As the speed of business and disruption of innovation increase so does the rate that long-standing companies are being replaced in the S&P500. The rise of the internet is an example of a game-changing disruption that has seen the rise of many new business models like Amazon or Netflix. Traditional companies, not used to change as a core competency of their business, have struggled to adapt and are often left behind before they even understand the shift that has occurred. By the 1950s, many companies would last 50-60 years in the S&P. In that past decade, that number has dropped to around 15-17 years. Currently, the churn rate is around 75% with today’s S&P being fully replaced by 2030.
Source: Professor Richard N. Foster, co-author of Creative Destruction