The sunset of an industry?

Photographer: Norm Betts/Bloomberg

Was 'Plastics' the Right Advice in 1967?

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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I’ve never known quite what to make of Mr. McGuire’s famous advice to Benjamin Braddock in “The Graduate.” Here’s the full exchange, as transcribed on Wikiquote:

Mr. McGuire: I want to say one word to you. Just one word.

Benjamin: Yes, sir.

Mr. McGuire: Are you listening?

Benjamin: Yes, I am.

Mr. McGuire: Plastics.

Benjamin: Exactly how do you mean?

Mr. McGuire: There's a great future in plastics. Think about it. Will you think about it?

Obviously this was partly a generational dig. As New York Times film critic Stephen Holden put it a while back:

To sneer at all things plastic was to offer an instant definition of oneself as among the young, hip, truth-seeking cognoscenti locked in a moral power struggle with an older generation of square, corrupt, greedy, warmongering materialists. More than any other touch, its ridicule of plastic defined "The Graduate" as a film about the 60s generation gap.

Still, it always seemed to me that this might also have been reasonable career advice. Once Benjamin got done with breaking up weddings and such, he needed some way to make a living. Plastics was a growing, high-tech industry in 1967, when the movie came out. Of course a young graduate should consider it.

Now, two of the world’s biggest plastics manufacturers, Dow Chemical and DuPont, are said to be planning a merger. This would be a marriage born not of limitless potential but of slowing growth and restless investors. Both companies have been under pressure from activist hedge funds to, among other things, spin off their divisions that make plastics.

But hey, that’s okay -- Benjamin Braddock probably would be retired by now, anyway. The actor who played him, Dustin Hoffman, is 78. The character was meant to be younger, but would still be pushing 70.

So what matters is what happened between 1967 and now. And Dow and DuPont, while they make a lot of other things besides plastics, provide a handy measuring stick.

In 1967, DuPont was the 12th biggest company in the U.S., according to that year’s Fortune 500 list, with revenue of $3.2 billion ($22 billion in today’s dollars). This year it’s No. 87, with $36 billion in revenue in its last fiscal year. Dow was No. 50 in 1967, with revenue of $1.3 billion ($9.3 billion in today’s dollars). Now it’s No. 48, with $58 billion in revenue. Those positions on the Fortune 500 often reflect mergers and spinoffs as much as corporate performance: DuPont was still No. 16 on the 500 list before it spun off Conoco in 1999, for example. The combined Dow-DuPont would be No. 24 on the list, based on 2014 revenue, but it may break into three separate companies again after the merger.

Stock performance, then, may give a better indication of how things have gone. I don’t have ready access to total return data for the first 13 years of Benjamin Braddock’s career, which were pretty terrible years for stocks of all kinds. But this’ll do:

Okay, so their performance has lagged that of the S&P 500. But DuPont hasn’t lagged it by all that much. For two companies that were already long-established giants in 1980, this isn’t bad.

Still, Mr. McGuire seems to have been telling Benjamin to consider a career in plastics, not to buy stock. Here’s what employment in plastics manufacturing has looked like since 1990, which is how far back the industry data series provided by the Bureau of Labor Statistics goes:

Since 1990, employment in plastics manufacturing has fallen 11.7 percent. Not great. But total manufacturing employment is down much more at 30.7 percent. Manufacturing employment stalled in the 1970s, dropped sharply in the early 1980s and then was pretty stable for about a decade and a half before the great collapse that began in 2001 and didn’t end until 2010.

Monthly data on plastics manufacturing employment aren’t available online for before 1990, but the industry did add a lot of jobs in the preceding decades. According to a Census Bureau report using slightly different categories from those in the above chart, employment in plastics manufacturing was just 434,000 in 1961, and by 1990 it totaled 692,000.

Then there’s pay. Average weekly earnings in plastics products manufacturing was $872.55 in October, just above the overall private sector average of $872.27. In resin, rubber and artificial fibers manufacturing it was much higher: $1,246.98. Benjamin Braddock presumably would have become a manager, not a production worker, and the median annual salary for managers in plastics products manufacturing in 2014 was $99,560, according to the Bureau of Labor Statistics, while those in the top 25 percent made at least $140,040. In resin, synthetic rubber and artificial synthetic fibers and filaments manufacturing (the names keep changing depending on which BLS data series you’re looking at) the median was $111,780 and the top 25 percent started at $148,200. For private industry overall, those figures are $98,720 and $147,060.

All in all, going into the plastics industry in 1967 seems likely to have worked out okay, but not spectacularly. Google Chairman Eric Schmidt frequently dispenses the career advice that one should choose an industry that’s growing explosively (hey, it worked out for him). As he and Jonathan Rosenberg write in their book “How Google Works”:

Think of the industry as the place you surf ... and the company as the wave you catch. You always want to be in the place with the biggest and best waves.

Plastics may have looked like that kind of industry in 1967, but it was already so big and established that its subsequent growth basically just matched or slightly trailed that of the overall economy. “Plastics” was certainly better advice than, say, “steel” in 1967, but “computers” or “management consulting” or “real estate” (especially if Benjamin stayed in California) would have worked out a lot better. “Wall Street” would have worked out too, eventually, although the late 1960s and early 1970s were so terrible there that Benjamin might not have made it to the flush 1980s. Identifying which industry is hot right now is easy; figuring out what will be hot over the next 40-plus years is much, much harder.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Paula Dwyer at pdwyer11@bloomberg.net