These weird combinations look fun but they're generally the result of having conglomerates, companies that have gobbled up a bunch of smaller, unrelated companies.

Conglomerates are tricky to pull off because managing a lot of disparate business lines. A CEO who knows all about how to market construction equipment is likely to miss that one of their other products became an iconic sex toy years ago. The big problem is that more focused companies can typically outmaneuver you in their area of focus.

Theoretically, there might be synergies that make your company more effective but normally, conglomeration is drag on the risk-adjusted rate of return on your company. It's much easier to pull off when your government has strong protectionist policies or if there are officials you can bribe to keep out the competition.

Why would a company do something that's generally bad for the company? It's generally good for the CEO. A CEO often has a very concentrated investment portfolio. Changes in the value of the company they're running can have a huge impact on their personal wealth. Conglomeration allows a single company to be a diversified asset. It does it in a way that's objectively worse for shareholders but better for the CEO.

[–] masquenox@lemmy.ml 9 points 1 year ago (1 children)

Koreas "chaebol" system isn't just any kind of conglomerattion, though... it was based on the system the Japanese used to dominate Korea during it's colonization of that country, which the US simply encouraged after the war. The dictatorships that followed basically ran with it... and now you have these gigantic, government-subsidized "chaebols" that is the epitome of "too big too fail." South Korea is about as oligarchic as it gets.

It's utterly hilarious to me when "free market" cultists try to use South Korea as an example of how miraculous their fairy tale economic ideology is.

[–] nednobbins@lemm.ee 2 points 1 year ago (1 children)

It's functionally close enough to a conglomerate though.

I'm not exactly sure what '"free market" cultist' is or if you're accusing me of being one. Modern economists don't normally align themselves with simplistic ideologies like "free market", "communist" or "capitalist". They're aware of the historical and modern usage of these terms but they tend to focus on areas that are far to specific for those terms to even make sense. You won't find a lot of economists that argue for complete Laissez-faire capitalism any more than you'll find real economists arguing in favor of classical Marxism.

There is general agreement that conglomeration benefits management more than shareholders. There's general agreement that they are more likely to arise under some economic conditions and that those conditions usually aren't associated with socially optimal economic policies.

[–] masquenox@lemmy.ml 1 points 1 year ago

Modern economists don’t normally align themselves with simplistic ideologies

Yeah... there's just a whole bunch of them whose sole purpose seems to be coming up with simplistic fairy tale narratives to brainwash the masses with. After all... what would Reagen have been without Hayek, or Pinochet without the Chicago Boys?