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Aramco Profits, Obamacare Reversal, Paul Jacobs: CEO Daily for 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

Top News

Aramco Profits

Saudi Aramco is the most profitable company in the world. The country’s national oil company opened its books yesterday, in the run-up to a planned bond sale, showing that it made $111.1 billion in net income last year. Apple made just $59.5 billion, and rival fossil fuel firms Shell and Exxon Mobil just $23.9 billion and $20.8 billion respectively. New York Times

Obamacare Reversal

The Trump administration last week began a push to replace the Affordable Care Act and… he’s already changed his mind. Now the president says Republicans will wait until after the 2020 election, “when Republicans hold the Senate and win back the House,” to vote for an Obamacare replacement. Bloomberg

Paul Jacobs

Former Qualcomm CEO and chair Paul Jacobs will no longer try to buy the semiconductor firm. He has apparently decided to instead put his energy into his wireless technology company, Xcom, as Qualcomm was too expensive to take private. Wall Street Journal

Brexit Votes

U.K. lawmakers have again rejected every alternative to Prime Minister Theresa May’s negotiated Brexit deal, with one option—that of the country remaining in a customs union with the EU—failing by just three votes. So what happens now? May will probably make yet another attempt to get her thrice-rejected deal approved by Parliament. Right now the two most likely outcomes appear to be a catastrophic no-deal Brexit, or a fresh election. Guardian

Around the Water Cooler

U.S. and China

Moody’s says a global recession will be “highly likely” if there’s no U.S.-China trade deal within the next few months. Professor of government Minxin Pei warns of the worst recession in recent Chinese history. And Malaysia’s trade minister, Darell Leiking, has urged the U.S. and China to “stop thinking only of themselves” as their spat affects everyone. Financial Times

Hyundai and Kia

The National Highway Traffic Safety Administration has opened investigations into thousands of reported fires involving Hyundai and Kia cars. The agency was previously going to fold the non-crash-fire probes into an existing investigation about Hyundai and Kia engine failures, but will now treat the fires as a standalone matter. Japan Times

Cryptocurrency Rally

Bitcoin’s up 12%—at one point it even briefly peeked across the $5,000 barrier—and the rest of the cryptocurrency scene is also firmly in the green. Why? As is so often the case in the cryptocurrency world, the answer, apart from “a large injection of liquidity in the markets,” is opaque. Coindesk

Renault Jets

Renault’s post-Ghosn internal investigation has revealed that the company’s joint venture with Nissan owns four private jets, not just the one that was known about. Renault will apparently report back on its investigations tomorrow. Irish Times

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.