The early 1980s were the heyday of management consultants peddling wild diversification strategies to stodgy companies. Other examples: - Owens-Illinois (glass

The early 1980s were the heyday of management consultants peddling wild diversification strategies to stodgy companies. Other examples: - Owens-Illinois (glass bottles; no growth) was told to buy nursing homes (people get older; lots of growth). It did so, only to bail out years later - Kao (Japanese detergent maker) tried expanding into floppy discs. Didn't work out. All these moves were based on a child-like belief that getting any aging company and its management into a growing business was more important than having the culture, talent, processes, etc. to work well in that industry. Call it a stock-picker's mentality. This context helps explain why stock buybacks have become such a big thing now. When companies have more cash flow than they can profitably use in their core business, they no longer are as eager to diversify into fast-growth, cash-hungry businesses that need funding. BigCo managers now know their limits. So they give the money back to shareholders instead. And investors can insta-swap into supposedly "better" industries, where fully formed management teams and business processes are ready to roll. We can argue about whether multi-billion-dollar buybacks are a good thing for society or not. But we got here for a reason.