This Japanese Inn has been open for 1,300 years. In Japan, there are more than 20,000 companies more than 100 years old, with a handful that are more than 1,000 years old. There is even a specific word for long-lived companies in Japanese: shinise.
Shinise are rarae aves. The typical half-life of a publicly traded company in the US market today is only about a decade, according a new study from scientists at the Santa Fe Institute(1). The probability of surviving 100 years is approximately 4.5 x 10-5 and for 200, 10-9. The average lifespan of S&P companies dropped during 20th century—from 67 years in 1920 to 15 years today.
Is there a magic recipe for longevity? Professor Makoto Kanda, who has studied shinise for decades, says that Japanese companies can survive for so long because they are small, mostly family run, tend to be clustered in industries that never really go out of style, and because they focus on a central belief or credo that is not tied solely to making a profit.
Nice, but for a company listed in the US stock market “It doesn’t matter if you’re selling bananas, airplanes, or whatever,” Publicly traded companies die off at the same rate, regardless of the firm’s age or what sector it’s in.
The good news is that American companies die mainly to create new companies or become a part of another company. They often persist in some form as part of other organizations. The authors of the study think that this is important:
This is an important point because it associates death events with organizational splits and mergers that may make sense in the light of the structure of transaction costs, rather than the failure to be productive and disappear. Furthermore, a constant hazard rate, independent of age, suggests that at each stage of a firm’s life cycle there is a similar probability to being acquired.
And who wants to live forever when there is a heaven—living in others—for a good 50%?
(1) Daepp, Madeleine I. G., Marcus J. Hamilton, Geoffrey B. West, and Luís M. A. Bettencourt. “The Mortality of Companies.” Journal of The Royal Society Interface 12, no. 106 (May 6, 2015): 20150120. doi:10.1098/rsif.2015.0120.
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