(^34) Best columns: Business
Big business has few friends left in the political arena,
said Michael Strain. There’s no question the marriage
between corporate America and the Republican Party
is on the rocks. Former President Donald Trump
obviously helped drive this wedge by using his soap-
box in ways that “sent chills through the business
community.” Some corporate leaders also feel “a
sense of civic responsibility in the face of some of
the most troubling aspects of today’s GOP.” In the
pre-populist era, “Republicans might have tried to
mend fences. Not this time.” No longer. Last month,
“House Republican leaders kicked the Chamber of
Commerce, the nation’s most powerful pro-business
lobbying organization, off their strategy calls about
the Democrats’ social spending package.” The move
seemed to be retribution for the Chamber’s criticism
of House Republicans over the recently passed infra-
structure bill. The rift goes beyond political games-
manship: A Gallup poll this summer found that just
20 percent of Republicans expressed “a great deal of
confidence in big business,” the lowest number on
record. The problem for business leaders is that “the
Democratic Party remains even less friendly to its
interests than the GOP.” Business leaders’ best hope
may be “to ride out the populist storm,” because
until it ebbs there is nowhere for them to shelter.
Rivian’s $120 billion stock market debut was practi-
cally underwritten by the federal government, said
The Wall Street Journal. A lot of people have been
hailing 12-year-old EV designer Rivian as “the next
Tesla.” But hang on. When Tesla went public in
2010, “it reported $93 million in revenue and was
valued at $1.7 billion.” To date, Amazon-backed
Rivian, which went public last week, has delivered
only 156 of its electric trucks, almost all to its own
employees. Yet it’s now the fifth-most valuable auto-
maker in the world. Why? Because “investors are bet-
ting the government won’t let it fail.” The Democrats’
social spending bill includes a $7,500 tax credit for
electric pickups, trucks, vans, and SUVs costing as
much as $80,000, which covers Rivian’s higher-end
$73,000 R1T truck. A $4,500 bonus tax credit
will come if Rivian starts producing its vehicles in a
unionized U.S. factory. On top of that, Rivian didn’t
even have to comply with ordinary disclosure stan-
dards ahead of its IPO, because it is considered “an
emerging growth company.” Meanwhile, at least
three other EV makers—Nikola, Lordstown, and
Workhorse Group—have come under scrutiny for
bogus or exaggerated claims. The euphoria around
Rivian may wane, too, but maybe not as long as the
government keeps steering capital in its direction. Re
ute
rs
A rift between
big business
and the GOP
Michael Strain
Bloomberg.com
How to spin
riches from
tax subsidies
Editorial
The Wall Street Journal
Once-mighty conglomerates have been
shrinking for decades, and last week
“one of the biggest survivors waved the
surrender flag,” said David Nicklaus in
the St. Louis Post-Dispatch. In spinning
off its medical and energy businesses,
General Electric was dismantling an
empire that had loomed over U.S. busi-
ness since 1892. Shortly after, Toshiba,
based in “conglomerate-loving Japan,”
and Johnson & Johnson said they were
splitting up their sprawling entities, too.
These economies of scale make sense
“when buying office supplies or account-
ing services, but their layers of bureaucracy” come with a cost.
Some companies still cling to this model, like 3M, which “makes
60,000 products ranging from Scotch tape to medical software.”
Warren Buffett’s Berkshire Hathaway has been “a longtime in-
vestor darling,” but its portfolio includes “an electric utility, a
railroad, insurance, and chocolate.” The Buffett-GE model “was
all the rage in corporate boardrooms.” Now it’s ancient history.
We hear conglomerates are dead every few years, said Brooke
Masters in the Financial Times. That’s because the history
of conglomerates is cyclical. First giants—ITT and Tyco are
examples—grow by acquisition, then they come apart. After
it “becomes conventional wisdom that conglomerates need to
be broken up, we end up with companies so specialized that
somebody decides there is merit” in being all-encompassing, and
the cycle starts again. Resist the temptation to make too much
out of GE’s demise, said Brooke Sutherland in Bloomberg.com.
That’s “a cautionary tale” about how “hodgepodge, omnidirec-
tional growth, and size for size’s sake”
can go terribly wrong. But a “key tenet
of the modern conglomerate is continu-
ous reinvention and a willingness to
pivot.” That philosophy has benefited
other “reimagined conglomerates” such
as Honeywell and Roper Technologies.
What kills conglomerates is “the myth
that great management can always
work miracles,” said Jason Zweig
in The Wall Street Journal. ITT first
“popularized the idea that hundreds of
elite managers” could provide expertise
on a wide range of subjects. GE, under iconic CEO Jack Welch,
elevated “management to a kind of science,” with its “leader-
ship institute” in New York’s Hudson Valley. But “by the early
2000s, the company was spending $1 billion a year on train-
ing.” GE became complacent in the belief that “management
technology would always save” it.
A new incarnation of the model seems alive and well, said
Matthew Boyle in Bloomberg.com. The giants of yesterday have
been replaced by what University of Michigan business professor
Jerry Davis calls “neo-conglomerates,” such as Amazon, which
sells everything from groceries to corporate cloud-computing
services. This “new breed, fueled by coders and cheap capital,
now command the same awe and respect in management and
investor circles as Welch’s GE did in the 1980s.” What they do
better than GE is “skate quickly to where the profit is, whether
that’s automation, social commerce, sustainability, or even the
much-hyped metaverse.”
Corporations: The end of the conglomerate—again
GE: Reducing its global footprint
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