Saudi and Foreign investors stand in front of the logo of Saudi state oil giant Aramco during the 10th Global Competitiveness Forum on January 25, 2016 in the capital Riyadh.
Fayez Nureldine—AFP/Getty Images
By Alan Murray and David Meyer
April 2, 2019

Good morning.

Economic inequality is not just growing among people; it’s also growing among companies. The folks at the McKinsey Global Institute studied more than 5,750 companies with over $1 billion each in revenues, and found that just 10% of them—the “superstar” companies—accounted for 80% of the economic profit. Moreover, that number was 1.6 times bigger, after adjustment for inflation, than it was two decades ago.

Meanwhile, the bottom 10% of companies destroy almost as much value as those at the top create. And that amount has grown 1.5% over the last two decades. Most companies bump along in the middle, with little or no profit, above the cost of capital, to show for it.

Partly driving this divergence is the increasing importance of intangible assets: software, patents, databases, etc. No surprise that the superstars far outspent the others on intangibles—especially R&D. The top ten percenters accounted for 70% of all R&D spending.

But here’s something that was a surprise, to me at least: the top ten percenters are no more likely to keep that position than they were twenty or thirty years ago. Nearly half the superstar companies lost their vaunted status over the course of a single business cycle…roughly the same rate of churn as in the previous two cycles. That suggests that proponents of a new, tougher approach to antitrust may be off the mark. The fact that companies are super big and super profitable doesn’t mean they can’t be challenged in the marketplace.

You can read the McKinsey report, out this morning, here. More news below. I’m in San Diego this morning, where Fortune’s annual Brainstorm Health event is about to get underway. Among those in attendance: WW CEO Mindy Grossman, Rakuten CEO Hiroshi Mikitani, Kaiser CEO Bernard Tyson, John Hancock CEO Brooks Tingle, Zenefits CEO Jay Fulcher, Humana CEO Bruce Broussard, and IBM EVP John Kelly.

Alan Murray
@alansmurray
alan.murray@fortune.com

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