WaPo gets it wrong

Sunday’s Washington Post had an article by one Anne Dumas that’s been blogged here and there, provocatively titled What’s American and Envied by France?. It starts with a rather shocking assertion that has, unsurprisingly, been quoted in a lot of the bloggage:

[N]ot a single enterprise founded here in the past 40 years has managed to break into the ranks of the 25 biggest French companies. By comparison, 19 of today’s 25 largest U.S. companies didn’t exist four decades ago. That’s why France is looking to the United States for lessons.

Alas, this quotable assertion is completely false.

I checked it out by comparing the top 25 firms in the Fortune 500 and the 25 largest firms in France by business (from Wikipedia). Then, I got the founding date for each using Wikipedia, or the company’s own webpage, or in a couple of cases I had to trawl the web for it.

Now, this isn’t quite as simple as all that. Many of the firms listed are conglomerates and holding companies which have come into their present form through buy-outs and mergers. Since Ms Dumas’ principal claim is that the US is a better climate for small businesses to grow, obviously the merger of two or more already giant businesses shouldn’t count. So, in each case, I tried to use either the founding date of the main component of the business, or the date the company’s own web page gives as its founding in some sense, or in the case of fairly equal mergers, I’ve tried to use the oldest of the pre-merger firms. In a few cases, I just took the earliest date that I could easily find.

For France, the list is as follows:

	NAME					FOUNDED
1	Total				1924
2	Axa				1816
3	Carrefour			1959
4	Vivendi Universal		1853
5	PSA Peugeot Citro?n		1810
6	EDF				1946
7	France T?l?com			1878
8	Suez				1858
9	Les Mousquetaires		1969
10	Renault				1899
11	Saint-Gobain			1665
12	Veolia Environnement		1853
13	Auchan				1961
14	Pinault-Printemps-Redoute	1960
15	Leclerc				1949
16	Publicis Groupe			1926
17	Rallye				n/a
18	Casino Guichard Perrachon	1898
19	Bouygues			1956
20	SNCF				1938
21	Alstom				1928 (or earlier)
22	Aventis				1863
23	Airbus industrie		1970
24	CNP Assurances			1855 (approx)
25	VINCI				1899

At number 17, Rallye is a holding firm whose principle asset is number 18, Casino Guichard Perrachon, now known as Groupe Casino. So, I disqualified it because it had never been a small firm. Airbus was founded in 1970, but it was formed as a consortium of four large European aerospace firms that date back to the 1920s and earlier, so it shouldn’t count either. I couldn’t find a good date for Alstom either, but according to Wikipedia, it came into being in its current form in 1928 as a merger of two older firms, so it’s at least 77 years old. CNP Assurances also didn’t give a precise date, but their website says they’ve been serving the public for 150 years, so I took that as their age.

Les Mousquetaires is a more complex case, since it was founded in 1969 by a group of supermarkets splitting off from number 15, Groupe Leclerc. So, while it was never exactly a small business, it was certainly established after 1965.

So, Ms Dumas is almost right. Only one of the top 25 French firms was founded in the last 40 years. But, if 19 out of the 25 top US firms post-date 1965, then she’s still correct on the merits, right?

So, let’s take a look at the top 25 US firms, according to Fortune:

        NAME					FOUNDED
1	Wal-Mart			1962
2	Exxon Mobil			1863
3	General Motors			1908
4	Ford				1903
5	General Electric		1890
6	ChevronTexaco			1879
7	ConocoPhillips			1875
8	Citigroup			1812
9	IBM				1896
10	American International Group	1919
11	Hewlett-Packard			1939
12	Verizon				1926
13	Home Depot			1978
14	Berkshire Hathaway		1960?
15	Altria Group			1902
16	McKesson			1833
17	Cardinal Health			1971
18	State Farm Insurance		1922
19	Kroger				1883
20	Fannie Mae			1938
21	Boeing				1916
22	AmerisourceBergen		1907
23	Target				1902
24	Bank of America			1874
25	Pfizer				1849

I couldn’t get a good date for Berkshire-Hathaway’s founding. Originally, it was a failing textile firm that Warren Buffett took over and turned into a holding company. It got out of the textile business shortly afterwards, so it’s hard to assert that it’s a small business turned big.

So, of the 25 largest firms in the US according to Fortune, just two were founded after 1965. It’s possible that Ms Dumas has a different list of firms than I do, but that at least 16 of its members are different would be surprising.

One out of 25 to two out of 25 is just not that big a difference. In fact, if we pick the last 50 years instead of the last 40, we get exactly the same number of firms for each: 4. Same thing if we pick 25 years: 0.

This is why you can’t trust the anglophone press to report on the European economy.

14 thoughts on “WaPo gets it wrong

  1. Hi Scott,

    In all seriousness, can I recommend that you send this link to the ombudsman at the Washington Post?

    His name is Michael Getler, and his address is ombudsman@washpost.com.

    Doug M.

  2. You probably use sales-based ranking. That’s why Microsoft is not included. Neither is Intel and many others. Try to make a market capitalization-based list.

  3. Welcome back Scott.

    Nice post. She of course is probably confusing definitions: everything would – as you suggest – depend on what you mean by ‘founded’. Even moving from Fortune to Forbes wouldn’t help her. If you take market cap (and not just sales) into account you still only add Microsoft I think.

    The key issue for France would be labour market reform and reducing unemployment (and Bernanke earlier today was arguing that even the US needs labour market reform), and adapting the welfare system to be able to handle an ageing population. OTOH since she’s French and writing in a US newspaper, it’s hardly surprising if people are badly informed.

  4. Doug, that’s an interesting idea. I think I will e-mail her and cc the ombudsman. We’ll see.

    Pavel, I had considered that, but I thought that all that would prove is that French traders value firms with established track records and high revenues over start-ups with potential. I can’t really see a moral point about market structure there. Also, I couldn’t find a list to compare it to. I had considered how Microsoft and Intel weren’t on the list, but I suspect that most of the US firms that are under 40 years old and have enormous market caps are probably international tech firms, and there are other reasons why those firms tend to operate out of the US.

    Edward, I agree with you about reducing unemployment – although I saw someone blog a piece in Alternatives Economiques about how government spending is the principal reason why unemployment is lower in the UK than France. (Actually, I thought it was you, but now that I’m looking for it, I can’t find it.)

    I’m not claiming that everything is fine in France. Clearly it isn’t. I’m just not convinced that it’s government barriers to business that are the real problem. I don’t have a problem with more flexible labour markets, but I do think that government has to find ways to reduce the risks to workers.

  5. It really depends on what biggest means in terms of a company – Revenue, Market cap, Profits, # of Employees. I like profits or market cap for this purpose. Has anybody looked at the list from that angle? By the way using revenue for this exercise is completely meaningless.

  6. By my count, if she used market cap instead of revenues, then 8 of the largest 25 U.S. corps have been founded since 1965: Microsoft, Intel, Cisco, Dell, Verizon, Genentech, Home Depot, and Amgen. If she used a slightly different list, or compiled the list on under a slightly different market, then I could believe 9 of 25, and a typo somewhere along the line probably transformed 9 into 19.

  7. Here’s the top 25 US companies by market cap:
    http://quicktake.morningstar.com/ETF/Holdings.asp?Country=&Symbol=IWB&fdtab=portfolio

    At least Microsoft, Intel, Cisco and Dell did not exist 40 years ago.

    It’s not a majority of the top 25, but at least it proves that in the US it possible to achieve the top of the business within one’s lifetime. Now show me a similar story in recent France. One single case, please.

    Look where’s Nouveau March? and where’s Amazon.com, eBay.com and Google.com now.

  8. “At least Microsoft, Intel, Cisco and Dell did not exist 40 years ago.”

    What I think we need here is some scientific comparison. First of all we would need a list of the top 25 French companies by market cap. Then we could see. I doubt our French journalist friend did this.

    Secondly: to what extent is market cap a valid comparison? I genuinely don’t know. We are in some ways comparing apples and pears, since the French system of funding may be more bank based than equity based. Beyond this I don’t see what it serves. The Chinese giants are mainly going to be State Owned Businesses recycled with some private finance. They may well dominate global markets 20 years from now. The Japanese companies mainly come from large conglomerates. What are we learning?

    I still think there is a lot of scope for second mover advantage. You can live quite well, and get a lot of leisure time thrown in to boot.

    That there are various models, that the Europeans generally were slow off the mark with the internet boom, and since that is all or nothing the ground is not retrievable, all this is pretty obvious. But are new giant companies – apart from Google – still being generated so rapidly in the US now as they were in the 90’s?

    I mean there are a lot of questions, none of this is so easy that you can just say: bang, I’ve got you. If they were people wouldn’t have been arguing this around for years and years and years.

  9. Oh, and I don’t know why this didn’t come to me before, you could make a list of the top 25 companies in offering home employment and compare them, again the results would probably be different. It depends what you want from your companies I suppose.

    Caveat: this doesn’t mean that we shouldn’t be doing more in the EU to address the issues of innovation, company formation and growth, of course we should. But again, as the actual article itself argues, things in France have improved significantly over the last decade. If there is an information revolution going on, I don’t imagine the French want to be left out of it forever.

    BTW there is historical precedent here. The French were slower off the mark with the first industrial revolution too, and eventually they caught up. So don’t lets be so quick to write them off. Also the demographics – as we’ve been noting – are a lot better than many other EU countries.

    @ pavel

    Are you expressing a literary preference, or are you a relative?

  10. “…the internet boom, and since that is all or nothing the ground is not retrievable, all this is pretty obvious…”

    What exactly do you mean by Internet boom here ?
    – Hardware ?
    – Software companies ?
    – Trade to private customers ?
    – Service providers ?
    – E-commerce between companies ?
    – News, Info and entertainment ?
    – Deflated Dot-com bubble stocks ?
    And which of these are all-or-nothing ? Why ?

  11. Well after all…

    “France doesn’t have a word for entrepreneur” if I remember President Bush correctly.

    What the real recently founded list really indicates is that the US had a head-start in IT and that it could set the global standards in this domain. Also that first mover advantages in fixed cost industries like this matter a lot – at least until the first mover has been able to set the standard.

    I don’t have a list for Germany, but I would not be surprised if the only recently founded German giant were SAP.

  12. I think market cap is a quite reasonable choice. It is still a fine catch and please do write to the Post.

    Exageration of the comparison is not the only point that should be challenged. Are there no other advantages US companies might have?

    There is the massive and relatively uniform home market for a start. That makes growing much easier and is certainly an explanation of the success of US investment banks and a great help to Dell. Certainly it is part of the difference the biotech company noticed.

    Then there is the Hollywood effect. Hollywood movies that wash their face at home can be effectively dumped on foreign markets. There is a structural advantage to being the largest market.

    Turning things around it also surely begs the question of why large American companies can’t maintain their advantages. Is there an American equivalent of Nokia?

    Maybe these particular things don’t actually amount to much and she probably has more than a grain of truth in her argument but why attribute all the difference to only slightly freer markets and not to other differences such as the network benefits of having a huge home market or the role of immigrant labour?

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