Conglomerate Discount
Markets value diversified companies below the sum of their parts if operated independently.
PayPal as an independent company would command a $45-50B valuation. As eBay's subsidiary, the market valued it at $30B. The conglomerate discount was destroying $15B+ in shareholder value.
Specialists outperform generalists when niches are stable. The anteater's specialized tongue and claws make it unbeatable at ant extraction—but useless at anything else. Koalas dominate eucalyptus niches but can't adapt to other food sources. In evolution, generalists (raccoons, crows) survive environmental volatility; specialists extract more value from stable niches. The biological trade-off: specialization increases efficiency in known conditions but reduces adaptability to change.
Business Application of Conglomerate Discount
Markets value diversified companies below the sum of their parts if operated independently. By 2010, investors preferred pure-plays (companies focused on a single industry) over conglomerates. GE's sum-of-parts valuation exceeded its market cap, destroying value. The eBay/PayPal conglomerate discount was destroying $15B+ in shareholder value before the spinoff.