Oh Shift!

I've been reading Deloitte's "Shift Index" which attempts to capture metrics over the last 30 years to predict what's coming in the future. This is, of course, always challenging, inherently error prone, mostly wrong . . . and yet, still fascinating. Amidst the normal discussions of faster processors, more wireless connectivity and more bandwidth, there was a fascinating and disturbing chart.

Deloitte took the performance of corporate assets of public companies over the last 35 years and plotted returns on those assets (ROA). While I'm sure we can all poke some holes in their methodology, the results are stunning. Despite a continuous fall in effective corporate income tax rates over the period, ROA has plummeted over the last three decades. The most disturbing conclusion is that business's attempts to stop this erosion have largely failed.

In the last decade, firms have launched a salvo of defensive efforts to bolster ROA centered on efficiency improvements, financial engineering, and mergers and acquisitions . . . [these] measures have barely put a dent in the secular forces eroding returns.