Cannibalising the transcendent margin: reflections on conglomeration, LBOs, recapitalisations and other manifestations of corporate Mania

Abstract

According to Keynesian wisdom, we should concentrate on the short run, because in the long run we are all dead. This truism notwithstanding, I believe that all of us identified with major corporate enterprises and the financial community generally must devote ourselves to surmising the long run. Our resource-allocation decisions will regularly affect the fate, for good or ill, of generations of consumers, security holders, workers and communities. I identify the phrase 'transcendent margin' with the late A.A. Berle, Jr.; the phrase is intended to describe the responsibility that each generation of entrepreneurs (hence corporate managers) has to transmit to future generations: an economic, industrial, technological infrastructure that is stronger and sounder than the one that was acquired. Briefly, this margin or surplus value represents the productivity of the present generation that is not consumed by it, but is passed along to enrich posterity. For me this transcendence, this commitment to higher levels of consciousness, is an integral aspect of what we dub civilisation. Alas! That which should be a self-evident verity diverges sharply from recent and current experience.