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Comment by rswail | Hacker News Reader

Lesson from GE: Financial engineering is not engineering.

Further lessons from GE:

* Gaming the system internally or externally is something a CEO needs to actively manage and defeat, not reward.

* Trying to turn businesses based on contracts for delivery (with lumpy revenue/risks) into contracts for service and recurring revenue is a dangerous game, because you take your eye off the ball that is delivering the products in the first place.

* Conglomerates of disparate businesses never work in the long term, primarily because of the points above. Google is an example of how that affects IT/cloud/services businesses. Microsoft is an example of how to re-orient the business to focus on a specific class of customers (Enterprise) and their direct needs.

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> Conglomerates of disparate businesses never work in the long term

Tell that to Yamaha, Mitsubishi, Siemens, 3M, etc

Aren’t the Japanese conglomerates perpetually underperforming businesses that get away with it because Japanese shareholders are toothless?

Yes, because due to unorthodox monetary policy the Bank of Japan is the largest shareholder in the country. https://www.bloomberg.com/news/articles/2020-12-06/boj-becom...

Berkshire Hathway is also a conglomerate, but it does perform fairly well.

BH is extremely delegated. Bufett is not in the business of managimg Fruit of the Loom for example.

But it is a holdings company, and their business model is to make returns on equity (and possibly loaning out capital to their subsidiaries) instead of directly managing their subsidiaries' operations and generating revenue.

Some sizable part of their total equity is in Apple.

Siemens is German and 3M is very much US.

Siemens also spun out so many of its divisions over the last years that I'm no longer sure what's part of Siemens anymore...

EDIT: here's a list - https://en.wikipedia.org/wiki/Siemens#Former_operations

> perpetually underperforming businesses

Is this a bad or good thing for sustainability?

You're suggesting the answer by asking the question, but yes, companies that consistently deliver moderate performance (are less extractive and don't maximize gains) would generally be better for the world as a whole than highly optimized, fragile corporations that deliver maximal returns by chewing up everything in their path.

They'd even, in the longer run, be better for their own shareholders and their descendants.

They might even help in closing (or reducing) the gap between the rich and the middle class. But, as there are no incentives for such behavior in society any longer, I doubt we will see widespread adoption until it is inevitable.

Thank you for reply. I truly couldn’t tell whether underperformance was a threat to the longevity of a company.

The question then becomes, are they moderately performant?

Japan’s bubble resulted in deflation because a bunch of zombie firms spent decades paying down balance sheet debts rather than resolving things quickly through bankruptcy. And the Japanese keiretsu structure mostly disadvantages businesses outside of the massive conglomerates, particularly small and medium enterprises.

Most of FAANG as well.

I think time will tell how they do in the long term.

Siemens is by no means an example of good performant conglomerate.

And to think that Alstom is even worse.

3M is spinning off their healthcare BU, selling off stake in Combi, etc.

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