The benefit comes from correlation, not from the number of holdings. Thirty US technology stocks are one position wearing thirty names; a smaller mix of equities, bonds, currencies and commodities carries far less concentrated risk.
It is the rare improvement that is close to free. Combining assets with similar expected returns and imperfect correlation lowers the volatility of the whole without lowering the expected return of the whole.
Its weakness is well documented: correlations converge towards one in a crisis. When investors need cash they sell whatever is liquid, and the diversification that worked for a decade delivers least in the month it is most needed.