The Great Corporate Extinction

About this video

• Video Title: The Great Corporate Extinction
• Channel: How Money Works
• Speakers: [None explicitly named in the transcript]
• Duration: 13:15

Overview

This video explores the significant decline in the number of publicly listed companies despite economic growth and an increase in new business registrations. It attributes this trend to the rise of private equity, market concentration by a few dominant companies, and the changing landscape of venture capital, ultimately arguing that this "corporate extinction" is detrimental to investors, workers, and consumers.

Key takeaways

• Declining Public Companies: While new businesses are being created at record rates, the number of companies publicly listed on stock markets has drastically decreased since its peak in 1996, even as the economy has grown significantly.
• Market Concentration: A small number of very large companies (e.g., Microsoft, Nvidia, Apple) now represent a disproportionately large percentage of the S&P 500's market capitalization, a trend that has tripled in less than a decade.
• Rise of Private Equity: The growth of private equity firms managing vast sums of money has led many companies to forgo public listings due to compliance burdens, preferring to stay private or be acquired by other private equity firms.
• Influence of Asset Managers: Large asset management firms like BlackRock, State Street, and Vanguard, which hold significant stakes in nearly all major companies, can disincentivize competition between businesses as they benefit from the overall market's profitability rather than individual company success.
• Venture Capital Shift: Venture capital, once focused on funding innovative startups, now often prioritizes scaling businesses for acquisition by big tech companies, leading to "kill zones" where new ventures that threaten established players struggle to find funding.
• Consequences of Consolidation: This trend negatively impacts investors, workers (fewer job opportunities and lower wages), consumers (higher prices, reduced service), and even the companies themselves, as innovation is stifled and competition diminishes.