This paper proposes that idiosyncratic firm-level fluctuations can explain a significant portion of aggregate shocks and provide a microfoundation for aggregate productivity shocks. It challenges the traditional view that aggregate shocks dominate business cycles, arguing instead that idiosyncratic shocks to large firms can generate substantial aggregate fluctuations. The paper shows that when firm size distributions are fat-tailed, the standard diversification argument that aggregate fluctuations are negligible breaks down. Instead, aggregate fluctuations are more persistent and significant, as large firms account for a substantial share of economic activity. The paper introduces the concept of the "granular" hypothesis, which suggests that macroeconomic fluctuations can be understood by examining the behavior of large firms. It demonstrates that the idiosyncratic movements of the top 100 firms in the U.S. explain about one-third of variations in output and the Solow residual. This finding supports the idea that aggregate fluctuations are not solely due to aggregate shocks but also stem from the behavior of large firms. The paper also shows that idiosyncratic shocks are of the correct magnitude to explain business cycles. Using a model based on Hulten (1978), it demonstrates that the standard deviation of total factor productivity (TFP) growth is influenced by the sales Herfindahl of the economy. The results suggest that idiosyncratic volatility is quantitatively large enough to matter at the macroeconomic level. The paper contrasts the "granular" hypothesis with other models that rely on aggregate shocks or sectoral shocks. It argues that the "granular" hypothesis provides a more accurate explanation of macroeconomic fluctuations, as it accounts for the role of large firms and the fat-tailed distribution of firm sizes. The paper also highlights the importance of considering the distribution of firm sizes and the implications for aggregate volatility. The paper concludes that the "granular" hypothesis offers a new perspective on macroeconomic fluctuations, emphasizing the importance of large firms and the role of idiosyncratic shocks in explaining aggregate variability. It suggests that further research is needed to better understand the mechanisms underlying these fluctuations and to refine the measurement of idiosyncratic shocks.This paper proposes that idiosyncratic firm-level fluctuations can explain a significant portion of aggregate shocks and provide a microfoundation for aggregate productivity shocks. It challenges the traditional view that aggregate shocks dominate business cycles, arguing instead that idiosyncratic shocks to large firms can generate substantial aggregate fluctuations. The paper shows that when firm size distributions are fat-tailed, the standard diversification argument that aggregate fluctuations are negligible breaks down. Instead, aggregate fluctuations are more persistent and significant, as large firms account for a substantial share of economic activity. The paper introduces the concept of the "granular" hypothesis, which suggests that macroeconomic fluctuations can be understood by examining the behavior of large firms. It demonstrates that the idiosyncratic movements of the top 100 firms in the U.S. explain about one-third of variations in output and the Solow residual. This finding supports the idea that aggregate fluctuations are not solely due to aggregate shocks but also stem from the behavior of large firms. The paper also shows that idiosyncratic shocks are of the correct magnitude to explain business cycles. Using a model based on Hulten (1978), it demonstrates that the standard deviation of total factor productivity (TFP) growth is influenced by the sales Herfindahl of the economy. The results suggest that idiosyncratic volatility is quantitatively large enough to matter at the macroeconomic level. The paper contrasts the "granular" hypothesis with other models that rely on aggregate shocks or sectoral shocks. It argues that the "granular" hypothesis provides a more accurate explanation of macroeconomic fluctuations, as it accounts for the role of large firms and the fat-tailed distribution of firm sizes. The paper also highlights the importance of considering the distribution of firm sizes and the implications for aggregate volatility. The paper concludes that the "granular" hypothesis offers a new perspective on macroeconomic fluctuations, emphasizing the importance of large firms and the role of idiosyncratic shocks in explaining aggregate variability. It suggests that further research is needed to better understand the mechanisms underlying these fluctuations and to refine the measurement of idiosyncratic shocks.