much of that revenue comes from overseas operations. But these companies are still the guts of the U.S., and the global, economy.
We and others have noted that the logic behind these behemoths is changing. Ronald Coase won the Nobel Prize for his theory, developed three-quarters of a century ago, that giant companies were necessary because the “transaction costs” of building large industrial operations in the free market were too great. Since the onset of the digital era, however, those transaction costs have plummeted. You can now build a global business from your bedroom.
Yet a new logic—based on network effects and zero marginal costs of production—has led digital companies to achieve massive scale even faster than their industrial forebears—witness Google (goog), Facebook (fb), and the aforementioned Uber. Size still matters, even if for new reasons.
Rapid technological change is the greatest threat facing big business.
This year, as part of our research, we sent a survey to all the Fortune 500 CEOs. One question we asked: What is your company’s greatest challenge? “The rapid pace of technological change” topped the list, besting “cybersecurity” (a close second), as well as other popular business bogeymen, such as “increased regulation,” “shareholder activism,” and a “shortage of skilled labor.” Moreover, a whopping 94% of those who responded said their companies would change more in the next five years than in the past five.
Today’s CEOs clearly recognize that new technologies are going to radically change the way they do business. And they know they need to figure it out before their competitors do.
Despite the focus on change, “disruption” is overstated.
“Disruption” may be the most used word in the business vocabulary these days. And it is certainly the 2015 favorite for business-book titles.
But actual disruption isn’t as great as advertised. Sure, 57% of the companies on the 1995 Fortune 500 list aren’t there today. But that record isn’t dramatically different from the first two decades, when 45% of the companies on the 1955 list were gone by 1975.
Moreover, when we asked CEOs who their “most dangerous competitor” was, 57% said it was another Fortune 500 company. Only 20% cited competition from a startup, and only 4% cited competition from companies in less-developed countries, the purported sources of disruption.
Fortune 500 companies have no plans to shed workers.
The latest wave of technology, with its emphasis on artificial intelligence, has raised the specter of displaced knowledge workers and caused many commentators to wonder what jobs will be left for humans.
But for now at least, the CEOs of the nation’s biggest companies harbor no doubts about the value of human capital. Fully 82% said they planned to employ more people two years from now than they do today.
Fortune 500 companies would prefer to be private.
The vast majority (84%) of CEOs who responded to the survey agreed with the statement: “It would be easier to manage my company if it were a private company.” Frustration with the pressures of public markets is clearly on the rise. Surviving the new technological revolution requires long-term thinking and smart investment. But public shareholders, searching for better investment returns in a zero-interest-rate world, are demanding short-term results. Public-company CEOs are caught in the crosshairs.
In this issue, we present our latest Fortune 500 rankings. We also show you how some iconic companies—Walmart, Oracle (orcl), PepsiCo (pep), Facebook, Union Pacific (unp), Caesar’s (czr), Cummins (cmi) —are surfing the waves of change. We urge you to read it, and then put it on your bookshelf. You’ll find it a useful guide throughout the tumultuous year ahead.
Special thanks to assistant managing editor Brian O’Keefe, who oversaw this issue, and to senior editor Scott DeCarlo, who wrangled the data.
A version of this article appears in the June 15, 2015 issue of Fortune magazine with the headline 'Myth-busting the Fortune 500'.