“Breaking up is the newest craze for ginormous global companies. Johnson & Johnson, Toshiba and GE announced plans to split into multiple entities this week,” reports CNN. Why?Conglomerates are big and unwieldy. Wall Street hates them, because it doesn’t know how to value them properly. CEOs and corporate boards are finally getting the message: Nimble is the new big.…Other companies may find that spinning off divisions will give them greater autonomy to forge business relationships that may have not made as much strategic sense as part of a colossal conglomerate.But spinoffs and asset sales are also a way for companies to reverse decisions that investors weren’t thrilled with in the first place.I’m reminded of something I wrote a few years ago in The Libertarian Mind:Large companies sometimes decide to split up because they have become too large and diverse to be managed efficiently. ITT and AT&T both did that in 1995. Viacom and CBS split in 2006, TimeWarner and AOL in 2008, Rupert Murdoch’s News Corp. in 2012. If corporate managers and investors with their own money at stake find that businesses can get too big to be run effectively, can it really be possible for Congress and 2 million federal bureaucrats to manage a $4 trillion government—to say nothing of a $17 trillion economy?Maybe a smart manager would spin off some of government’s non‐core functions.
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