After the back page Cartoon Contest and glancing the table of contents, the first thing we read in The New Yorker is James Surowiecki's excellent Financial Page column. Generally, he's penning a consumer-oriented story. Even when he's talking big picture things, like the credit card industry or free-trade, Surowiecki always brings the conversation to the person level: How does this affect you?

Not in this week's issue, which makes his topic choice – CBS's foolish decision to buy CNet for some $1.8 billion – all the more interesting. Clearly, this subject stuck out to him: Why would a giant media conglomerate feel the need to spend billions on a digital content company.

He does not write with any less vigor.

If CBS and CNET had simply agreed to cross-promote each other’s brands and distribute each other’s content, CBS would have had many of the benefits of merging without the costs. [...]

Unfortunately, the CBS-CNET merger fits none of the criteria for a good deal. The overlap between the two companies is limited, and so are the opportunities for cost-cutting. And, because CNET is neither small nor privately owned, CBS paid a forty-five-per-cent premium on CNET’s stock-market price. That means that, for the deal to work, it will need to improve CNET’s performance not by a little but by a lot. Rationally speaking, then, it’s unlikely that this deal will end up making CBS money. But the deal was not driven solely by that consideration. CBS is also trying to fight the perception that its business is slowly fading away. This isn’t unusual. C.E.O.s of public companies often feel what you might call the “grow or die” imperative—if the company isn’t growing briskly, they worry, investors will abandon it in search of better opportunities. This fear often has a basis in reality—Wall Street analysts, for instance, have been pressing CBS to do something to revitalize the company—and C.E.O.s should worry about increasing shareholder value. But while acquisitions, almost by definition, boost a company’s growth rate, they too often make it bigger without making it better.

It’s the rare C.E.O., of course, who’s comfortable presiding over a shrinking empire, and running a public company creates a bias toward action, if only as a way of convincing investors that you recognize your problems and are dealing with them. But history suggests that, when it comes to mergers, the best response is often to just say no. In effect, deals like the CNET acquisition are a bit like an aging outfielder taking steroids in order to stave off the boobirds. The difference is that steroids usually work. [New Yorker]