TOO BIG OR NOT TOO BIG?

THE CHINESE, WHO HAVE SEEN THEIR SHARE OF HISTORICAL cycles, say there is a visible momentum governing human affairs. Their epic novel Three Kingdoms begins by declaring that empires rise and then fall into chaotic fragments; but from those many small kingdoms, powers coalesce to form new empires to restore order to the cosmos. A grandiloquent way of saying, Sometimes you're up, sometimes you're down, sometimes you're big, sometimes you're small. For those who believe in such chronic convulsions, the business world last week provided the spectacle of two cycles reaching opposite apogees at once, of simultaneous expansion and fragmentation. But here is the twist on the ancient adage: one corporation divides, the better to thrive; two companies, meanwhile, join for astonishing cash flow--but in so doing step into new uncertainties.

"I'm tired of being little all the time," Ted Turner crowed last week. "I want to see what it's like to be big for a while." But when it comes to running a conglomerate, is bigger better? Or is less more? Americans could be forgiven if they were confused by last week's economics lesson. First they witnessed the three-way breakup of AT&T, and then, just 48 hours later, the rebirth of Time Warner as the world's largest media company with its agreement to buy Turner Broadcasting. To the old but continuing question, "What's happening to the big old phone company I grew up with?" is added, "Will I now get all my news and entertainment from only a couple of media behemoths?" And both are thrown into the debate over proportions and perspectives. When is an organization too big for the good of its members, its customers, its citizens? And does the loss of human scale have a lot to do with America's crisis of confidence about its institutions?

"Big" and "small" may be elementary concepts, but defining them can be complex and contentious. Thus, is a company downsizing or rightsizing when it lays off employees? America's two-party system is decrepit, but what kind of chaos would a third and fourth party bring? The Federal Government is too big, but if it devolves its responsibilities to the states, local governments may not be big enough to take up the burden. The questions devolve to everyday life: I owe too much money, but if I didn't, I'd never live anything close to the American Dream, which only seems to clutter itself up with a wider range of requirements each day.

American business has been dreaming big dreams for the past several years. Acquisitors from Disney to Chemical Bank continue to gobble up firm after firm. So far this year, there have been more than $270 billion worth of such expansions. Yet the corporate divorce rate runs high, as companies spin off partners they once bought with great fanfare. In fact, Wall Street investors are scouting bargains among once acquisitive companies that are now dubbed "tangerines" because they seem ripe to be taken apart in segments. Meanwhile, the celebrated corporate restructurings of the past decade may be most remembered for the resulting layoffs by the thousands as employees were spat out like fruit seeds.