What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing the dow jones industrial average is one of the most recognized us stock market indexes alongside the s p 500, although it only has 30 stocks and is Price weighted rather than market cap weighted because it is one of the oldest indexes - is still considered one of the most important. It also carries a lot of history and by looking at what companies have been included in this prestigious index over the past hundred years, we can learn about the changing order of the biggest american companies in this video. We'll examine three examples of former dao icons and what the dallas historical components can teach us about how industry in america has evolved in the modern era, the dow jones industrial average is an index of 30, publicly traded companies first put together in 1896.. It was made by charles dao and edward jones to track the most important heavy industry related companies in the country.

Initially, there were 12 companies on the index. They included oil and gas companies, railroad companies, leather and rubber companies and general electric general electric remained in the index for more than a century eventually dropped from the index in 2018. It has the longest continuous presence in the index at 122 years, total general electric has its roots in the very first electric lighting technology and was actually formed by the combination of thomas edison's, edison general, electric company and another electric company. Its first areas of business included.

Designing and manufacturing electric lights, which were revolutionary at the time throughout the 20th century, general electric continued to lead technology and innovation in the u.s, helping to develop technologies like radio and television. They also expanded into heavy industry with aviation being a big component starting in world war. 1 ge started producing components for aircraft engines. Ge aviation eventually became one of ge's biggest and most profitable divisions, although ge successfully expanded into all kinds of industries that eventually turned into its undoing.

Ceo jack welch led the company through the 80s and 90s and grew the company into a behemoth that made more than 100 billion dollars of revenue per year by 2000. But nearly half of that revenue was from ge's foray into the financial services industry, which was demolished by the 2008 financial crisis. Furthermore, ge's obsession of acquiring smaller companies eventually made their businesses too diverse and unrelated one company made aircraft engines, wind turbines and healthcare devices, while also issuing credit cards and writing mortgages. This growth mentality of expanding into unrelated businesses backfired when the company became spread too thin and profitability suffered.

You can see that ge's revenues steadily declined through the 2010s as they desperately divested their underperforming portfolio companies despite the divestitures. Their profitability has still not yet recovered. In part, due to ongoing efficiency problems in the remaining businesses, another drag on ge's earnings is their massive pension liabilities left over from the days when they are a bloated conglomerate with hundreds of thousands of employees. Although their current ceo, larry culp, has been lauded by analysts for streamlining the company, somewhat ge's stock price has still nowhere near recovered to its former glory.

The next company on our list of biggest historical dial components is bethlehem. Steel, bethlehem, steel was started in the mid 19th century and was a major part of the industrial revolution in the u.s. It was involved in the production of some of the first iron clad battleships in the u.s navy. It continued to serve shipbuilding and metal production operations of the navy throughout world war, 1 and world war ii.

Bethlehem also made some of the first galvanized steel, an important innovation that protected steel from rusting after world war ii with foreign steel industries destroyed the american economy and steel industry in particular flourished. At this time, bethlehem steel was one of the biggest and most profitable companies. In america, for two decades, the company enjoyed this privileged position. However, bethlehem steel eventually became too complacent with their own success.

Making billions of dollars in profits every single year makes it hard to resist getting lazy with innovation. They resisted adopting new technologies for steel production, while both domestic and foreign competitors who were hungry to eat bethlehem, steel's cake, embraced them by the end of the 1970s. Other companies were able to produce steel for significantly cheaper than bethlehem. Steel was also more advanced techniques for construction and other heavy industry dampened steel demand, growth overall, bethlehem proved unwilling or unable to innovate.

Throughout the 1980s and 1990s, they were forced to shut down certain businesses, such as steel mills and divested other businesses, such as their railcar business. Over the course of just two decades, they went from being one of the most admired american industrial companies to filing for bankruptcy. In 2001., bethlehem steel was initially added to the dow in 1928, a true industrial giant for almost 70 years that remained until being removed in 1997, four years before its bankruptcy. The rise and rapid fall of bethlehem shows that when a company is on top of an industry for a century, it's easy to become complacent.

Management starts to think that the business will always do well and normal employees start to adopt a mentality of milking the giant company. But when the broader economy, advances beyond the scope of the business or new innovators make the company's products obsolete, a powerful giant can fall in just a couple of decades. The third and final dow giant on our list of companies dropped from the index is raytheon technologies. Although raytheon was technically only on the dow for four months, what is now raytheon was really united technologies before a merger in 2020..

United technologies was first added to the dow in 1976 and has been a giant military contractor for the past century. It has a long history of producing aircraft, engines, helicopters, military aircraft and even fire and security systems through many merges and acquisitions of other defense contractors. Over the years, united technologies became a true industrial behemoth. This culminated in 2019 when they announced they would merge with raytheon, which itself was a huge company in its own ray after more than 45 years.

It looked all but certain that united technologies now as raytheon would make it to half a century in the dow. But s p global the company in charge of making changes to the dow took raytheon out of the dow in the same year as a merger. Although raytheon was severely impacted by the coronavirus pandemic, their defense business was able to give them a comfortable amount of margin to get through the pandemic. So why did they get dropped from the dow right before their 50-year anniversary? One reason was simply to make room for a new stock to be added.

Salesforce salesforce is a software company in san francisco that provides customer relationship management services. These services and platforms help companies manage their sales contracts and relationships, for example. This might include keeping track of what products that customers have bought in the past and may be likely to buy again in the future. In turn, these services promise better sales and customer retention.

All sorts of companies use salesforce to help grow their own sales generation, but the reason that salesforce is significant to the dow is, as the first true software company to be included in the index. It marks a breakage of the index with its own descriptor of industrial. Since salesforce is not actually an industrial company at all, when the dow took out raytheon along with two others and added salesforce into other companies, they said that part of the reason was to increase the index's exposure to software and technology. Since software has become such a significant part of the overall economy, so what can we learn from these three companies that once dominated the doubt but ultimately fell? The first thing to notice is that no matter how advanced an admired a company may be, it will almost always have its own downfall in the cases of bethlehem, steel and ge.

These were two companies that were at the absolute pinnacle of industry and technological innovation, but after about a century of dominance, they both fell from their highs. Ge is still operating today and in the middle of a turnaround, but bethlehem, steel went bankrupt and its operations were shut down. Even today's economic powerhouses, like amazon and google, will almost surely suffer a similar fate at some point in the future. Second, companies die when they become complacent and fail to innovate.

Bethlehem steel allowed the industry to overtake it, both in terms of foreign companies breaking into the american markets and domestic competitors being more adept at incorporating new technologies and processes. Other dial giants like sears and kodak, suffered a similar fate, often times employees at these companies, get used to be working for a mega cap company and adopt a mentality of milking the system until retirement when you're. On top it's easy to get lazy. A third thing we can learn is that the biggest companies today are all technology or software focused, there's nothing.

An oil company, for example, can do to avoid being overtaken by the new kid on the block. Raytheon may be a strong company with innovation and ambition, but the reality is that the biggest growth areas today are occupied by companies like salesforce, alright, guys that wraps it up for this video. What do you think about the dow jones industrial average and what it can teach investors today? Let us know in the comments section below also, if you enjoyed this content, make sure to smash that like button and subscribe, so you don't miss future videos in the meantime. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.