Monday, January 03, 2022

The Rule of Big

As the world careens mindlessly from the conditions I pointed out years ago (A Nation of Children), it seems that the data is in, and that much to many people's chagrin, I was right:  The undermining of America's most prominent brands and institutions is well under way -- for all the same reasons.

This isn't my opinion, mind you.  This is pure, raw data supplied to the public by no less than Dow Jones, whose job it is to track this stuff. I just interpret the more far-reaching conclusions, and believe me, they're not good:

According to Dow Jones:

Walt Disney, Verizon, and Boeing, as well as California-based biopharmaceutical firm Amgen and tech conglomerate Honeywell, were the worst stocks of 2021, according to stock market index Dow Jones.  Disney and Verizon stocks saw double-digit percentage losses, while the other three firms booked losses in the single digits.

Not too pretty, is it?  And yet it was completely predictable.  Not because these giants are incapable of healthy growth and profitability; but because all of them have abdicated their founders' brand strategies.  The fact that brands grow and die is nothing new. The manner in which they grow and die, however, has changed.  And here's how:

There's an old adage about the Three Generations of Wealth:  "The first generation creates it.  The second generation spends it.  The third generation loses it."  As a rule of thumb, it's pretty accurate for both family and corporate brands.  Think about the canny progenitors who founded companies like Ford and families like the Kennedys, and then think about their grandchildren and great-grandchildren,  an army of inept buffoons who steer the ship on to the rocks so predictably that the phenomenon has inspired its own HBO series (Succession).

Ever wonder why this happens with such regularity?  Well, it happens precisely because of the brands' successes. It's the same scenario, deployed repeatedly across families, enterprise, education and government.  I call the the Rule of Big and it goes like this:

The size of the entity is inversely proportional to its structural strength.

What that means is that the larger the brand, the less need people see for maintaining and nurturing the brand, which weakens the brand overall.  Back in the day, an old saw was that "nobody went broke buying IBM," on the theory that IBM was a dominant market player and would never do anything to forsake that position.  That was in the 1960s.  Take a look at IBM and its market today.  Not too pretty.  Same story with Xerox. Remember when "he went to Harvard law school" meant something?  Today, not so much, although people too lazy to think still accept its mythic value..  The Rule of Big ensures that most large entities begin to atrophy and die, like huge blue whales slowly decomposing -- not from sharks, but from tiny, greedy, self-involved bacteria.

People mindlessly jump on gravy trains simply because the brands, families, universities and governmental agencies are huge, figuring that if they're that big, they must know what they're doing.  What they don't realize is that the larger the entity, the less focused the brand is on its core strategy.  The result is less attention to productivity and more distraction on non-business matters, such as diversity hiring and cause marketing, neither of which contribute to core deliverables and both of which contribute directly to brand atrophy.

Doubt that the Rule of Big exists? Take a look at "some of the biggest universities" across the country. Is there anyone, anywhere who takes Harvard, Yale or U.C. Berkeley seriously anymore? Does anyone view the New York Times or the Los Angeles Times as anything close to impartial sources of news?  Start looking around, and notice how many things in your life simply aren't as reliable as they once were. Don't even get me started on medical information.

Why should you care?  Take a closer look at those equities listed above.  How many are in your investment portfolio or 401K? Do you even know? Or have you been lumped into a "highly rated fund" composed of equities you were too lazy to investigate?

Has the Rule of Big lulled you into being one of the walking dead who figures "my investment firm is one of the largest in the country?" Newsflash:  Your fund manager knows even less than you do.  He probably can't even define collateralized mortgages -- and it was his company reliance on them that caused the financial meltdown. 

Maybe it's time you looked at the real data yourself.  Maybe it's time you realized that the Rule of Big is everywhere -- and getting even bigger.  


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