Is the Single Company, Multiple Businesses Model Still Beneficial to Your Retirement Plan?
By Anthony Rhodes
Logic would tell us that owning companies with multiple streams of revenue is both rewarding and protective of our capital assets. The rationale behind this thinking states that if one of these sources happens to dry up for a particular reason, the other streams would compensate for the difference and balance out the whole, which is why mutual funds are such popular mainstays within our retirement plans.
This belief system has powerful legs to stand upon, with colossal conglomerates like Berkshire Hathaway and Toshiba providing consistently reliable growth for millions of retirees over a successive period of decades. The advent of the Internet has spawned newer names to follow in their lead, and to continue to carry the torch of diversification as a standard growth model for 401 (k)'s of Generations X, Y, and Z.
But just over the horizon lurks a bevy of problems which could potentially put an end to this tried and true method of nearly guaranteed capital appreciation. The questions one needs to answer are, will their momentum impact the model sooner, rather than later? Or, should they continue to reap its benefits, in hopes that they won't, in fact, alter the model, at all?
If our recent experiments with remote working and learning has taught us anything, it is that the cost of doing business today is not nearly as expensive as it has been in the past. With our homes becoming offices, and interactive video conferences via computers replacing physical meetings, the elimination of the overhead normally associated with these essentials may cause many to surmise, that striking out on their own is not nearly as intimidating an issue as it once was. This potential addition to the "gig" economy could wreak havoc on a plethora of companies, and in many different sectors. If seasoned employees decide to instead take the route of becoming business owners themselves, the single company, multiple businesses model could easily teeter on the brink of collapse, and move towards rapidly becoming a remnant of the past.
The New Trust Busters
Regulatory bodies from all over the world are also focusing their attention on these conglomerates. Gargantuan companies like Google and Alibaba are firmly in the sights of their host countries' authorities, which makes the prospect of them being either broken up or severely limited in their usual business activities, more than a distinct possibility. These acts are purposely designed to both enact punitive measures to all current practitioners of the model, and to deter future adopters from seeking to follow in their lead. If successful, the rulings could all but put an end to the structure as it currently exists. The result being, that such mandates could usher in a period in which companies must focus their attention towards singular streams of revenue, instead of the potpourri assortment which has made these corporations so incredibly powerful, and profitable.
All good things must come to an end. And although I don't expect this particular paradigm to disappear overnight, the recent challenges to its existence, if nothing else, are at least exposing us to some significant signs of its aging. Will it be able to adapt to new circumstances, and emerge even stronger than ever? Or will it become yet another relic of a bygone age; forever crystallized in our histories as a method of a specific period, which was unable to transition to new realities, and finally abandoned as a victim of pure capital obsolescence?
Only time will tell.
(Anthony Rhodes is the President and owner of wealth management firm The Planning Perspective www.theplanningperspective.com. Do not reproduce without permission.)