Industry, Business and Product Longevity

November 2021

Phil Ruthven, AM

Nothing is forever, as they say; and this is certainly true in business. Industries come and go (although more come than go); as do products, which have shorter lives than industries. Businesses have much shorter lives than either.

We begin with a backdrop of industry and product longevity.

Industries and products

Australia has over 500 industries operating in its economy, as defined at the official ANZSIC four-digit class level. These industries are born through outsourcing or invention. Outsourcing is more frequent, where an industry is created to do what was previously insourced by a household or business. Invention involves the creation of a new activity that did not pre-exist, such as the telephone, electricity or computers and software.

The world’s standard of living increased dramatically with outsourcing and invention, especially with the birth of the Industrial Revolution in the United Kingdom around 1760. Adam Smith’s ‘division of labour’ principle, as outlined in his 1776 tome The Wealth of Nations, did much to encourage the expansion of industries, efficiency and productivity. While there would have been fewer than 100 industries at that time, the number grew to over 250 at the end of the 19th century, and double that again by the end of the 20th century.

As noted earlier, most industries are created via the outsourcing of activities previously insourced by households or businesses, thus becoming a formalised part of the economy. These new industries are then measured as part of our GDP, being the final value of all goods and services produced by businesses on a do-it-for-me (DIFM) basis. Household production of goods and services – or the do-it-yourself (DIY) activities – would add some 40% to this official output figure. So, there is a lot of room this century for more DIY activities to be converted into DIFM activities, thereby creating a new industry or expanding an existing industry.

In our current age of progress – sometimes called the Infotronics Age – such outsourcing is mostly of a services nature, rather than the goods-production outsourcing that took place in the Agrarian and Industrial ages. Invention – being the second reason for creating new industries – is a prominent factor in the Infotronics Age, with modern industry activities being underpinned by innovations such as computer software, artificial intelligence and high-speed telecommunications.

So new industries are being created all the time – but do they also die? Yes, but not often; and not in big numbers.

Recently, we have seen the demise of music stores and video stores, both supplanted by online streaming via the likes of Spotify, Netflix and Stan. Newsagents seem to be heading in the same direction. Other industries have gone through a similar transition; such as department stores, which have moved from traditional to discount to online (Amazon being a prime example). Our Motor Vehicle industry hasn’t completely disappeared, given import modifications and transport vehicle manufacture; but it is a shadow of its former importance.

Perhaps the most important characteristic of industries is their longevity, especially compared with the longevity of businesses. The vast majority of industries have a life of up to centuries; whereas businesses have a life of only decades.

Within their centuries-long lives, industries at the class level run in repetitive cycles – or life cycles – averaging 40 to 45 years in length. In other words, Australia has hundreds of industries that have been reborn many times over via a new life cycle. For example, our Wine Production industry began with the British settlement in 1788 and is into its ninth life cycle in the 2020s. Its history over the past 120 years is shown below.

This life cycle phenomenon is explained in far greater depth in the Ruthven Institute’s e-book, Business Success.

By contrast, businesses –  if they cycle at all – have a shorter average life cycle length of 31 to 33 years. Unlike industries, few businesses ever complete one such cycle, let alone several.


Australia had over 2.4 million businesses entering 2021, although only around 900,000 of these have any employees. We lose around 13% of our total businesses each year, suggesting the average life of a business is less than 10 years. But we create more businesses than we lose in most years, averaging around 14%. The recent gap has been around 2% in favour of entries versus exits.

The oldest business in Australia is said to be Australia Post, which was established in 1809. Westpac (originally the Bank of New South Wales) was created in 1817, and is our oldest listed company on the Australian Stock Exchange (ASX). Our biggest company, BHP, was listed in 1885.

Three companies that were founded in the 19th century are currently listed on the ASX. Another 97 were founded up to 1986 (the 20th century), rounding out 100 stocks; and the other 2100 – being 95% of all stocks nowadays – are 34 years of age or younger, at least as listed entities. Many are older, of course, if their years of private ownership are included.

Very few businesses survive more than 10 years, as suggested earlier; with public companies generally having a longer life than private businesses. A small number of companies become insolvent statistics; others get taken over; and most seem to have double the longevity or more than the average business.

As said earlier, companies with very long histories tend to run in life cycles of 31 to 33 years. This is the case for companies such as Westpac, BHP, Forges, Coles, Myer, Elders and Washington H. Soul Pattinson. Each cycle is different in its operations from a previous cycle, including the company’s Board and CEO(s).

This being the case, it is at least good governance to expect that trends in revenue growth, profitability and wealth creation for listed companies will have changing fortunes over long periods and are thus worth anticipating. This means, in turn, that long-life corporations could have periods of upward, horizontal and downward trends. Three charts below provide examples of such trends, all based on profitability (return on shareholder funds, or ROSF).

Of course, the life of a corporation may be short – say, under 15 years – and only one of these trends may show up.

In short: it is a survival of the fittest in a take-no-prisoners economic arena. And these final charts remind us of that reality.



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