Legend of Izanagi & Izanami: A Story of Conglomerates
This is a story from?The Kojiki or “Records of Ancient Matters”?is an early Japanese chronicle of myths, legends, hymns, genealogies, oral traditions, and semi-historical accounts concerning the origin of the Japanese archipelago, the?kami (神), and the Japanese imperial line. Lots of ancient figures are mentioned, such as?Amaterasu, Susanoo, Izanagi and Izanami,?and many more. In this story, I’ll quote the story of Izanagi and Izanami.
Izanagi and Izanami were a divine couple, brother and sister, who had a principal role in creating the islands of Japan and from whom many important and elemental kami (gods) had their birth.
At the beginning of formation of ther world, there are three primal Gods: Amenominakanushi, Takamimusubi and Kamimusubi, seven successive generations of gods and goddesses came into being, the seventh generation consisting of the God Izanagi and the Goddess Izanami.
Standing on the Bridge of Heaven, they churned the ocean’s water with a jeweled spear, then drew the spear up. The brine that dripped from the tip of the spear became the first Japanese island, Onogoro. Izanagi and Izanami descended onto the island, erected there a high pillar and a hall, then circled the pillar in opposite directions. When they met, they were united, and thus the islands of Japan were born.
After the birth of the islands, various other deities were born including the eight principal islands of Japan — Awaji, Shikoku, Oki, Tsukushi (Kyushu), Iki, Tsu, Sado, and Oyamato. Also created were a prodigious number of other gods. in fact, more than 800 kami (gods, spirits, and natural phenomena) exist in the Shinto Pantheon.
Kagutsuchi, the Fire God
The birth of some of the gods came at a certain price though. Izanami was terribly burnt when she gave birth to Kagutsuchi and it is said that many kami were born from her tears as she suffered from her injuries until finally, she died. Revenge was swift though, as Izanagi cut the fire god to pieces with his sword. It is said that many new deities sprang up from each piece of the god.
Izanagi, unable to live without his beloved wife, rashly followed her down into the underworld or Yomi. Unfortunately, he was unable to rescue Izanami as she had already eaten food in the underworld and so was forbidden from returning to the living realm. However, Izanami pleaded with the gods to be made an exception of and made Izanagi promise that he would be patient and not try to see her in her present state.
The process of release was too long, and an impatient Izanagi wanted to see his beloved. He was in shock to see the body of the goddess was already decomposing. Izanami was more displeased at her husband breaking his promise and seeing her in such a state. Then the Eight Thunders and the Ugly Females chased the god out of the underworld.
I can quote a lot more of The Kojiki but what I want to show is how the story of Izanagi and Izanami will be a good theme and example on the topic that I’ll review in this story.
The Conglomerate
What is a conglomerate?
According to Investopedia, A?conglomerate?is a corporation of several different, sometimes unrelated, businesses. In a conglomerate, one company owns a controlling stake in several smaller companies, conducting business separately and independently.
Conglomerates often diversify business risk by participating in many different markets, although some conglomerates, such as those in mining, elect to participate in a single sector industry. Economists, however, warn that large and far-flung conglomerates can become inefficient and costly to maintain, eroding value for shareholders.
How does conglomerate form? Some ways such as?acquisitions, merges, expansion, and extensions?just like the creation of Islands of Japan in the Kojiki.
What’s the purpose of conglomeration?
Resources can be shared between networks of conglomerates, may be in form of fundings, core knowledge, assets, and supports from parent and related companies.
Let’s say conglomerate owns 5 companies, which 2 of the companies is facing hard challenge in the industry. The profit from the rest of the companies may be used as an offset for the unprofitable one.
What are some examples of conglomerates in Indonesia?
A holding company which owns subsidiaries that conduct businesses in coal supply chain such as coal mining, logistics, equipment engineering, fuels, lubricants, and power plants.
A conglomerate controlled by Jardine Matheson , another Hong Kong based conglomerate, which owns business in automotive, financial services; heavy equipment and mining; agribusiness; infrastructure and logistics; and information technology sector.
A multinational conglomerate engaged in media, financial services, and entertainment such as MNC Media and PT MNC LAND Tbk .
Also known as MNC Media, is a company that conducts investment activities in companies that runs in media and telecommunication.
A conglomerate that runs in metal production, autoparts, construction materials, infrastructure, and trading. This conglomerate is undergo restructure process after massive debts incurred in 2008 Financial crisis which the group had to divest some of their subsidiaries to pay off debts during 2009 until 2018.
Also known as Emtek, is a conglomerate in technology, telecommunication, and media which is the second largest media company after MNC Media. Some known brands such as Indosiar, SCTV, and Vidio are under Emtek’s management.
Part of Lippo Group; is a conglomerate that runs in retail, technology, financial service, and telecommunications. Some popular brands under Multipolar is PT Matahari Department Store Tbk , Timezone, and Nobu Bank.
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The Disadvantages of Conglomeration
Diversification can shift core focus and waste resources away from core operations, contributing to poor performance. If the acquiring firm is inadequately experienced in the industry of the acquired firm, the new firm is likely to develop ineffective corporate governance policies, poor pricing structures, and an inexperienced, underperforming workforce. People tend to use past-experience (especially if it gives result based on expectation) which may limit the potential of new firm. The best analogy may be visualized through?the Fleas in a Jar experiment.
The God of Fire in Conglomerates
Due to the possible risks, some conglomerates had experienced “the birth of the Fire God” which caused them a great loss. I will give 2 real-life examples.
Microsoft is a tech conglomerate with many lines of business, from software to social media.
In 2013, the software maker is “streamlining” its smartphone business, writing off $950 million and cutting 1,850 jobs. The cuts come almost a year after Microsoft wrote off $7.6 billion and cut 7,800 jobs. Only a small number of former Nokia employees will remain at Microsoft, and the company’s consumer phone making days are over.
Microsoft has wasted at least $8 billion on its failed Nokia experiment, including the costs of restructuring and severance payments for thousands of employees. Microsoft originally hired 25,000 Nokia employees as part of its $7.2 billion acquisition of Nokia’s phone business, but a series of layoffs over the past two years has triggered the end of Microsoft’s mobile subsidiary.
Meanwhile, 谷歌 's experiment with making its own Android phones resulted in the search giant selling 摩托罗拉系统 to 联想 for $2.91 billion, less than two years after paying $12.5 billion to acquire it.
While Google’s investment was primarily driven by the need to obtain key patents, it’s not clear how Microsoft has benefited from its Nokia deal.
In September 2005 when eBay announced it was buying Internet telephony company Skype Technologies for $2.6 billion. But after four years of unfulfilled expectations, the marriage came to an end when eBay said it was unloading Skype to a group of private investors for $1.9 billion.
What was the cause? When eBay bought Skype, it had hoped the VoIP service would improve communications between its customers. Buyers could talk easily with sellers about items they were interested in; in turn, sellers could build relationships with customers via the power of VoIP chats. But the Skype-eBay integration never panned out. The main reason: For most eBay users, email is good enough. Buyers and sellers don’t really need a voice call to seal a deal.
Another factor was the culture clash; from my research on job reviews, I found that eBay tend to have a conservative culture due to the size while Skype has flexible culture which similar to Google’s.
The Diworseification
Do not search this term in Thesaurus! Because it’s an unique term mentioned by Peter Lynch in his book which means?Bad Diversification.
Instead of buying back shares or raising dividends, profitable companies often prefer to blow the money on foolish acquisitions. The dedicated ‘diworseifier’ seeks out merchandise that is overpriced or completely beyond his or her realm of understanding.
From an investor’s point of view, the only two good things about diworseification are owning shares in the company that’s being acquired, or in finding turnaround opportunities among the victims of diworse-ification that have decided to restructure.
Usually,?stalwart companies tend to do bad diversifications, and in hyper-growth startups. So, if you asked, “After reading this, what should I do? I thought all conglomerates has large assets and bound to be safe?”
And that’s the honey trap! Even the biggest corporation may fail and tumble to pieces which you can see clearly in the history of companies such as the VOC, Enron, Lehman Brothers , and many more. In Indonesia, PT. BUMI Resources, Tbk. (BUMI) used to be a ‘bluechip’ and owns the largest coal fields in Indonesia. From 2006 to 2008, the stock price reached 8450 from 780 and everyone thinks BUMI is a prospect and then rockets down to 50 from 2015 to 2021.
The Conclusion
I’ve prepared some tips that might help you in dealing with conglomerates.
Lynch also said that the only positive aspect is that some companies that diworseify themselves into sorry shape are future candidates for successful turnarounds.
This is a special story, because personally I noticed an interesting questions from my acquaintances and colleagues such as:
“I only want to invest in big companies, because simply it’s too big to fail.”
“I want a safe investment, please recommend any bluechips?”
“I heard Company A has acquired Company B, which Company A competes in lots of industries. What a prospect!”
At the end, some of them suffer from the wrath of Kagutsuchi.
The God Fire doesn’t always come in form of a subsidiary; it may come in forms such as departments, new product line, new acquired team, new entry in target countries, and others.
I wrote this story as a reminder for myself to minimizing risk of encountering the God of Fire after I put my money in a company; I’ll be happier if I met one with my cash ready.
Afterall, the God of Fire isn’t always a disaster. If you meet a company suffering from it, it may be a potential hidden gem!
I’ll end this story with a quote:
“Fire is a duality’
Fire is treacherous, you must constantly watch it.
or it will burn your house down.
But at the same time, Mastering the Fire wisely shall lead to prosperity.”
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1 年For my generation, (Wibu Jadul ?? ) Izanagi and Izanami become popular from Naruto. I am always excited to read your next article, Ko Dennis Z., and curious about what anime or tales reference you will tell. For the next article, please make reference to Dragon Ball, if you gather 7 dragon balls, you can make a wish to become "The Richest People in the World" so you don't need investment. Just Kidding ?? , Good Luck to you and Investoria. Regards.