First, a note to Jane Galt: This has been highly simplified, so deal with it.
In the ’60s and ’70s, there was a strain of corporate thought that bigger — any kind of bigger — was better. If a communications company also sold Twinkies, then Twinkie sales would keep them afloat if the comms business ever went south, and vice versa. That’s why ITT once owned Hostess. Big companies bought any smaller company that was for sale, and even a few that weren’t.
By the mid-’80s, that was changing. “Core competence” become the new battle cry. The good people at ITT realized that they didn’t know jack about selling Twinkies, so they dumped Hostess. Hell, after the whole bad experience, they didn’t know much about comms, either — they mostly do engineering now.
Then came the roaring ’90s, and all that easy stock and VC cash. What to do with it? Too often, it didn’t make sense for companies to invest in themselves. The dotcoms hadn’t seen any profits, and older companies were already pretty well entrenched in their own fields. But they couldn’t just shove all that money under the mattress.
So, another buying binge resulted. Regardless of profits on either company’s ledger, corporations consumed each other at a staggering pace. Slippery accounting helped grease the wheels. Hell, I have a cousin who bought a bunch of AOL before AOL bought Time-Warner. He’s been grumpy for the past couple of years.
Jeffrey Sonnenfeld looks at some of the worst offenders, and knows how and where to lay some blame for messes like Enron and Tyco. Do not read on an empty stomach.