Conglomerate Challenges

Companies often face a "conglomerate tax," where diversifying can lead to questionable asset ownership, as seen with the New York Times and its stake in the Boston Red Sox. CEOs are incentivized to grow their companies, which can result in risky acquisitions, despite the fact that two-thirds of these deals fail. This drive for expansion often stems from a desire to reduce anxiety around performance by smoothing out earnings across different brands.