Just back after a vacation so let me expand on earlier offhand dissin’ of Levitt.

My read of him — based on what I remember from business school marketing classes — is that he regards corporations as sufficiently plastic that all schemes to reinvent themselves are possible. And that if senior execs throw enough ideas at the wall, a good one will eventually stick. Or am I doing violence to his thinking?

Go back to his famous railroads example. He casually tosses out that they should have seen they were in the transportation business, that this would have enabled them to respond to the rise of airlines and trucking.

My anti-Levitt approach comes out of Chicago finance/modern portfolio theory. If I think the railroads are going to hell and that airlines are the future, then I’m better off investing in United airlines myself than in having the Union Pacific railroad start acquiring airliners. (Let’s set aside that Congress specifically banned the railroads from owning any airline that had contracts to haul US mail.)

Just as if I think portable music players are a terrific business, I’d rather invest in Apple than see the managers of Dell piss away resources trying to design what will likely never be more than a third-rate iPod.

Levitt, as I remember him, doesn’t think like a Merton Miller. Levitt sees no reason why Dell can’t do what it takes to respond to any and all competitive threats. To him, it’s all just a matter of management doing some brainstorming at a corporate retreat.

So if Michael Dell wants to build fighter planes AND sell kitty litter — why the hell not?

In some unexpected way, I think of Levitt as an apologist for the 1960s conglomerate craze, in which empire builders like Tex Thornton and Charles Bluhdorn acquired all sorts of unrelated assets about which they had so littel understanding and passion that they almost necessarily had to manage them according to financial and accounting metrics.

I read that thick description essay in the fall of freshman year and again in the late spring of senior year, bookending my college education. Oh, and I read it twice more in between those years. Geertz was a ubiquitous presence in the late 1970s.

The problem with the pure Levitt approach is that it cuts with only one blade of the scissors. Dell is not going to be successful running social networking sites even if they do turn out to be the Next Profitable Thing. This is because Dell lacks the internal capabilities to be successful there. If there really were a trend toward more radical customization of computers, Dell would have a big advantage because of its make-to-order manufacturing system; I’m skeptical of this supposed trend, however.

I guess I think that a marketing perspective is insufficient for thinking clearly about business strategy, although it’s usually necessary. Even if you decide you’re in a different business and sell off all your existing assets, whoever buys those assets is going to be right back in the problem you “escaped” by asking the Levitt question. Business identity isn’t that easy to shed, for it ends up being conserved somewhere.

I have bookmarked your blog and will be reading you regularly. Thank you so much for a very stimulating and interesting post.