Morning:
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The arrival of yet another overseas mining company and the likely departure of our leading housebuilder, Persimmon, from the FTSE 100 index in the latest quarterly review have sparked the usual round of comment about the changing nature of the index.
Nevertheless, it is startling to see how much it has actually changed since it was launched on 3 January, 1984 - and what it says about the short lives of so many companies.
Of the 100 companies that made up the index then, just 20 are still in it now, which means that in less than a quarter of a century four out of five of what were our biggest businesses have either gone bust, been taken over or become so diminished in size that they no longer figure in the rankings.
What a long-term investor is to make of this is a moot point - but it seems a very good way to lose money.
The names that have gone were stars of their day - Ferranti in electronics, Allied Lyons in foods, P&O in shipping, Thorn EMI in electronics and music, Hanson among conglomerates. None were slouches - but the world changed and they became less relevant, less fashionable or simply less well equipped to cope. You see the same thing elsewhere. The Sunday Times Rich List is a great bit of fun when it comes out every year, but one of the more fascinating insights came from JPMorgan a year or so ago when the firm looked to see what had happened to the top 200 names on the very first Rich List, published in 1989.
Of the original 200, 91 no longer figure even in the top 1000. A further 43 feature but have slipped down the rankings, while a mere nine of the 200 have managed to improve their position.
I would never claim that this is a scientific survey, and it is obvious that a lot of people will have dropped out through death and divorce - or because, as possibly, with Robert Maxwell, they lied about their wealth and should never have been in the list in the first place. But even accepting that the sample is flawed, it does seem reasonable to conclude that while it is extremely hard to make a lot of money, it is harder still to hold on to it.
The economic wheel of fortune is just waiting to cast the successful back down into the shadows, and it seems to be getting worse. Change has always been with us, but its pace has never been this fast. Nor has it ever been easier for competitors to emerge.
The growth of globalisation and outsourcing means that an entrepreneur with an invention can create what is, in effect, a virtual company by outsourcing everything from the building of a prototype, through testing, to manufacture, shipping and distribution. Never has it been easier or cheaper to start a business. And the reason businesses-tend not to survive is that the guy in the garage can get his product to market while his established competitors are arguing about whether something new is a threat or an opportunity, - or more likely, who in the organisation should get the credit for it.
But there is more to it than that. Companies are organised on the basis that capital is the scarce resource. That belief underpins the whole concept of shareholder value and the priority given to meeting the needs of the owners of capital, and indeed giving ludicrously generous incentives to executives.
These days, though, capital is cheap and abundant - notwithstanding the credit crunch. Most firms in the same sector have similar capital resources. What differentiates one from the other is not its capital, but the quality of the people it employs and management's ability to get the best out of them.
This is most apparent in investment banking, the bulk of whose profits go to the employees, who tend increasingly to show no loyalty to their organisations beyond the next pay or bonus cheque. The bank is a convenient umbrella under which to ply their trade. When it is no longer convenient, they move.
What we need to understand is that this is not an aberration - not something confined to the financial sector - but the likely pattern of the future.
Tomorrow's company will be like the Chelsea or Arsenal football teams - an assembly of talent which comes together but rarely stays together for long. Managing businesses like that, and indeed choosing those in which you should invest, will require a range of skills which we have as yet barely begun to appreciate.
