Why Are We Still Classifying Companies by Industry?

For more than 60 years, investors, analysts, business leaders, and even governments, have classified companies based on industries. First there were Standard Industry Classification codes, which were introduced in 1937, then the North American Industry Classification System, and now we have Standard and Poor’s Global Industry Classification Standard (GICS). Even though these systems are updated regularly, we can no longer rely on standards and measures that were developed in a different age to reflect today’s realities — especially when we’re evaluating tech firms. Many of our current economic measurements saw their birth in the Industrial Age when the companies that were growing and shaping the world were giants with big physical plants and lots of material products — companies like Exxon Mobile and GE. There were no tech companies back then, at least not as we currently define them.

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