Fortune 500 reveals what we value: cheap stuff, tech and health care

Lists lost much of their impact after the arrival of click-bait websites and business magazine features like “The Top 30 Under 30 Left-Handed Female Aluminum Siding Executives.”

Fortune magazine’s annual list of the biggest companies in America is one that has not lost its impact. The Fortune 500 still tells important stories that politicians and policymakers should understand.

{mosads}The macro story is that the list changes. Between 1955 and 2016, nearly 90 percent of the companies on the list changed. Some went broke. Some merged and disappeared in name. New companies grew their way onto the list.

Old companies shrunk their way off. How the list changes tells us more than stories about companies. It tells us stories about ourselves.

Because the list ranks companies based on their revenues — the amount companies take in when they sell their goods and services — it tells us what we as a society spend our money on. What we spend our money on is influenced by our values, so the ranking reflects our values in a concrete, dollars-and-cents way.

For 40 years, the rankings showed that we valued individually-owned cars. In 1958, six of the top-10 companies sold cars or gasoline for cars. In 1998, five of the top 10 still sold cars or gasoline.

Fifteen years ago, we saw a couple of changes. Although we still valued cars and gasoline (four of the top 10), we also valued cheap goods. Walmart rose to the top of the list with 30-percent more revenue than General Motors, the long-time No. 1.

We also got a preview of the rise of finance. Two financial services firms, Citigroup and AIG, joined the top 10. 

This year, the list tells us a lot about our changing values. Fewer of us now value owning cars. Only one car and one oil company are in the top 10. This is consistent with evidence from my college classrooms where many students don’t have or want a driver’s license. They place a low value on driving.

What do we value enough to spend our money on? We value health care. Three of the top 10 companies are involved in health care (United Health, CVS and McKesson). Their revenues exceed the revenues of the car and oil companies. In 1998, no health-care company was in the top 10, but a cigarette company, Altria, was No. 9.

We value fashionable smartphones. Apple is No. 4. We don’t like No. 9 AT&T as much as we like Apple, but we value being connected in an AT&T sort of way, so we spend a lot on it.

We value low prices and delivery, so we spend a lot with Amazon (No. 8). We still value cheap shirts and groceries enough to keep Walmart No. 1 on the list.

My guess is that in another 10 years, we will value owning cars less than ever but will still value technology that is fashionable and easy to use. We will continue to value health care enough to spend even more on it.

New industries will join the list. We will see companies in transportation as a service, instant delivery and maybe cryptocurrency and virtual reality.

We may see “intelligence companies” — companies that add intelligence to everything from power grids to transportation to health care and maybe even to education. The list will still include companies that sell cheap shirts and groceries because we will still value both.

In 10 years, the Fortune 500 will still be more than a list of big companies that gives CEO bragging rights and supposed justification for higher compensation. It will continue to tell us how we as a society spend our money, and that will tell us what we value. 

Politicians and policymakers who dissect opinion polls where people are asked to report what they value should pay attention. It is easy for us to say that we value what we think we should value.

If we don’t spend our money on what we say we value, how much do we really value it? How we spend our money is a truth test of our values. 

That makes the changes in the list a sign of changes in our values. Are we changing our policies to reflect those changes? If not, our policymakers should pay more attention to the list than to the opinion polls they follow so closely.

Erik Gordon is a professor at the University of Michigan’s Ross School of Business, is a regular contributor to Marketplace Morning Report and frequently appears on PBS’s Nightly Business Report, Bloomberg Radio and Television and in major media outlets.