The Lex column today reminds us that back in 2000, after many mega mergers, the "big ten" or "supermajors" oil companies represented 2/3 of world's oil companies market cap. In a sector where scale is so relevant, all other players were believed to be doomed, destined to eternal irrelevance.
Fast forward to January 2008. It turns out that once again the "game-over" was called too soon. The "big ten - supermajors" today account for only 23% of worlds oil companies market cap. The take-aways?
1- Too big is often bad. Even in big oil.
2- Labels are terribly dangerous. Triple A companies can go bust very quick as we've been given many examples recently, "genius fail", and five or more sigma events that were statistically supposed to occur once in a million years have been blamed for many of the crisis over the last decade.
3- You can never be sure of anything in the future. You must have values and should have some convictions but certainty will always elude us. Build your positions accordingly.
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