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Hmm. From here:

Over-Diversification: Keeping an eye on opportunities for expansion is an important part of maintaining a healthy and successful business. But too much emphasis on diversification can be a bad thing, according to the study.

Take Amazon.com. The e-retailer leveraged its success away from music and books and into unrelated areas and got burned. For example, its furniture store, a partnership with Living.com, was shut down last August when Living.com folded.

Over-diversification is a problem because growth and innovation alone aren't sufficient means for achieving lasting success. Innovation must be tempered with efficiency, profitability and true wealth creation, according to the study.

Are you saying that this doesn't happen to governments?
... Take US FedGov. The central government leveraged its success away from liberty and justice for all, and into unrelated areas and got burned. For example, its BATF, an organization that should never have existed due to it's conflict with the Second Amendment, now incarcerates, or in some cases incinerates, citizens whom it finds in violation of its picayune firearms regulations. ...

I would agree that growth and expansion are not a moral ambition for the government, but that doesn't seem to stop them.

In what way do you think this principle applies to libertarianism? Or were you using a different definition of "over-diversification"?