4 ms·

Mitsubishi makes a very good example. I remember back in the '80s being struck by an issue of Consumer Reports that reviewed two different Mitsubishi products -

by mark-r 8y ago

Mitsubishi makes a very good example. I remember back in the '80s being struck by an issue of Consumer Reports that reviewed two different Mitsubishi products - one was a car, the other a can of tuna fish. American companies aren't diversified in the same way because investors realized that breaking up a conglomerate maximizes the stock prices - the underperforming parts put a damper on the stock.

skrebbel 8y ago
I think it's a rather bad example because all that the different Mitsubishi firms share is a name and a logo. They're four independent companies.
hrktb 8y ago
I am not verse enough in the legal matters yo have concrete examples, but I think Japanese style zaibatsu wouldn’t fly in the EU or US from regulatory perspectives. The main goal of having conglomerates is to modularize essential parts, in particular a financing branch that acts as a money pump through the whole group. So by definition the companies from the same group are defined legally as separate units while fixing deals between themselves and protecting the other companies’ turfs.
- mark-r 8y ago
  Not sure about how the Japanese are structured so I can't comment about that. But large conglomerates aren't impossible in the US, GE is probably the best example.
  - njarboe 8y ago
    Or the fifth largest US company by market cap: Berkshire Hathaway.
    - Retric 8y ago
      The fact it's fifth probably has more to do with it. Conglomerates have the overhead of vast companies but gain minimal benefit from that overhead.
      - lancewiggs 8y ago
        Berkshire Hathaway is a poor example to use for that. They famously contribute essentially nothing in overhead costs and instead make a fortune for the overall entity through smart capital allocation and investing.
        Retric 8y ago
        Again though they don't have dividends yet are worth less than Apple which is a younger company that hands out dividends. BH's overhead is not direct costs but relatively poor asset allocation due to it's vast size making the overhead of smaller investments unwieldy and lacks focus to maximize gains on any component.
        deleted 8y ago
        [deleted]
        Retric 8y ago
        PS: You can argue about performance. But, in the last 20 years their stock has done slightly worse than the Dow when you include dividends. Meaning they could have done better investing their profits in an index fund. https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/ may 1998 - may 2018 = 323.965% http://www.macrotrends.net/stocks/charts/BRK.A/prices/berkshire-hth-a-stock-price-history http://www.macrotrends.net/stocks/charts/BRK.A/prices/berksh... May 1998 - May 2018 = 320%.
taurath 8y ago
> American companies aren't diversified in the same way because investors realized that breaking up a conglomerate maximizes the stock prices Is Google or Amazon not at the conglomerate level yet? Is it simply because their services and products are all on the internet? I've seen the trend go the opposite direction - conglomerates are in now, because they give you nice steady dividends and less shock when one part of the company is failing. If not for AWS, where would AMZN stock be today? I've seen no serious effort on the investor level to break up these companies, and practically none politically (fledgeling movements on the far ends of the spectrum).
- mark-r 8y ago
  Don't Google and Amazon still make substantially all their revenue from a single business? I could see that changing for Google if they're successful with self-driving cars. The pressure to break up a conglomerate comes from outside investors who don't have a stake in running the businesses. There have been hostile takeovers motivated completely by the anticipated profit from a breakup. I don't see that happening for either Google or Amazon.
  - robotresearcher 8y ago
    No need to wait for Waymo to get your example: AWS is already a large and fast growing business.
    - closetCS 8y ago
      > AWS is already a large and fast growing business. But isn't AWS the same as Amazon, just instead of selling a new vacuum, its selling cloud compute? Its still e-commerce, just rebranded as "cloud provider."
      - robotresearcher 8y ago
        Leasing services opposed to mail order retail? Seems like a very different business to me.

by mark-r 8y ago

skrebbel 8y ago

I think it's a rather bad example because all that the different Mitsubishi firms share is a name and a logo. They're four independent companies.

hrktb 8y ago

I am not verse enough in the legal matters yo have concrete examples, but I think Japanese style zaibatsu wouldn’t fly in the EU or US from regulatory perspectives. The main goal of having conglomerates is to modularize essential parts, in particular a financing branch that acts as a money pump through the whole group. So by definition the companies from the same group are defined legally as separate units while fixing deals between themselves and protecting the other companies’ turfs.

mark-r 8y ago
Not sure about how the Japanese are structured so I can't comment about that. But large conglomerates aren't impossible in the US, GE is probably the best example.
- njarboe 8y ago
  Or the fifth largest US company by market cap: Berkshire Hathaway.
  - Retric 8y ago
    The fact it's fifth probably has more to do with it. Conglomerates have the overhead of vast companies but gain minimal benefit from that overhead.
    - lancewiggs 8y ago
      Berkshire Hathaway is a poor example to use for that. They famously contribute essentially nothing in overhead costs and instead make a fortune for the overall entity through smart capital allocation and investing.
      - Retric 8y ago
        Again though they don't have dividends yet are worth less than Apple which is a younger company that hands out dividends. BH's overhead is not direct costs but relatively poor asset allocation due to it's vast size making the overhead of smaller investments unwieldy and lacks focus to maximize gains on any component.
        deleted 8y ago
        [deleted]
        Retric 8y ago
        PS: You can argue about performance. But, in the last 20 years their stock has done slightly worse than the Dow when you include dividends. Meaning they could have done better investing their profits in an index fund. https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/ may 1998 - may 2018 = 323.965% http://www.macrotrends.net/stocks/charts/BRK.A/prices/berkshire-hth-a-stock-price-history http://www.macrotrends.net/stocks/charts/BRK.A/prices/berksh... May 1998 - May 2018 = 320%.

taurath 8y ago

> American companies aren't diversified in the same way because investors realized that breaking up a conglomerate maximizes the stock prices Is Google or Amazon not at the conglomerate level yet? Is it simply because their services and products are all on the internet? I've seen the trend go the opposite direction - conglomerates are in now, because they give you nice steady dividends and less shock when one part of the company is failing. If not for AWS, where would AMZN stock be today? I've seen no serious effort on the investor level to break up these companies, and practically none politically (fledgeling movements on the far ends of the spectrum).

mark-r 8y ago
Don't Google and Amazon still make substantially all their revenue from a single business? I could see that changing for Google if they're successful with self-driving cars. The pressure to break up a conglomerate comes from outside investors who don't have a stake in running the businesses. There have been hostile takeovers motivated completely by the anticipated profit from a breakup. I don't see that happening for either Google or Amazon.
- robotresearcher 8y ago
  No need to wait for Waymo to get your example: AWS is already a large and fast growing business.
  - closetCS 8y ago
    > AWS is already a large and fast growing business. But isn't AWS the same as Amazon, just instead of selling a new vacuum, its selling cloud compute? Its still e-commerce, just rebranded as "cloud provider."
    - robotresearcher 8y ago
      Leasing services opposed to mail order retail? Seems like a very different business to me.