Checking Firms’ Life Spans Expected 30 Years Ago

: Thirty years ago, in 1987, a questionnaire that asked the question, “The average lifespan of a company is said to be 30 years. What do you think the probability is that your company will have survived after 30 years?” was sent as part of a white-collar survey of 11 large Japanese firms. Responses were received from 575 people, and the average “probability” was 72%. Thirty years later, in 2017, two companies that employed 127 of those 575 people did not survive. This makes a survival rate of 78%.


Introduction
In Japan in the latter half of the 1980s, the "corporate lifespan 30 years" theory became well-known despite making people 258 uncomfortable, and among so-called salarymen working in Japanese businesses, there was an increased interest in the lifespans of companies. This started with a publication entitled Kaisha no Jumyo [literally, "Company Lifespans"] (Nikkei Business, 1984). The basis of the assertion in this text was a chart that ranked "Japan's top 100 companies" by total assets for 10 approximately 10-year periods of 1896, 1911, 1919, 1929, 1936, 1940, 1955, 1966, 1972, and 1982. If these rankings of the top 100 companies were unchanged over time, then it stands to reason that the total number of companies appearing in the rankings across all 10 time periods would not exceed 100. In actuality, a total of 413 companies appeared in the rankings. A simple calculation shows that because 413 companies made it into the top 100 across all 10 time periods, each company appears in the rankings 2.4 (=100 * 10 / 413) times on average. This calculation led to the birth of the famous "corporate lifespan 30 years" theory that "a successful company will on average be ranked among a group of excellent companies 2.5 times or, given periods of 10 years, for less than 30 years" (Nikkei Business, 1984, p. 9). In actuality, only 194 companies out of 413 were ranked in only one period; 73 were ranked in two; 54 were ranked in three. Overall, almost 80% of the companies, 321, disappeared from the rankings in three periods or less.
However, was this truly the case? Many salarymen at the time felt uncomfortable with this theory. Thirty years ago, in 1987, a questionnaire that asked the question, "The average lifespan of a company is said to be 30 years. What do you think the probability is that your company will have survived after 30 years?" was sent as part of a white-collar survey of 11 large Japanese firms. Responses were received from 575 people. The average "probability" given at that time was 72%. Thirty years later, what has happened to the companies to which those 575 people belonged?

Method and Results
This survey was conducted 30 years ago among employees of large Japanese corporations that participated in the "Academy of The questionnaire included the following question.
Question: The average lifespan of a company is said to be 30 years. What do you think the probability is that your company will have survived after 30 years? Please respond with a percentage 1 − (20 + 107)/575 = 78%.
Even among the 11 companies that, at the time of the survey 30 years ago, were already large, employees thought that there was a greater than 70% probability that their companies would survive after 30 years, which has now actually been confirmed 30 years later.

Discussion
The Japanese economy stumbled due to a strong yen following the Before the bubble economy, the 1980s saw Companies D and E both experiencing tremendous growth, although despite this, the "probabilities" given for the two companies in Table 1 averaged 71% and 73%, respectively, those are almost overall average "probability." In retrospect, interviews with employees from both companies  (Hayashi, 1962

Conclusion
In actuality, as was noted by Takahashi (1995), the methods of estimation employed by Nikkei Business (1984)  It is a fact that two companies in the survey did not survive after 30 years, despite being successful, just as Nikkei Business (1984) warned. However, even among companies that were already large at the time of the survey, employees granted a probability of survival after 30 years of on average more than 70%, which has been confirmed after 30 years. At the time of the survey, no one could have foreseen the bubble economy and its collapse, nor the lost two decades afterward. Despite this, the intuition of these employees at the time regarding the "corporate lifespan 30 years" theory, though perhaps discomforting, was accurate after all.