Diminishing returns.
From a very interesting essay by John Ralston Saul:
As for the romance of Gigantism–of corporate size as a criterion for industrial success–it was beginning to look pretty silly. Endless mergers had led to high levels of unserviceable debt and bankruptcy. It was as if size had replaced thought. As if it were a male thing.
It was all beginning to resemble the seventeenth- and eighteenth-century speculation markets–the South Sea Bubble, John Law and the French regency, the Dutch tulip-bulb frenzy. The larger the corporations grew, the slower and more directionless they became–enormous management structures frightened of serious investment and risk. They resembled out-of-control bureaucracies. Yet the whole argument in favor of Globalization had been the apparently desperate need to wrench power from the bureaucracies and place it firmly in the hands of real owners capable of taking real risks.
Anyone who has ever worked in a Fortune 1000 company will recognize the truth in Ralston’s analysis of the modern mega-corporation. That said, while I agree with much of his analysis and find all of his arguments worthwhile and well constructed, I don’t share Ralston’s opinion that markets are failing humanity and that the nation state will rise to the rescue. Although I can’t help but wonder if our world views aren’t closer than they might first appear. Indeed, if ‘global markets’ are defined in Ralston’s mind as the hulking network of protected and unwieldy multi-national corporate giants, well then yes I would agree we are at the late stages of their political and economic pre-eminence. However, the promise, the opportunity of the sixth paradigm is precisely the opposite: that technology will empower individuals and communities to harness the powerful potential of truly global markets and in time reshape the very nature of the coporate-industrial landscape. (For context you may be interested in re-reading my thoughts on the implications of applying Coase’s theory of the firm in such an environment.)
What does this mean? Well it might mean that the next big corporate transactional trend is the (deleveraged!) corporate breakup. Or DBU for short.
