The case for Conglomerates
If you pick up a business journal from the past year, the headlines are dominated by companies with sharp, almost single-minded specialization: NVIDIA and ASML in semiconductors, OpenAI and Anthropic in large language models, SpaceX in aerospace manufacturing and launch. These companies look like the emblem of a new era: focused missions, deep technical moats, and category-defining execution.
And yet, when you zoom out, something familiar reappears.
This moment oddly mirrors the 20th-century age of conglomerates, when scale and diversification ruled: RJR Nabisco, General Electric, IBM, Siemens, Berkshire Hathaway. Then, through the 2010s, a similar pattern emerged in Asia and later intensified in the US: Samsung, LG, Hyundai (South Korea), Reliance (India), and finally the American giants: Amazon, Alphabet, Microsoft, Apple. The names changed, the business models modernized, but the underlying logic stayed intact: large, diversified organizations sit underneath the global economy like load-bearing beams.
Here’s the deeper point:
Many of the most critical nodes of the modern world are run by conglomerates in one form or another.
Not always glamorous. Not always high-margin. Often politically messy, capital-intensive, and operationally brutal. But essential.
Take the medium you’re reading this on: the internet.
A simplified version of the internet stack in India looks like this:
- India connects to the global internet through undersea cables operated by large telecom and infrastructure players (e.g. : Tata Communications and consortium partners).
- A huge share of Indian applications are hosted on hyperscale cloud infrastructure: AWS, Azure, Google Cloud.
- Day-to-day communication rides on platform ecosystems like WhatsApp and Instagram (Meta), plus other large networks.
In other words, even when innovation happens at the surface level, the “pipes and plumbing” are typically owned and operated by companies with enormous balance sheets, global operating experience, and the ability to absorb risk over long time horizons.
Why does this consolidation happen?
Because conglomerates have a capability that smaller firms usually don’t: the internal capital market.
They can fund loss-making or early-stage products using profits from mature cash cows elsewhere in the organization. They can tolerate long payback periods. They can survive “strategic” investments that would get a startup killed in six months. And because many are publicly listed with scale and credibility, they can raise capital on terms that, in practice, only governments can consistently match.
That combination creates a structural advantage: they can build infrastructure before it’s fashionable.
And infrastructure is almost never fashionable at the beginning.
The macro environment is quietly making this advantage bigger
For the last decade-plus, the world lived through a period where capital was unusually cheap. Growth at all costs was rewarded. Venture funding could subsidize experiments for longer. That environment made it easier for smaller firms to challenge incumbents across categories.
But in a world where Quantitative Easing is no longer the default mood and capital has an actual cost, the rules shift. Higher rates do something brutally simple: they punish long-duration bets unless you have the balance sheet to carry them.
That’s where conglomerates regain an edge. If you are a large firm with:
- steady cash flows,
- cheaper access to capital relative to most challengers,
- and the ability to spread risk across a portfolio,
then you can invest in products with long gestation periods that aren’t currently “hot” enough for venture capital. You can keep funding the unsexy work: infrastructure, compliance-heavy markets, regulated transitions, deep tech with uncertain timelines.
And from a shareholder perspective, this isn’t even irrational. Many conglomerates face a reality that’s hard to dress up with nice branding: revenue stagnation in core businesses and limited high-growth avenues. So what do they do with large cash piles? One rational answer is: take asymmetric bets. Build options. Place multiple long-term chips on the table and hope one becomes the next growth engine.
There’s a second tailwind: global trade contraction
Over the past year, the trend toward reshoring, friend-shoring, and supply-chain regionalization has become more than just a policy slogan. When cross-border trade gets more expensive and complex, the operating burden rises: compliance, logistics, data localization, export controls, tariffs, supplier risk, geopolitical disruption. Complexity becomes its own tax.
Smaller firms feel that tax more acutely. They struggle with:
- the fixed cost of compliance
- multi-country operational complexity
- supplier diversification
- regulatory and geopolitical shocks
Conglomerates, on the other hand, have been operating inside complexity for decades. They have legal teams, procurement muscle, government relationships, and contingency planning as a built-in function. They’ve already paid the tuition fees of operating across fragmented systems. In a world where global smoothness is declining, scale becomes a form of resilience.
The result is predictable: the playing field bends toward conglomerates, especially in sectors where reliability and risk absorption matter more than margin aesthetics.
What does this mean for the next decade?
A few implications feel likely:
- More “infrastructure ownership” by mega-firms
The critical rails (compute, connectivity, logistics, payments, energy transition supply chains) will keep consolidating, because they demand sustained capital and operational endurance. - Specialists will still win at the frontier, but often on rented land
Many breakthrough companies will remain narrow and exceptional. But they will increasingly build on top of platforms, clouds, app ecosystems, and distribution networks controlled by conglomerates. - Conglomerates will behave more like portfolios of startups plus utilities
One part of the org will look like a regulated infrastructure operator. Another part will look like a venture studio. Internally, capital will flow to whatever can create the next wave of growth.
The uncomfortable counterpoint
When conglomerates run the world’s nodes, we also inherit the risks: concentration, systemic fragility, and reduced competition. When too much of the internet, cloud, communications, or payments stack sits with a handful of players, failures and policy decisions have outsized consequences.
That’s why this trend inevitably invites regulation and scrutiny. The tension won’t disappear. Societies want both: the efficiency and reliability of scale, and the dynamism and fairness of competition.
So the story isn’t “specialization versus conglomerates.” It’s more nuanced: specialists define the frontier; conglomerates increasingly control the rails. The future looks like an ecosystem where innovation moves fast at the edges, while the core infrastructure consolidates under the firms best equipped to fund and operate it.
Not glamorous, but then again, neither is plumbing. And yet, everybody notices when it breaks.