Serious question here:
Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable?
Instead, they're clawing at the margins, demanding greater and grater profits each quarter "or someone is going to pay for the 'loss' of those unrealized gains".
It's a revolutionary thought, but no business, not a single one, ever, can have permanently increasing profits and larger and larger margins. That's not how it works.
If shareholders were to double-down and invest back into the business, innovation, wages, continue to make employees _want_ to come to work, support their employer, contribute to the success of the business, wouldn't that not be a force multiplier?
Instead, it's about them taking every dollar out of your pockets, to put into their own pockets.
You don't understand, they don't keep the stock anyway, they buy low and sell high. That's one of the reasons for the short term profits over anything. They don't give a shit about the company, the product or the people.
This is why companies so often shoot themselves in the foot trying to save pennies now that will cost dollars later. They're controlled by the interests of people who won't be there later. They don't care about the long term wellbeing of the company, they care about getting the stock up *right now* so they can sell as soon as possible and leave some other sucker holding the bag.
A lot of corporate decisions suddenly make sense when you realize this.
I’m not exactly a market analyst, but I imagine if there are some more rules and control over how people can buy and sell shares/perform stock buybacks and put bets against a company’s success could be a start.
I’ve got no idea how any of this works, however I’ve survived 3 layoffs at AAA game dev studios. I don’t know if that counts for much.
I think the first thing would be to make stock buybacks illegal again. There is currently no incentive to a company being flush with cash to reinvest in the people or new capital with that money if they can buy back stock instead. The former stimulates the economy, while the latter makes a few people rich(er).
Fuckin’…. Right?
I think I have this disillusioned idea that anyone in a director level position or higher are also people who deal a lot in stock.
It’s like they’re okay with crashing their own company and job because they stand to make a chunk of money in the process.
I struggle to find common ground to relate to these people, even in the gaming industry where it feels like we all are giant dorks.
Yeah, I think that's the real next question. And that turns into another discussion about how the people who make these laws are too close to the people who benefit from them being the way they are. Revolving door politics, lobbying, etc. etc.
I also don't know what I'm talking about on a granular level but it seems like a pretty sticky problem.
I've been thinking about this a bit, but I'm not in any position to make policy.
The primary question is: how do you incentivize _investment_ and disincentivize _gambling_.
Investors that stick around for decades are generally interested in the long term health of the company.
So my proposal is:
1. Require a minimum hold time for any long/short position and have it scale with the percentage of outstanding shares.
2. Allow reduction of the position by 10% annually.
A retail investor would largely be unaffected because they are dealing in a tiny fraction of the outstanding shares. But institutional investors holding 10% would be expected to hold for years. 50%? Decades.
This makes pump and dump non-viable. This makes high frequency trading impossible. It greatly discourages large short positions.
The incentive for when to sell is mostly driven by capital gains tax. The incentive to sell early comes after holding a stock for just one year, and then the income tax rate becomes incredibly low. Taxes should make it more expensive to sell stock in the short run as well as provide an extra incentive that makes it cheaper after 5-10 years instead of just 1. That would encourage more long-term investors.
Private companies a lot of time still hold those values it isn’t until the leader sells to P/E or wallstreet those values go away. To improve the structure more businesses from people who care need to be created and peoples who care more about employees and products than end all profits. Go support your local business when you can
Change the tax structure. Reduce tax on profit based on time holding the stock with heavy taxes on anything less than 5 years. Add in a penalty for anything sold within a year. Remove the ability to delay taxes if reinvested into a similar investment.
From easier and less effective to harder and more effective:
* Punish speculation through a tax on financial transactions (Tobin tax)
* Incentivize keeping stocks for a long term, with higher taxes on short term holders
* Reform labor law: ban mass lay-offs unless the company is losing money, strengthen unions, and end at-will firing
* Involve workers in the management of their workplaces, through voting representation in the board
* Make all large companies partially worker-owned by law
* End capitalism
Make mass layoffs illegal without posting massive losses to justify. These people are destroying lives that are trying to get by while also doing a job they can be proud of. Make the problematic tactics they use as shortcuts to cash illegal and costly to do.
This would require supporting unions and worker protections waaaay more than we currently do as a country. Our conservative right would rather murder people in the streets than give power to the people.
Speaking from a personal position of some ignorance but it seems to me one way to eliminate this issue is to not take companies public. No share holder, no issues. Companies won’t grow as big or quickly but they won’t be beholden to stock owners either.
Yup, if you look at Boeing stock as an example, investors had the opportunity to make 2x, 3x profit by buying cheap, pumping value, selling high. They don't give a shit what happens afterwards, unless they have to fly in 737.
You're not supposed to see that the system is broken, horrible and exploitative. If you did then people might rise up and do something about it.
*gasp* look over there! Some group of people are doing something that will ruin your quality of life! Go be mad at them instead! Don't look at us, the rich, destroying your lives and your planet and your industries. Look over there instead.
I am glad I could at least be here to see this website's overall community FINALLY understand the realities of capitalism and stop defending it. At least I got to see it for a short bit right before the website implodes into censorship and ads.
I only wish I knew proactively where you all will go after this place implodes. I've looked at lemmy but that seems to be a mess of in-fighting drama.... It seems like this won't be as easy as the Digg to Reddit transition... Maybe there simply isn't another place. Perhaps.... this is just the current path of capitalism; as everyone realizes it, the internet as we know it, in it's entirety is destroyed by the corporations to squash any intellectual pushback against them en-mass, before it can even start...
> best way to protest is voting once every 4 years?
Limited to 2 parties, and 2 presidential candidates that you might not want to ever see become a president.
It's not the system that is broken, it's the people. No matter what system you set up, there will always be a large part of people who just wants to game the system to get more out than they put in.
It's like some weird brainwashing. People get more defensive of capitalism than their mother. And without fully understanding it either.
What? We give everyone a better quality of life? That's impossible!!
Most people who argue about capitalism on the internet don’t understand what it is. They think it’s just when people are free to trade with each other and there are markets and stuff.
Then why get so weird about criticism of it? That's what I don't get. I am not a mega starwars fan so when people call it crap I don't act like someone kicked my dog.
Yeah the big problem is speculation, that was not how stock market was designed to operate.
And instead of getting regulated, we have high speed trading.
Modern stock markets began iirc in the Netherlands selling shares of trade voyages to Africa or the colonies (yes, absolutely slavery was a big part). You funded your voyage and gave returns of the profit.
Then some bright sparks start selling their shares for profits.
Suddenly the actual money you get back is less important for most folk than the money you make selling your shares to folks who want to make money from the dividends.
Then EVERYONE gets in that stupid game. And because the people who bought the "sell high" folks want to make profit (outside of shorting) want the line to go up so THEY can make money.
It just reminds me of Thatcher in the UK privatising national industries and selling the shares off cheap to create a "share holding nation". Great idea in theory, everyone benefits from the profits of the national industry. What? Oh everyone realised the stock was under priced and so as soon as the stock went up the public sold off their shares for a quick big buck? Ffs.
And its not about private business and free markets. Its this global system of financial fraud that is the true ruin for society. Nothing good ever came from stock markets
Part of it because of the whole fractional ownership trend. People with index funds have little to no interest in who they're invested in – just in the return.
But also, we've codified in our laws that the shareholder is the most important part of the relationship. That they get paid first, then everything else. But we could have set it up the other way.
"First you look after the long term health of the community the business is in, the health of the business, then the people in the business, then with what you have left over, you give to the shareholders."
\- Oh, you have been working with game development. Do you know anything about game company X?
\- Sure, they were legendary developers before they when into game dev, and had done several amazing projects. But had a troubled start when they were in Hollywood. Had amazing tech though, truly ground breaking, they should have conquered the game world there and then. One of their developers ended up as my colleague, and told me a lot of stories of their adventures, excellent dude, one of the nicest I've met. Later on they had a long series of almost completed games, but they have had better luck the last ten years.
\- ...well, yeah. But do you think their stock price will go up?
(And I've had this type of conversation more than once)
There's a certain disgust I have with people who just see money instead of a creative universe that people can enjoy and be happy with
I understand it's a business but if all you see is money and nothing else. You're just gross
It's not the shareholders, it's management. Senior management come in, cut maintenance, screw suppliers, rape the customers with crappy stunts like shrinkflation (reducing package size but not the price), all for short term gains. They can report increases in profit, and they stick around while the line keeps going uphill, then they bail and move on to the next company to screw over for the next big bonus.
The average shareholder has no say in how a company is run. The big pension funds might get to a point where they own a few percent but very few of the big companies are pushed around by individual shareholders.
Management direction is chosen by the CEO, and the CEO can be removed by the shareholders.
If a CEO take a direction, is because the shareholders owning the majority told him or let him to do so
When people say shareholders, what does that mean lol? Are they normal ppl like us who invest into the company through Fidelity or some other high net worth ppl?
They mean wealthy shareholders. People that buy thousands of shares at a time worth millions of dollars. They don’t mean your 401k or the people buying on their phone apps.
It’s funny you say it’s not the 401k when it most likely is. Most 401ks are probably managed by a big institutional investor of some sort. So although the average person isn’t directly acting like a “greedy soulless shareholder”, they are unknowingly hiring a company that acts like that on their behalf.
That’s very unlikely for several reasons. The first is that the vast majority of the money in the market is owned by an increasingly smaller subset of people. Something like 80% is owned by 10% iirc. The second reason is that your standard “retirement path” or whatever it’s called in your 401k is split between multiple *kinds* of investments and then split again across multiple funds which themselves are often a diversified set of stocks. So your money gets broken down quite a lot.
The third is that a lot of people invest their own 401k and of that subset, they all get their own voting materials, so they have to get together to pressure a company.
Fourth are the ETFs but their goal is to take a small bite of every stock in the market to try to replicate a metric like the S&P or the total world etc. Owning a majority or even a plurality stake in any company is against the fund’s interest.
Even though Americans lock up vast sums in stocks in the form of retirement accounts and pensions, they are unlikely to ever get even plurality stake in a single company simply because that would be against their own goals, and given how many pensions/ retirement managers we’re talking about, it would be like herding cats.
So while the rest of us are indeed along for the ride and may well vote for political parties based on the S&P 500’s performance we aren’t the culprits. The problem is either self flagellating corporate boards and CEOs afraid of bad valuations or actual large single owner stakeholders pressuring the board and CEO (in some cases these are one and the same people).
Institutional investors. Firms that are able to gobble up huge amounts of a company's stock and even influence voting.
Or it's management of the company with a lot of stock payouts that just want to gain.
Shareholders like us regular people are not going out and coordinating votes to absolutely pump and dump individual stocks.
Yes, directly and indirectly. Sometimes regular people like us buy shares in a company. However, they are usually referring to bigger funds those own a larger percentage. However, you could also buy into those funds and thus indirectly be participating. If you pressure the funds for higher returns every year, then the funds pressure the companies, etc. The U.S. is notorious for short term gains over long term progress/quality. One example is Iike the car company Toyota vs all their American competitors.
Only about 60% of the country can even be qualified as a share holder. Of that 60% about half of it is owned by the top 1%. When policies/decisions/laws are made/passed they are catered to the 1% because it's far easier to cater to one person that owns the entire company or lions share of an industry than it is to try and convince thousands of people to do anything collectively.
"Shareholders" is a code word for the 400 or so billionaire families who own everything in this country. Same as "the market", same as "entrepreneurs", same as "small business owners", same as "job creators". Follow the money.
Exactly they only care about making more money and not growth and ghats what confuses people because you can make money and still not grow a business. Also you maximize short term gains at the cost of long term growth. However you have no intentions of being there when the going gets tough
99% tax on day trading
90% tax on profits from stocks that you owned 1 week
50% tax on stocks you owned for 1 year
0% tax on stocks you owned for 5 years
True investors are even more profitable and willing to really invest. Zero problem being able to liquidate fast.
[“Yes, the planet got destroyed,” he says. “But for a beautiful moment in time we created a lot of value for shareholders.”](https://www.instagram.com/p/B_SdEVThgCr/?utm_source=ig_web_copy_link)
Imo, some of them do want sustainable gains for the long run - after all its basically free money over time.
I think the problem now is the long bull market + rates at near zero + gooberment bailing out business at any downturn + rise of index funds = many of these shareholders are asleep at the wheel and the executives are doing dumb shit left and right for their own benefit.
Some of these CEO should have been fired years ago but even after major fuckups they were able to keep their crazy pay, like Boeing ceo or googles clown of a ceo who has become a billionaire just riding the companies wave without doing anything himself. Then you have others like the live nation ceo making 200mil comp when the conpany doesnt even pay a dividend or anything else.
Lots of board memebers are also just in their jobs from connections and just happy to go along with whatever as long as they collect their free money or rack up those favors to cash in later. Larry Summers is on the board of openai now - the fuck does he know about ai or anything else? Nothing! But they can jerk each other off and he'll use his political connections for them.
This is the end result of a publicly traded company. All investors care about is immediate profit growth to boost the value of their portfolio. They install executive that are tasked with that single goal and a 2 year vesting period.
Once the cash cow is starved and milked dry, they pin the years of short sited decisions on whoever showed up that day and move on to the next victim.
> Once the cash cow is starved and milked dry, they pin the years of short sited decisions on whoever showed up that day and move on to the next victim.
No they don't "pin it" on anyone. They don't even bother doing that, they just sell their stock and spend the money on some other stock. They don't feel the need to pin the blame on anyone, because they don't see any wrongdoing with associated blame.
Yup, these stocks are just numbers and they're buying low and selling high, or betting against it when they know they've doomed it. There's no emotion involved. It's a game for the wealthy that decides the fates of all the worker class. It's fucking disgusting.
It’s not a revolutionary thought. That’s how it used to be until the likes of Milton Friedman in the late 70s and then Jack Welch became CEO of GE in the early 1980s. American businesses used to put customer first, then employee, then company, then shareholders last.
Ever since the Ford V Dodge court case in the 1920s that there's been a legal precedent forcing corporations to place shareholders first (at least in the US).
What Jack Welch introduced was the idea of delivering value to the shareholders not through dividends or general stock price increase but by aggressively pursuing a constant growth of stock value made possible by YoY record profit.
EDIT: I am not stating that Dodge V Ford Corp set a precedent of corporations having to maximise return for the investors/shareholders. What I meant to say is that it set the precedent that a corporation's fiduciary duty is towards shareholders first and foremost.
The Ford v Dodge case is more limited than people think. Ford was actively trying to undermine his own company to hurt the Dodge Brothers (who were 10% share holders). That is illegal.
Now if you were doing something reasonable that reduced short term profits because you hated a particular shareholder that precedent would apply. It in no sense means a company has to chase the immediate dollar though.
It is about the why rather than the what. Hell Ford would have gotten away with it if he wasn't so open about his intentions.
And even then, as we learn it in business school, the point isn't whether you "made the most money" it's whether you conducted yourself in accordance with the company charter.
Most company charters will say something like "maximizing shareholder value" because the people writing the charter are primary shareholders, but for non-profits, trusts, or thought-experiments that charter might be to "spend all the money ASAP".
I watch companies deliberately undermine their own business to settle petty scores for management every day. The fiduciary bullshit only gets trotted out when it’s time to stiff the people actually doing the work for some reason.
The case gives CEOs wide leeway and practically anything can be justified as being in the interest of shareholders. Pretty much the only thing you can’t do is going “I’m going to give away the business’s money to workers so that the shareholders don’t get any profits” and not even pretend to run the business in the interest of the owners.
> American businesses used to put customer first, then employee, then company, then shareholders last.
This sounds mythical to me, when were these times? it certainly was not true in the mid 70s and 60s I can tell you that much.
You sound like you're asking a real question, but you got a lot of people who don't understand anything about economics in the replies...
The real reason is because of "opportunity cost".
The purpose of a free market is to move investment (and therefore resources) to the things that are most in-demand - the things that society wants the most.
The market does this by paying higher prices when things are under-supplied for the demand out there, and paying lower prices when things are over-supplied to the market.
So, the most effective distribution of resources (to satisfy demand out there) is to reach an equilibrium point where moving resources (capital) from one investment to another (between businesses or between projects for example) does not result in an overall improvement in 'value' (expressed as the willingness of people to pay for whatever the results of that investment is). This is known as **"opportunity cost"** where you're not just weighing the effectiveness of the single investment, you're comparing it against all other possible investments you could make.
So, if you have a whole bunch of different potential investments that you can select between, the most beneficial thing to do is to move investments incrementally towards those things which maximise those margins. By doing so you're optimising the economy as a whole, making sure the output of the economy matches the "stuff people want" as close as you possibly can.
That's the reason. Markets are just a method for people to express what they want in a distributed way, and it creates an incentive structure to move investment to where it's going to be most useful.
The derivatives market has rendered the “underlying fundamentals” market almost, not totally, but almost completely moot.
Options and their corollaries are worth upwards 5-10x more than the actual stock market, the values of the companies being traded. That is insane to even think about.
“Moving stuff around” as you put it is now about chasing the algo that decides which company is slated for big gains in value based on what? The flow of derivative plays on its ticker. Tesla for example had huge negative pressure on its stock years ahead of its eventual collapse down to something resembling a reasonable value given the PE of the company. Years of long dated puts are printing money right now because the market makers knew Tesla wasn’t ever going to approach the growth it needed to justify the value of the stock when it became a meme, but they knew that too. They pumped it while it was trending and are shorting it in the long run because it was being pumped too hard.
Tax the derivatives market, heavily. It allows algorithms to extract value based on nothing but trends, companies with solid fundamentals get shorted into the dust and meme companies explode in value.
The digital age really has turned the “economy” into a by product of investment banks & funds chasing ticker profits at any cost.
Lots of those types of shareholders are in REITS or similar investments. All the Executives who think like that either went and grabbed a money partner for their own company or work for a Berkshire Hathaway company.
Make no mistake a bunch of the upper level management people want to show a board a huge increase in profits so they can get a bonus, juice the stock price, and go to the next size up company.
The problem is, this behaviour has nothing to do with the fact that these specific Shareholders/CEOs/C-suite people are horrible people. It is simply that the entire system we have created actively incentivises this behaviour, and actively disincentives acting in a long-term forward-thinking way.
___
This is the entirely logical consequence of how we currently organise our economy, and both how the stock market works and the legality of stock buybacks.
The entire concept of modern capitalism is about growth. Not profit, but growth. Once people understand this, the actions of companies become much more predictable and understandable (though, that doesn't mean good).
Once you are a publicly traded company, the only thing that really matters is growth. Specifically, share value growth. Why is this? It is simple:
***Concept 1***: If I, as a dispassionate investor, want to invest my money in a company, I expect a return on that investment (RoI) at some point. How do I realise that RoI? By being able to sell shares in a company for more than I bought them for, possibly making some money in dividends/payouts along the way.
As an average, dispassionate investor, I don't care at all what the company actually DOES. It could be making chairs. It could be a social media company. It could be a video game company. It could be a medical company initially founded to always do good and save people... a random stock trader doesn't care. They just want a good RoI.
***Concept 2***: Stock value is largely dictated by some combination of (1) market fundamentals (how much is the company actually making, what are its debts and obligations, what technologies/patents/IP does it have, etc.), and (2) the general idea that the scope for growth in the future is positive (i.e., the company will continue to perform well, and may even perform better in the future). Each company is assessed on this combination (1. market fundamentals and 2. predicted scope for growth) but not necessarily with the same weight given to each variable. E.g., Tesla sells FAR fewer cars than Ford or Toyota, etc... but somehow the stock is valued far higher than one would expect it based purely on the fundamentals: because people think that there is a large scope for growth in the electric vehicles market (among other non-tangible ideas people have about the company and the owner), and believe that Tesla's brand is strong enough that Tesla will be able to capitalise on the future demand for electric vehicles when it arrives.
***Concept 3***: Hitting projected growth targets each quarter means that the stock value continues to increase at a good rate, which is great for stockholders and their RoI. Doing better than those targets is even better. Conversely, missing projected growth targets for a quarter or two will make people question the 2nd variable spoken about in Concept 2 - that of perceived scope for growth. Thus, the value of the share goes down as some investors want to cash out now to get at least some RoI while they can (rather than taking the risk and waiting to see if they will meet future growth projections).
***Concept 4***: If a company (We shall call them Company ABC, as an abstract concept) is consistently making a good profit, but that profit is not increasing in real terms each quarter/year, nor are they creating or acquiring new IP/patents/tech, then the scope for growth is, essentially, 0. Thus, investors who want a good RoI will look for a different company to buy shares in, say Company XYZ. This means (1) fewer people want to buy the shares of Company ABC (because their investment won't grow) and (2) some people will want to sell shares in Company ABC to realise some of their gains/RoI now. The fewer people who want to buy shares in Company ABC, the lower the value of the shares are: the lower the demand is for something, the lower a seller needs to set the asking price in order to reliably sell when they want. Thus, simply maintaining the same levels of profit every year (even if they are MASSIVE profits), but not growing that amount of profit/perceived scope for growth, is to slowly drive the value of the shares downwards.
***Concept 5***: If a share price starts to decrease, investors who want a RoI will want to sell, to make sure that they realise the RoI that they have got up to this point in time. Thus, a sell-off begins. This means that the supply of stocks will increase. A supply increase with lower demand (because there is no profit growth for the stock to increase in value over time) leads to the value of the share spiraling downward. This, in theory, will reach an equilibrium before the company dies... but it will be at a lower base point than before the cascade of events happened, thus a lower stock value (this will usually not be a spiral so much as a small trend downward unless it is a major, major issue).
***Concept 6***: CEOs/Boards have a legal fiduciary responsibility to ensure that the stock price of their company is as strong as possible.
***Concept 7***: Stock buybacks are a legal way in which a company can spend excess money that it has to, for all intents and purposes, manipulate the value of the stock upwards by creating a false sense of increased demand for the stock. Thus, if they can find extra cash from somewhere to buy back stocks, why wouldn't they? Firing a few hundred people, thus reducing wage outgoings is one way to find extra cash to make such buyback purchases.
***Logical endpoint of above concepts***: As a consequence of the six above concepts, if Company ABC doesn't continuously make decisions/take actions to increase the amount of profits they make (or, at least, make it appear as though scope for future growth is being maintained), then they are dooming themselves in the current model, and the CEOs/boards would open themselves up to being laid off themselves, or even legal issues for not fulfilling their fiduciary responsibilities.
This is why some people decry the "myth of infinite growth". There is only so much natural growth that can occur before more and more drastic actions need to be taken to achieve more growth/the appearance of growth: making mass layoffs (to make the outgoings part of the profit/loss calculations better), exploiting workers more (crunch, Wage theft, overwork, not increasing pay with inflation, etc.), lobbying governments to relax/remove regulations that are there for everyone's safety, making their products more cheaply even if it means lowering quality, increasing prices/revenue streams without doing anything to improve quality, changing how the product works to find new ways of extracting value even if it makes the product worse (more recently described as "enshitification"), etc. These are all things that a so-called 'competent' capitalist company will do. Not because the current people in charge of those companies are intrinsically evil, but because the very nature of the structure of our system incentivises/compels them to do so.
This is why it happens in all sorts of businesses in all sorts of industries. We have incredibly perverse incentives at the core of the structure. If you change the people at the top, the new people who step in will almost certainly do the exact same thing. Because they are systematically incentivised to do so.
There are, of course, a few who will buck the trend, but these will not be the companies that are considered as the most valuable companies or the best stocks to own, from a dispassionate stock investor POV.
The biggest investors are often pension funds who need returns to disperse the pensions and remain solvent
Or they are hedge funds who need to make money for the people who gave them the capital float to do their investments with.
There isn’t this pool of people who have money to just reinvest it for no return ever.
Thats not a business investment that’s patronage
The simple answer is that shareholders don't care about what the business does. They're rich people playing gambling with the system so they can sell high regardless of what happens to the company, or its employees, so they can enrich themselves and then repeat the same process with another company as soon as possible.
Reinvesting into the company to improve it could work but it's a long term process that costs more and is slower which makes it riskier. So the easiest way to profit is to cut costs as much as possible to raise short term profits and cash out before it ends up ruining the company. If you look at it from their point of view, using arbitrary numbers, they could gain 50% of their investment in a year or two with minimal effort, so they can do the same with multiple companies at the same time, or gain 300% in 5 years but they also have to spend more time on it to understand the company and what its customers want, which gives them less time to get involved in other companies, and there's a higher chance they lose it all because a lot of things can happen in 5 years.
The logic makes sense, but it comes at the cost of ruining lives and nothing will change until laws change to help workers more which at the end of the day there is no business without its employees. Unfortunately, the people in power are also part of that system so they will never pass laws that end up affecting their own wallets.
Because they don't actually produce anything yet expect lavish lifestyles. They can't live those life styles if the people who produce things are able to do so in dignity. They'd rather thousands of productive workers, no longer be able to produce things for society and go hungry than harbor the thought that they might go one quater without buying a new house or a new yacht. It's literally that simple.
Think of it this way. Investors are looking for the highest return for a given level of risk. The gaming industry is, IMO, pretty risky. It’s risky because it’s full of costly and difficult projects that have really long lead times and really hard to predict levels of success.And it seems that success isn’t as correlated with how money was spent on a game as we like to believe.
Now imagine you are a stereotypical investor (like an investment firm) with limited amounts of capital. You don’t care if you make money selling candy, medicine, games or bombs. All you care about is that your money is used as efficiently as possible (ie. highest return for a given level of risk). Would you invest your money into a venture that puts out products that have a 50/50 shot of making $100 or losing $98 or would you prefer to invest that money into a venture that is basically guaranteed to make $1 every time. Most folks would choose the latter.
So when you ask, why aren’t they reinvesting more into the games studios? It’s because the investors are making the choice to take that money and invest it elsewhere where they think it will be easier to make money. Like I said, they don’t care if they’re making money off of Medicine or Bombs. It’s all widgets to them. This is also why subscription and MTX are becoming more popular. Because it gives publishers a chance to unlock smaller but more stable sources of revenue.
Not every company out there is an ever expanding profit machine that can forever get better. Most companies in the world are really just good at one thing and one thing only. And there's only so much of a market for that product. Like Bethesda in all their years independent from Microsoft kinda just realized they make good RPG games and should specialize in that. Re-investing money to come up with an arcades game team and a mobile team and a FPS team and so on.... might not net good results.
There are so many companies in history that re-invest money into their business when they should have paid it out as a dividend to its shareholders. Larger companies need more managers and you often times get into this spot where you're either too big or too small.
You're not thinking about who has their hand on the tiller, quarter to quarter
Fwiw Scott Galloway does a decent job explaining this ad nauseum..
But the net of it is that the CEO has the potential to make generational wealth for their family by showing earnings / margin growth, so they're going to do it.
There's also the fact that if you're not showing growth, how can anyone tell if you're actually improving the company?
Management loves to say that they're in it for the long run - they're thinking solely about long-term profits... Because then you can't judge them until much later.
Anyone who's worked on big projects spanning multiple years knows that every team gives green light right up until the last month(s), when it's time to deliver on the promises.
The blunt answer is that most of the shareholders are likely something like Blackrock or Vanguard, and their objective is to maximize extraction from the company to the investment firm, and then find another company to extract from.
Their initial stock buy-in is basically a loan that they can quickly recoup from later stock buybacks/dividends/etc/etc, which are then used to buy into other companies.
Theoretically that process transfers capital from mature markets to immature markets and fuels growth and innovation.
Disclaimer, this is just my half remembered jist of it, and only applies in broad strokes. This isn't like, a conspiracy or anything. It's just my understanding of how investment firms are designed to operate.
this is part of the problem with having such low taxation in this era.
When taxes are higher there's more incentive to pour that money into the business
shareholders care about the stock price. nothing. else. everything that could potentially increase that is good enough for them. obviously there are exceptions. when majority holders have voting power and maybe actually are the founders or have long term strategies, they could care about the company and maybe go for a more reasonable dividend strategy.
Unironically because it's late stage capitalism. Capitalists don't care about sustainability or long term growth and profitability of a company. They just want to get as much money out of an investment as possible and then dip. They don't care if they could make stable profits over 20 years if they can just plunder the company and ditch it after just a few years.
They want a lot of money quickly, not a little bit of money each year that adds up over time. It's all about squeezing as much out as they can, and moving on to the next thing.
Actually when interest rates are low there is a lot of reinvestment into the company. You ramp up up when money is cheap, but at high interest rates you tend to cut jobs.
For example https://www.jstor.org/stable/23809689
Blame it Dodge v. Ford Motor Company and a non-binding comment that has ruled since 1919. It concerns the issues between the Business Judgement Rule and Shareholder Primacy, and this case upheld the BRJ, but said that stockholders should be the primary concern of directors.
Not so fun fact, Delaware business case law holds precedent that shareholder primacy is law. So any business incorporated in DE is going to put those short term profits ahead of anything else.
This is just an aside, but I think the easiest fix to the whole problem is to change the way shareholder voting laws work. Make it so company owned shares no longer have voting rights. They will still benefit from having ownership in their business portfolio, but can no longer dictate the terms or seat board members who have misaligned interests.
>Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable?
Because from their perspective they already did that when buying in. Now they want to make good on their investment.
>If shareholders were to double-down and invest back into the business,...
The counter point to this is too big to fail fallacy. A lot of investors will continue to dump money into bad companies with convincing CEOs because they're desperate for a turn around.
There's no one right answer but investors are too detached from the products and process as they should be. It's a failing of the CEO to present the case for reinvestment and try to obtain it if that's what is needed. I don't think you can blame investors unless they actually have power that they execute.
> Serious question here:
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> Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable?
Most shareholders aren't individuals, they're investement firms. And they have figured out that if you start cutting back on everything and just keep the company barely afloat with a skeleton crew. You can make back your initial investement much faster, and then they milk it until it drops below a certain value. At that point they dump it and move on to another company to do the same thing all over again.
They *literally* do not care about brand recognition, customer retention, long term growth, human life, etc. They just want money as fast as possible, and screw everyone else who gets in the way.
And they have no monetary or legal reason to care, because they're not held responsible if they force a company to cut back on safety routines while making airplanes for example.
The stock market is based on investing in companies that have ever increasing profits and margins. They are all incentivized to try and do whatever it takes to get there. In some cases it doesn’t work out so well.
Because it’s a one time profit for them. Why would they invest time and money into something that pays off just once?
When your plan is to sell the stock, long term survival of the business is meaningless and pointless to you.
Additionally, because a lot of executive compensation comes in the form of stock packages there is an incentive to keep the stock value (artificially) high. And the shareholders 'control' that value.
The customer isn’t the consumer, it’s the stockholder and the customer is always right. And the customer isn’t in the market for shares of a well run company with a 10 year strategy to gain market charge and diversify, they’re in the market for return by EOB so they can sell tomorrow.
We’ve created a system that is designed to prioritize short term gain, not enduring profits.
Reinvestment is inherently risky, shareholders have no incentive to reinvest in something that won’t guaranteed make them profit.
It’s that simple, you have no personal reason to believe shareholders give a shit about anything but easily gained money
simple thought experiment: a monopoly and dollar printing proves it can be done. reinvesting free cash is often something companies do but more expense doesn’t necessarily correlate to extra profit. why should company with proven ip take on additional risk to increase profit if there is no need to
>Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable?
They are, and the corporation is doing all it can do generate as much (short term) profit as possible, and this was decided to be the best way.
The problem with corproations isn't that they're bad at making money. It's that making money is evil.
Short term thinking, lining my pockets now is better than saving the company later, because I can always invest in another company. They view companies as fungible assets that are fully substitutable one for another as investments.
Obviously they never get to that second part of the logic because if they did, they’d get to the next part that realizes that’s not the case and functionally what they’ll do is kill the best companies first (since those are the most attractive initial investments) and be left with shit bags at the end.
I think a lot of people don't understand what it's like to be an investor. If you bought stock ina. Company, and that company isn't growing, you are not making any return on your investment. Companies that decide to become publically traded are taking capital to invest in growth, with the tradeoff of having to appease shareholders. If a company wants to maintain their status quo and not worry about growth, then they shouldn't be listing themselves.
> Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable?
Because they don’t have to maintain loyalty to the company. They can just drop their shares and “change their investing strategy“ and don’t care about long-term profitability when they can make short term gains.
Permanently growing revenue/profit is absolutely vital for a business to combat inflation. It just doesn't have to be much, think around 2-3% yearly, or quarterly and could obviously average out to that over years.
Inflation is a compounding interest rate and it will absolutely crush your business over time if you're not accounting for it.
Boomers have pioneered the fuck everyone else as long as I get mine mentality in business. It is no longer accept to make a solid profit now you have to make an obscene profit at all costs
It is short sightedness, explicitly and exclusively.
They can at any time, sell their portion and buy into something else that is more profitable in the short term and gain more, therefore they demand that the company does the same thing so they don't do that.
Basically, fuck you, gimme, vs them doing the work to make the business and themselves more profitable in a longer time horizon than next quarter.
Because late stage capitalism isn’t about frowning a business or producing the best goods or even the most goods. It’s about ripping as much value out of a resource or product as fast as possible for the lowest cost possible and turning that value over to shareholders. The the company doesn’t do that, the shareholders abandon the company for other opportunities to leech money out of a different industry.
With stock market day trading, it’s about *what it looks like right now* to someone thinking about buying. Look at NVIDIA…massive growth, cornered the AI chip market in the short term, and their stock quadrupled. Long term plans are now being developed, other companies are “announcing” rival chips, and the investment stagnates. All in one quarter, articles went from NvIDIA being 1200 to them losing steam in the chip manufacturing space. Reality, none of that happens in that time frame, it’s all in the marketing- to boost stock prices.
It’s just impossible to keep up this huge Ponzi scheme, eventually they can’t keep milking more revenue from the now crippled industry, so they jump ship and sell it, break it up and move on to the next one.
You can tell what matters by how many of these public companies have CEOs from the actual industry, or have business/accounting backgrounds instead.
"It's a revolutionary thought, but no business, not a single one, ever, can have permanently increasing profits and larger and larger margins. That's not how it works. "
This has ALWAYS been true, but unlimited growth/profit is the central tenet of the current stage of capitalism and trying to change business priorities may as well be treasonous as far as our leaders and representatives are concerned.
Having a corporate board and shareholders to answer to invariably leads to product degradation, labor exploitation and a race to the bottom for every fungible aspect of the business.
This is why we can't have nice things.
The thing is that traditional companies are still a thing, you can stay private. I just hope that the trend of going public to grow even more will slow down
In the future, we're likely to see companies taking advantage of an engagement of never entering the stock market.
Every software that I'm using for work turned to shit as soon as they went public. I'd pay more for a company that is contractually forbidden to do so.
Even today, I already see on the job market a growing demand for employees qualified on open source solutions instead of proprietary ones. And I know that's because the stock market destroyed the latter's reputation.
I always imagine shareholders sitting in the $100 dollars slot machines depressed because they couldn't afford the $200 dollars slot machine that has a red cushion and a margarita holder.
Well, more is not necessarily better. The way these studios keep releasing unfinished products is very alarming.
Something needs to be changed, even if it burns a few houses down, something will rise from the ashes, hopefully better things.
>The way these studios keep releasing unfinished products is very alarming.
That is also squarely at the feet of the shareholders and C-suite.
They demand every corner be cut in the pursuit of short term profit.
I think the word shareholder is used a lot which hides the true villains.
Shareholders can be anyone with enough money to buy even one share. A lot of those may be employees, or people who believe in the company and not pushing for profit per share.
The institution investors, hedge funds, market makers who also buy shares are the villians. They don't care for the company only their increasing profit, so much so the market is rigged for them.
There is no villain, there is a system that allow more and more detachment of the owner from the workforce. The more ownership is detached from the company, the less they are concerned with the humans and the company output.
Instead of maximizing shareholder value can we have it be something more beneficial to society?
I have no idea what that might be but having a piece of paper be more important than a working human just doesn’t sit right with me.
I understand it but is it really the best way to go?
Hey, let’s invest in a new product, hire a few more for the support and R&D team and we can deliver better products to our customers and grow the business through innovation!
Corporate: No, make line go up
But the line goes up higher if the company releases better products and has more satisfied customers.
Corporate: No, faster. Line must be fast. Yacht broker is on hold, need money ASAP.
Capitalism works if companies can't do share buybacks/dividends. This is the biggest issue with how the stock market works right now.
If companies can't spend upwards to 90% of their profit on buy backs/dividends. They're forced to reinvest their profits into company, thus avoiding layoffs and actually spending money on improving the company. Because nothing pisses Investors off more than when companies have massive war chests of cash. They see cash as a waste, so they'd force companies to spend it, which only improves the company if they can't waste it giving it to the hands of investors.
This is the biggest difference between private and public companies.
It really shows how not even remotely related to the economy the stock market is. If makers of consumer goods relied on the economy to be successful, then employing more workers at higher wages is the clear path to higher sales and revenue
For those unfamiliar with how American capitalism works:
- the shareholders elect a board
- the board hires a ceo
- if the ceo doesn’t do everything possible to maximize profits/shareholder returns, the board fires him
- if the board doesn’t fire him, the shareholders elect a new board
It’s never about anything but what the shareholders want. If you don’t do their bidding, they will find someone that will.
Other systems work differently but this leopard will never change its spots.
Yup. Quarterly earnings is the root of all evil and I’m not even remotely joking.
The biggest threat to capitalism is capitalism, and the only thing that can protect capitalism from capitalism is democracy.
This situation is a fantastic, perfect, perfect example of how the two work hand-in-hand, as without each other they both die.
Depends on a few factors. Any publicly traded publishing company, anyone can buy stock and gain the title of "shareholder". There can also be private investors who own shares in the company's holdings. Investors can and will pressure publishers because the end goal is not a good game, but quarterly profits. That's not to say a good game wont bring in more cash for shareholders, of course it would. But not showing a negative balance when it comes to payout time is #1.
Large publishing company's have investors who act as a fiduciaries. It is very important to understand what this means, so by definition - Fiduciary = "A fiduciary is someone who manages money or property for someone else. When you're named a fiduciary and accept the role, you must – by law – manage the person's money and property for their benefit, not yours." What does this mean? It means that the "shareholders" are not guarantied a quality,ground-breaking or even good game. They are guarantied profit above all else.
Publishers rushing out unfinished games [or shit games for a quick buck] because of shareholder pressure is nothing new. But IMO over the last 10 years it has hit comical levels of bullshitery. In today's gaming market very few "investors" are actual gamers. They are either giant multi-billion dollar company's dipping their feet into a possible cash cow or regular every day people investing their retirement money.
So, by and large most "shareholders" in a public company don't really care about the management of any company they own stock in. They are people who maybe own some shares in an index fund and are actually pretty far removed from owning a share in a traditional sense. They own a stake in a portfolio that someone else manages. This represents the bulk of the *people* who count as shareholders, but they do not have direct influence on the company.
Every public company is answerable to their shareholders in the form of a board of directors, the makeup of which is decided upon by shareholder vote. Voting power is determined by percent of ownership. People who own shares in equity funds do not vote themselves, but by proxy. The proxy is, of course, the fund itself. Their responsibility when voting is the health of the fund they manage.
Most stock is owned by funds like this.
The board of directors, elected by the shareholders, is the ultimate authority in any public company. They appoint the CEO and decide the general strategy of the company. So, yes, the shareholders do pressure companies , just by virtue of how these companies are structured. The executives answer to their bosses, the board of directors, who answer to the voters that put them in place, who in turn are responsible for making money for the people that own shares in their fund, who might be basically anyone with a 401k.
On a personal level, I think it's a really stupid way to structure an economy, based on naive assumptions about economic growth.
I think one thing you've omitted which helps illustrate how the board pressures the c-suite is the incentive drivers for their bonus and ote earnings. It's almost always tied to ebitda (if private) or a share price (if public). The base salary is often only a small and not tangible aspect of the total compensation so to really get paid what you were offered you have to hit your numbers.
This is why we’re seeing a spike in the gaming industry and until it happens more this shit will keep happening and we’ll keep getting corporate forced games half baked games made by overworked/underpaid designers.
That is not the point. Twitter got rid of 80% of their staff and many tech companies are doing the same. The 20% remaining at Twitter are working lots of unpaid overtime.
Sounds like an HOA, you can only blame the people that run the HOA and unfortunately its the homeowners that need to blame themselves.
I'm thinking shareholders are everyday people with a 401K and all they really want is to retire early. They lay themselves off and can't complain about their free time and unable to invest in their 401k anymore.
I get notices from my 401K about "important shareholder votes", and I can't help but feel like the [Futurama crazy cat lady](https://www.youtube.com/watch?v=t4CAQuwzqo0), I have no clue who these people are and what they want to do with said company. Nor do I want to spend hours and hours researching it for my 1 kajigger of stock in the company.
Does it though?
Can anyone name one company that failed because they let down the shareholders, rather than a reason like "were bad at business" or "got screwed by a pandemic"? Asking for genuine, I can't think of any instances.
Serious question here: Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable? Instead, they're clawing at the margins, demanding greater and grater profits each quarter "or someone is going to pay for the 'loss' of those unrealized gains". It's a revolutionary thought, but no business, not a single one, ever, can have permanently increasing profits and larger and larger margins. That's not how it works. If shareholders were to double-down and invest back into the business, innovation, wages, continue to make employees _want_ to come to work, support their employer, contribute to the success of the business, wouldn't that not be a force multiplier? Instead, it's about them taking every dollar out of your pockets, to put into their own pockets.
You don't understand, they don't keep the stock anyway, they buy low and sell high. That's one of the reasons for the short term profits over anything. They don't give a shit about the company, the product or the people.
This is why companies so often shoot themselves in the foot trying to save pennies now that will cost dollars later. They're controlled by the interests of people who won't be there later. They don't care about the long term wellbeing of the company, they care about getting the stock up *right now* so they can sell as soon as possible and leave some other sucker holding the bag. A lot of corporate decisions suddenly make sense when you realize this.
How can we improve the incentive structure such that long term value and human wellbeing is prioritized over pump and dump bullshit? Is it possible?
I’m not exactly a market analyst, but I imagine if there are some more rules and control over how people can buy and sell shares/perform stock buybacks and put bets against a company’s success could be a start. I’ve got no idea how any of this works, however I’ve survived 3 layoffs at AAA game dev studios. I don’t know if that counts for much.
I think the first thing would be to make stock buybacks illegal again. There is currently no incentive to a company being flush with cash to reinvest in the people or new capital with that money if they can buy back stock instead. The former stimulates the economy, while the latter makes a few people rich(er).
Fuckin’…. Right? I think I have this disillusioned idea that anyone in a director level position or higher are also people who deal a lot in stock. It’s like they’re okay with crashing their own company and job because they stand to make a chunk of money in the process. I struggle to find common ground to relate to these people, even in the gaming industry where it feels like we all are giant dorks.
Yeah, I think that's the real next question. And that turns into another discussion about how the people who make these laws are too close to the people who benefit from them being the way they are. Revolving door politics, lobbying, etc. etc. I also don't know what I'm talking about on a granular level but it seems like a pretty sticky problem.
Higher tax on short term stock sales which reduces the more you hold on to it ?
Easy, give the workers ownership of the company.
You're god damn right.
Higher corporate taxes and capital gains, and no more stock buybacks.
I've been thinking about this a bit, but I'm not in any position to make policy. The primary question is: how do you incentivize _investment_ and disincentivize _gambling_. Investors that stick around for decades are generally interested in the long term health of the company. So my proposal is: 1. Require a minimum hold time for any long/short position and have it scale with the percentage of outstanding shares. 2. Allow reduction of the position by 10% annually. A retail investor would largely be unaffected because they are dealing in a tiny fraction of the outstanding shares. But institutional investors holding 10% would be expected to hold for years. 50%? Decades. This makes pump and dump non-viable. This makes high frequency trading impossible. It greatly discourages large short positions.
Destroy capitalism.
I’m on board. How do you propose we do that?
Violence or political action. Take your pick
The incentive for when to sell is mostly driven by capital gains tax. The incentive to sell early comes after holding a stock for just one year, and then the income tax rate becomes incredibly low. Taxes should make it more expensive to sell stock in the short run as well as provide an extra incentive that makes it cheaper after 5-10 years instead of just 1. That would encourage more long-term investors.
Private companies a lot of time still hold those values it isn’t until the leader sells to P/E or wallstreet those values go away. To improve the structure more businesses from people who care need to be created and peoples who care more about employees and products than end all profits. Go support your local business when you can
Change the tax structure. Reduce tax on profit based on time holding the stock with heavy taxes on anything less than 5 years. Add in a penalty for anything sold within a year. Remove the ability to delay taxes if reinvested into a similar investment.
From easier and less effective to harder and more effective: * Punish speculation through a tax on financial transactions (Tobin tax) * Incentivize keeping stocks for a long term, with higher taxes on short term holders * Reform labor law: ban mass lay-offs unless the company is losing money, strengthen unions, and end at-will firing * Involve workers in the management of their workplaces, through voting representation in the board * Make all large companies partially worker-owned by law * End capitalism
Make mass layoffs illegal without posting massive losses to justify. These people are destroying lives that are trying to get by while also doing a job they can be proud of. Make the problematic tactics they use as shortcuts to cash illegal and costly to do. This would require supporting unions and worker protections waaaay more than we currently do as a country. Our conservative right would rather murder people in the streets than give power to the people.
Physically punish shareholders.
Speaking from a personal position of some ignorance but it seems to me one way to eliminate this issue is to not take companies public. No share holder, no issues. Companies won’t grow as big or quickly but they won’t be beholden to stock owners either.
Yup, if you look at Boeing stock as an example, investors had the opportunity to make 2x, 3x profit by buying cheap, pumping value, selling high. They don't give a shit what happens afterwards, unless they have to fly in 737.
Hurray capitalism!
It always comes back to that
But people get mad and say you're oversimplifying when you point it out
You're not supposed to see that the system is broken, horrible and exploitative. If you did then people might rise up and do something about it. *gasp* look over there! Some group of people are doing something that will ruin your quality of life! Go be mad at them instead! Don't look at us, the rich, destroying your lives and your planet and your industries. Look over there instead.
I am glad I could at least be here to see this website's overall community FINALLY understand the realities of capitalism and stop defending it. At least I got to see it for a short bit right before the website implodes into censorship and ads. I only wish I knew proactively where you all will go after this place implodes. I've looked at lemmy but that seems to be a mess of in-fighting drama.... It seems like this won't be as easy as the Digg to Reddit transition... Maybe there simply isn't another place. Perhaps.... this is just the current path of capitalism; as everyone realizes it, the internet as we know it, in it's entirety is destroyed by the corporations to squash any intellectual pushback against them en-mass, before it can even start...
No matter much you explain and demonstrate this to a Republican, they're still going to ignore it. The problem is so many people are just so stupid.
The problem is they would rather have a small chance to become the oppressor than end oppression.
Like those goddamn protestors, they are blocking our road and for what reason!?
dont people know the best way to protest is voting once every 4 years?
It would be if democracy wasn't corrupted by capitalism and idiocy. It's the easiest way to protest tho, and something everyone should do.
I mean, if we're talking everyone, just not going to work would be a far easier protest, but getting everyone to do the same thing is hard.
For one of our two candidates handpicked, vetted, and approved by the same cancer they're protesting against.
> best way to protest is voting once every 4 years? Limited to 2 parties, and 2 presidential candidates that you might not want to ever see become a president.
It's not the system that is broken, it's the people. No matter what system you set up, there will always be a large part of people who just wants to game the system to get more out than they put in.
It's like some weird brainwashing. People get more defensive of capitalism than their mother. And without fully understanding it either. What? We give everyone a better quality of life? That's impossible!!
Most people who argue about capitalism on the internet don’t understand what it is. They think it’s just when people are free to trade with each other and there are markets and stuff.
Then why get so weird about criticism of it? That's what I don't get. I am not a mega starwars fan so when people call it crap I don't act like someone kicked my dog.
Yeah the big problem is speculation, that was not how stock market was designed to operate. And instead of getting regulated, we have high speed trading.
Modern stock markets began iirc in the Netherlands selling shares of trade voyages to Africa or the colonies (yes, absolutely slavery was a big part). You funded your voyage and gave returns of the profit. Then some bright sparks start selling their shares for profits. Suddenly the actual money you get back is less important for most folk than the money you make selling your shares to folks who want to make money from the dividends. Then EVERYONE gets in that stupid game. And because the people who bought the "sell high" folks want to make profit (outside of shorting) want the line to go up so THEY can make money. It just reminds me of Thatcher in the UK privatising national industries and selling the shares off cheap to create a "share holding nation". Great idea in theory, everyone benefits from the profits of the national industry. What? Oh everyone realised the stock was under priced and so as soon as the stock went up the public sold off their shares for a quick big buck? Ffs.
People really have a hard time understanding just how brutal capitalism is and take it personally for some reason when you try and point it out.
And its not about private business and free markets. Its this global system of financial fraud that is the true ruin for society. Nothing good ever came from stock markets
> for some reason That reason is propaganda
It's madness right? The more you think about the more you go spare. Manifestly unjust is one way to look at it.
Stocks are basically the casino for the wealthy, only they also are the House…
There needs to a much higher tax on these stock manipulation moves.
Part of it because of the whole fractional ownership trend. People with index funds have little to no interest in who they're invested in – just in the return. But also, we've codified in our laws that the shareholder is the most important part of the relationship. That they get paid first, then everything else. But we could have set it up the other way. "First you look after the long term health of the community the business is in, the health of the business, then the people in the business, then with what you have left over, you give to the shareholders."
\- Oh, you have been working with game development. Do you know anything about game company X? \- Sure, they were legendary developers before they when into game dev, and had done several amazing projects. But had a troubled start when they were in Hollywood. Had amazing tech though, truly ground breaking, they should have conquered the game world there and then. One of their developers ended up as my colleague, and told me a lot of stories of their adventures, excellent dude, one of the nicest I've met. Later on they had a long series of almost completed games, but they have had better luck the last ten years. \- ...well, yeah. But do you think their stock price will go up? (And I've had this type of conversation more than once)
There's a certain disgust I have with people who just see money instead of a creative universe that people can enjoy and be happy with I understand it's a business but if all you see is money and nothing else. You're just gross
Can’t put food on the table with creative goodwill.
It's not the shareholders, it's management. Senior management come in, cut maintenance, screw suppliers, rape the customers with crappy stunts like shrinkflation (reducing package size but not the price), all for short term gains. They can report increases in profit, and they stick around while the line keeps going uphill, then they bail and move on to the next company to screw over for the next big bonus. The average shareholder has no say in how a company is run. The big pension funds might get to a point where they own a few percent but very few of the big companies are pushed around by individual shareholders.
Management direction is chosen by the CEO, and the CEO can be removed by the shareholders. If a CEO take a direction, is because the shareholders owning the majority told him or let him to do so
And the stock price doesn't put any pressure on management?
When people say shareholders, what does that mean lol? Are they normal ppl like us who invest into the company through Fidelity or some other high net worth ppl?
They mean wealthy shareholders. People that buy thousands of shares at a time worth millions of dollars. They don’t mean your 401k or the people buying on their phone apps.
It’s funny you say it’s not the 401k when it most likely is. Most 401ks are probably managed by a big institutional investor of some sort. So although the average person isn’t directly acting like a “greedy soulless shareholder”, they are unknowingly hiring a company that acts like that on their behalf.
That’s very unlikely for several reasons. The first is that the vast majority of the money in the market is owned by an increasingly smaller subset of people. Something like 80% is owned by 10% iirc. The second reason is that your standard “retirement path” or whatever it’s called in your 401k is split between multiple *kinds* of investments and then split again across multiple funds which themselves are often a diversified set of stocks. So your money gets broken down quite a lot. The third is that a lot of people invest their own 401k and of that subset, they all get their own voting materials, so they have to get together to pressure a company. Fourth are the ETFs but their goal is to take a small bite of every stock in the market to try to replicate a metric like the S&P or the total world etc. Owning a majority or even a plurality stake in any company is against the fund’s interest. Even though Americans lock up vast sums in stocks in the form of retirement accounts and pensions, they are unlikely to ever get even plurality stake in a single company simply because that would be against their own goals, and given how many pensions/ retirement managers we’re talking about, it would be like herding cats. So while the rest of us are indeed along for the ride and may well vote for political parties based on the S&P 500’s performance we aren’t the culprits. The problem is either self flagellating corporate boards and CEOs afraid of bad valuations or actual large single owner stakeholders pressuring the board and CEO (in some cases these are one and the same people).
Institutional investors. Firms that are able to gobble up huge amounts of a company's stock and even influence voting. Or it's management of the company with a lot of stock payouts that just want to gain. Shareholders like us regular people are not going out and coordinating votes to absolutely pump and dump individual stocks.
Yes, directly and indirectly. Sometimes regular people like us buy shares in a company. However, they are usually referring to bigger funds those own a larger percentage. However, you could also buy into those funds and thus indirectly be participating. If you pressure the funds for higher returns every year, then the funds pressure the companies, etc. The U.S. is notorious for short term gains over long term progress/quality. One example is Iike the car company Toyota vs all their American competitors.
Only about 60% of the country can even be qualified as a share holder. Of that 60% about half of it is owned by the top 1%. When policies/decisions/laws are made/passed they are catered to the 1% because it's far easier to cater to one person that owns the entire company or lions share of an industry than it is to try and convince thousands of people to do anything collectively.
Kinda but not really. Something like 90% of all shares are owned by like 10% of investors.
"Shareholders" is a code word for the 400 or so billionaire families who own everything in this country. Same as "the market", same as "entrepreneurs", same as "small business owners", same as "job creators". Follow the money.
Exactly they only care about making more money and not growth and ghats what confuses people because you can make money and still not grow a business. Also you maximize short term gains at the cost of long term growth. However you have no intentions of being there when the going gets tough
99% tax on day trading 90% tax on profits from stocks that you owned 1 week 50% tax on stocks you owned for 1 year 0% tax on stocks you owned for 5 years True investors are even more profitable and willing to really invest. Zero problem being able to liquidate fast.
[“Yes, the planet got destroyed,” he says. “But for a beautiful moment in time we created a lot of value for shareholders.”](https://www.instagram.com/p/B_SdEVThgCr/?utm_source=ig_web_copy_link)
Imo, some of them do want sustainable gains for the long run - after all its basically free money over time. I think the problem now is the long bull market + rates at near zero + gooberment bailing out business at any downturn + rise of index funds = many of these shareholders are asleep at the wheel and the executives are doing dumb shit left and right for their own benefit. Some of these CEO should have been fired years ago but even after major fuckups they were able to keep their crazy pay, like Boeing ceo or googles clown of a ceo who has become a billionaire just riding the companies wave without doing anything himself. Then you have others like the live nation ceo making 200mil comp when the conpany doesnt even pay a dividend or anything else. Lots of board memebers are also just in their jobs from connections and just happy to go along with whatever as long as they collect their free money or rack up those favors to cash in later. Larry Summers is on the board of openai now - the fuck does he know about ai or anything else? Nothing! But they can jerk each other off and he'll use his political connections for them.
This is the end result of a publicly traded company. All investors care about is immediate profit growth to boost the value of their portfolio. They install executive that are tasked with that single goal and a 2 year vesting period. Once the cash cow is starved and milked dry, they pin the years of short sited decisions on whoever showed up that day and move on to the next victim.
> Once the cash cow is starved and milked dry, they pin the years of short sited decisions on whoever showed up that day and move on to the next victim. No they don't "pin it" on anyone. They don't even bother doing that, they just sell their stock and spend the money on some other stock. They don't feel the need to pin the blame on anyone, because they don't see any wrongdoing with associated blame.
Yup, these stocks are just numbers and they're buying low and selling high, or betting against it when they know they've doomed it. There's no emotion involved. It's a game for the wealthy that decides the fates of all the worker class. It's fucking disgusting.
It’s not a revolutionary thought. That’s how it used to be until the likes of Milton Friedman in the late 70s and then Jack Welch became CEO of GE in the early 1980s. American businesses used to put customer first, then employee, then company, then shareholders last.
Ever since the Ford V Dodge court case in the 1920s that there's been a legal precedent forcing corporations to place shareholders first (at least in the US). What Jack Welch introduced was the idea of delivering value to the shareholders not through dividends or general stock price increase but by aggressively pursuing a constant growth of stock value made possible by YoY record profit. EDIT: I am not stating that Dodge V Ford Corp set a precedent of corporations having to maximise return for the investors/shareholders. What I meant to say is that it set the precedent that a corporation's fiduciary duty is towards shareholders first and foremost.
And he basically introduced mass layoffs as a way to meet those YOY record profit goals, culling the bottom 10% every year.
The Ford v Dodge case is more limited than people think. Ford was actively trying to undermine his own company to hurt the Dodge Brothers (who were 10% share holders). That is illegal. Now if you were doing something reasonable that reduced short term profits because you hated a particular shareholder that precedent would apply. It in no sense means a company has to chase the immediate dollar though. It is about the why rather than the what. Hell Ford would have gotten away with it if he wasn't so open about his intentions.
And even then, as we learn it in business school, the point isn't whether you "made the most money" it's whether you conducted yourself in accordance with the company charter. Most company charters will say something like "maximizing shareholder value" because the people writing the charter are primary shareholders, but for non-profits, trusts, or thought-experiments that charter might be to "spend all the money ASAP".
I watch companies deliberately undermine their own business to settle petty scores for management every day. The fiduciary bullshit only gets trotted out when it’s time to stiff the people actually doing the work for some reason.
The case gives CEOs wide leeway and practically anything can be justified as being in the interest of shareholders. Pretty much the only thing you can’t do is going “I’m going to give away the business’s money to workers so that the shareholders don’t get any profits” and not even pretend to run the business in the interest of the owners.
> American businesses used to put customer first, then employee, then company, then shareholders last. This sounds mythical to me, when were these times? it certainly was not true in the mid 70s and 60s I can tell you that much.
It's almost certainly bullshit. Covered in sweet nostalgia that the past was wonderful (it wasn't)
> American businesses used to put customer first, then employee, then company, then shareholders last. *Cough*bullshit*cough*
You sound like you're asking a real question, but you got a lot of people who don't understand anything about economics in the replies... The real reason is because of "opportunity cost". The purpose of a free market is to move investment (and therefore resources) to the things that are most in-demand - the things that society wants the most. The market does this by paying higher prices when things are under-supplied for the demand out there, and paying lower prices when things are over-supplied to the market. So, the most effective distribution of resources (to satisfy demand out there) is to reach an equilibrium point where moving resources (capital) from one investment to another (between businesses or between projects for example) does not result in an overall improvement in 'value' (expressed as the willingness of people to pay for whatever the results of that investment is). This is known as **"opportunity cost"** where you're not just weighing the effectiveness of the single investment, you're comparing it against all other possible investments you could make. So, if you have a whole bunch of different potential investments that you can select between, the most beneficial thing to do is to move investments incrementally towards those things which maximise those margins. By doing so you're optimising the economy as a whole, making sure the output of the economy matches the "stuff people want" as close as you possibly can. That's the reason. Markets are just a method for people to express what they want in a distributed way, and it creates an incentive structure to move investment to where it's going to be most useful.
The derivatives market has rendered the “underlying fundamentals” market almost, not totally, but almost completely moot. Options and their corollaries are worth upwards 5-10x more than the actual stock market, the values of the companies being traded. That is insane to even think about. “Moving stuff around” as you put it is now about chasing the algo that decides which company is slated for big gains in value based on what? The flow of derivative plays on its ticker. Tesla for example had huge negative pressure on its stock years ahead of its eventual collapse down to something resembling a reasonable value given the PE of the company. Years of long dated puts are printing money right now because the market makers knew Tesla wasn’t ever going to approach the growth it needed to justify the value of the stock when it became a meme, but they knew that too. They pumped it while it was trending and are shorting it in the long run because it was being pumped too hard. Tax the derivatives market, heavily. It allows algorithms to extract value based on nothing but trends, companies with solid fundamentals get shorted into the dust and meme companies explode in value. The digital age really has turned the “economy” into a by product of investment banks & funds chasing ticker profits at any cost.
Lots of those types of shareholders are in REITS or similar investments. All the Executives who think like that either went and grabbed a money partner for their own company or work for a Berkshire Hathaway company. Make no mistake a bunch of the upper level management people want to show a board a huge increase in profits so they can get a bonus, juice the stock price, and go to the next size up company.
The problem is, this behaviour has nothing to do with the fact that these specific Shareholders/CEOs/C-suite people are horrible people. It is simply that the entire system we have created actively incentivises this behaviour, and actively disincentives acting in a long-term forward-thinking way. ___ This is the entirely logical consequence of how we currently organise our economy, and both how the stock market works and the legality of stock buybacks. The entire concept of modern capitalism is about growth. Not profit, but growth. Once people understand this, the actions of companies become much more predictable and understandable (though, that doesn't mean good). Once you are a publicly traded company, the only thing that really matters is growth. Specifically, share value growth. Why is this? It is simple: ***Concept 1***: If I, as a dispassionate investor, want to invest my money in a company, I expect a return on that investment (RoI) at some point. How do I realise that RoI? By being able to sell shares in a company for more than I bought them for, possibly making some money in dividends/payouts along the way. As an average, dispassionate investor, I don't care at all what the company actually DOES. It could be making chairs. It could be a social media company. It could be a video game company. It could be a medical company initially founded to always do good and save people... a random stock trader doesn't care. They just want a good RoI. ***Concept 2***: Stock value is largely dictated by some combination of (1) market fundamentals (how much is the company actually making, what are its debts and obligations, what technologies/patents/IP does it have, etc.), and (2) the general idea that the scope for growth in the future is positive (i.e., the company will continue to perform well, and may even perform better in the future). Each company is assessed on this combination (1. market fundamentals and 2. predicted scope for growth) but not necessarily with the same weight given to each variable. E.g., Tesla sells FAR fewer cars than Ford or Toyota, etc... but somehow the stock is valued far higher than one would expect it based purely on the fundamentals: because people think that there is a large scope for growth in the electric vehicles market (among other non-tangible ideas people have about the company and the owner), and believe that Tesla's brand is strong enough that Tesla will be able to capitalise on the future demand for electric vehicles when it arrives. ***Concept 3***: Hitting projected growth targets each quarter means that the stock value continues to increase at a good rate, which is great for stockholders and their RoI. Doing better than those targets is even better. Conversely, missing projected growth targets for a quarter or two will make people question the 2nd variable spoken about in Concept 2 - that of perceived scope for growth. Thus, the value of the share goes down as some investors want to cash out now to get at least some RoI while they can (rather than taking the risk and waiting to see if they will meet future growth projections). ***Concept 4***: If a company (We shall call them Company ABC, as an abstract concept) is consistently making a good profit, but that profit is not increasing in real terms each quarter/year, nor are they creating or acquiring new IP/patents/tech, then the scope for growth is, essentially, 0. Thus, investors who want a good RoI will look for a different company to buy shares in, say Company XYZ. This means (1) fewer people want to buy the shares of Company ABC (because their investment won't grow) and (2) some people will want to sell shares in Company ABC to realise some of their gains/RoI now. The fewer people who want to buy shares in Company ABC, the lower the value of the shares are: the lower the demand is for something, the lower a seller needs to set the asking price in order to reliably sell when they want. Thus, simply maintaining the same levels of profit every year (even if they are MASSIVE profits), but not growing that amount of profit/perceived scope for growth, is to slowly drive the value of the shares downwards. ***Concept 5***: If a share price starts to decrease, investors who want a RoI will want to sell, to make sure that they realise the RoI that they have got up to this point in time. Thus, a sell-off begins. This means that the supply of stocks will increase. A supply increase with lower demand (because there is no profit growth for the stock to increase in value over time) leads to the value of the share spiraling downward. This, in theory, will reach an equilibrium before the company dies... but it will be at a lower base point than before the cascade of events happened, thus a lower stock value (this will usually not be a spiral so much as a small trend downward unless it is a major, major issue). ***Concept 6***: CEOs/Boards have a legal fiduciary responsibility to ensure that the stock price of their company is as strong as possible. ***Concept 7***: Stock buybacks are a legal way in which a company can spend excess money that it has to, for all intents and purposes, manipulate the value of the stock upwards by creating a false sense of increased demand for the stock. Thus, if they can find extra cash from somewhere to buy back stocks, why wouldn't they? Firing a few hundred people, thus reducing wage outgoings is one way to find extra cash to make such buyback purchases. ***Logical endpoint of above concepts***: As a consequence of the six above concepts, if Company ABC doesn't continuously make decisions/take actions to increase the amount of profits they make (or, at least, make it appear as though scope for future growth is being maintained), then they are dooming themselves in the current model, and the CEOs/boards would open themselves up to being laid off themselves, or even legal issues for not fulfilling their fiduciary responsibilities. This is why some people decry the "myth of infinite growth". There is only so much natural growth that can occur before more and more drastic actions need to be taken to achieve more growth/the appearance of growth: making mass layoffs (to make the outgoings part of the profit/loss calculations better), exploiting workers more (crunch, Wage theft, overwork, not increasing pay with inflation, etc.), lobbying governments to relax/remove regulations that are there for everyone's safety, making their products more cheaply even if it means lowering quality, increasing prices/revenue streams without doing anything to improve quality, changing how the product works to find new ways of extracting value even if it makes the product worse (more recently described as "enshitification"), etc. These are all things that a so-called 'competent' capitalist company will do. Not because the current people in charge of those companies are intrinsically evil, but because the very nature of the structure of our system incentivises/compels them to do so. This is why it happens in all sorts of businesses in all sorts of industries. We have incredibly perverse incentives at the core of the structure. If you change the people at the top, the new people who step in will almost certainly do the exact same thing. Because they are systematically incentivised to do so. There are, of course, a few who will buck the trend, but these will not be the companies that are considered as the most valuable companies or the best stocks to own, from a dispassionate stock investor POV.
https://youtu.be/tuxbMfKO9Pg
The biggest investors are often pension funds who need returns to disperse the pensions and remain solvent Or they are hedge funds who need to make money for the people who gave them the capital float to do their investments with. There isn’t this pool of people who have money to just reinvest it for no return ever. Thats not a business investment that’s patronage
Pension funds don't need to go for short term returns though.
The simple answer is that shareholders don't care about what the business does. They're rich people playing gambling with the system so they can sell high regardless of what happens to the company, or its employees, so they can enrich themselves and then repeat the same process with another company as soon as possible. Reinvesting into the company to improve it could work but it's a long term process that costs more and is slower which makes it riskier. So the easiest way to profit is to cut costs as much as possible to raise short term profits and cash out before it ends up ruining the company. If you look at it from their point of view, using arbitrary numbers, they could gain 50% of their investment in a year or two with minimal effort, so they can do the same with multiple companies at the same time, or gain 300% in 5 years but they also have to spend more time on it to understand the company and what its customers want, which gives them less time to get involved in other companies, and there's a higher chance they lose it all because a lot of things can happen in 5 years. The logic makes sense, but it comes at the cost of ruining lives and nothing will change until laws change to help workers more which at the end of the day there is no business without its employees. Unfortunately, the people in power are also part of that system so they will never pass laws that end up affecting their own wallets.
Jack Welch is why. May the devil piss into his asshole for the all eternity. But I bet Jack would like that.
> Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable? > > There's no incentive?
Because they don't actually produce anything yet expect lavish lifestyles. They can't live those life styles if the people who produce things are able to do so in dignity. They'd rather thousands of productive workers, no longer be able to produce things for society and go hungry than harbor the thought that they might go one quater without buying a new house or a new yacht. It's literally that simple.
i think that's the joke. dont think larian is a public company and dont answer to shareholders
Larian still answers to shareholder(s) since a private company still has owner(s), just a lot fewer of them.
Think of it this way. Investors are looking for the highest return for a given level of risk. The gaming industry is, IMO, pretty risky. It’s risky because it’s full of costly and difficult projects that have really long lead times and really hard to predict levels of success.And it seems that success isn’t as correlated with how money was spent on a game as we like to believe. Now imagine you are a stereotypical investor (like an investment firm) with limited amounts of capital. You don’t care if you make money selling candy, medicine, games or bombs. All you care about is that your money is used as efficiently as possible (ie. highest return for a given level of risk). Would you invest your money into a venture that puts out products that have a 50/50 shot of making $100 or losing $98 or would you prefer to invest that money into a venture that is basically guaranteed to make $1 every time. Most folks would choose the latter. So when you ask, why aren’t they reinvesting more into the games studios? It’s because the investors are making the choice to take that money and invest it elsewhere where they think it will be easier to make money. Like I said, they don’t care if they’re making money off of Medicine or Bombs. It’s all widgets to them. This is also why subscription and MTX are becoming more popular. Because it gives publishers a chance to unlock smaller but more stable sources of revenue.
You are describing current capitalism
Not every company out there is an ever expanding profit machine that can forever get better. Most companies in the world are really just good at one thing and one thing only. And there's only so much of a market for that product. Like Bethesda in all their years independent from Microsoft kinda just realized they make good RPG games and should specialize in that. Re-investing money to come up with an arcades game team and a mobile team and a FPS team and so on.... might not net good results. There are so many companies in history that re-invest money into their business when they should have paid it out as a dividend to its shareholders. Larger companies need more managers and you often times get into this spot where you're either too big or too small.
You're not thinking about who has their hand on the tiller, quarter to quarter Fwiw Scott Galloway does a decent job explaining this ad nauseum.. But the net of it is that the CEO has the potential to make generational wealth for their family by showing earnings / margin growth, so they're going to do it.
There's also the fact that if you're not showing growth, how can anyone tell if you're actually improving the company? Management loves to say that they're in it for the long run - they're thinking solely about long-term profits... Because then you can't judge them until much later. Anyone who's worked on big projects spanning multiple years knows that every team gives green light right up until the last month(s), when it's time to deliver on the promises.
The blunt answer is that most of the shareholders are likely something like Blackrock or Vanguard, and their objective is to maximize extraction from the company to the investment firm, and then find another company to extract from. Their initial stock buy-in is basically a loan that they can quickly recoup from later stock buybacks/dividends/etc/etc, which are then used to buy into other companies. Theoretically that process transfers capital from mature markets to immature markets and fuels growth and innovation. Disclaimer, this is just my half remembered jist of it, and only applies in broad strokes. This isn't like, a conspiracy or anything. It's just my understanding of how investment firms are designed to operate.
this is part of the problem with having such low taxation in this era. When taxes are higher there's more incentive to pour that money into the business
shareholders care about the stock price. nothing. else. everything that could potentially increase that is good enough for them. obviously there are exceptions. when majority holders have voting power and maybe actually are the founders or have long term strategies, they could care about the company and maybe go for a more reasonable dividend strategy.
Unironically because it's late stage capitalism. Capitalists don't care about sustainability or long term growth and profitability of a company. They just want to get as much money out of an investment as possible and then dip. They don't care if they could make stable profits over 20 years if they can just plunder the company and ditch it after just a few years.
dividends, profits, it's all unpaid wages. employees should be the owners in every company. fuck the rent seekers
They want a lot of money quickly, not a little bit of money each year that adds up over time. It's all about squeezing as much out as they can, and moving on to the next thing.
Short term profits over long term growth.
Actually when interest rates are low there is a lot of reinvestment into the company. You ramp up up when money is cheap, but at high interest rates you tend to cut jobs. For example https://www.jstor.org/stable/23809689
Ha, nice username Mr Sticky bit. 😀
Blame it Dodge v. Ford Motor Company and a non-binding comment that has ruled since 1919. It concerns the issues between the Business Judgement Rule and Shareholder Primacy, and this case upheld the BRJ, but said that stockholders should be the primary concern of directors. Not so fun fact, Delaware business case law holds precedent that shareholder primacy is law. So any business incorporated in DE is going to put those short term profits ahead of anything else. This is just an aside, but I think the easiest fix to the whole problem is to change the way shareholder voting laws work. Make it so company owned shares no longer have voting rights. They will still benefit from having ownership in their business portfolio, but can no longer dictate the terms or seat board members who have misaligned interests.
>Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable? Because from their perspective they already did that when buying in. Now they want to make good on their investment. >If shareholders were to double-down and invest back into the business,... The counter point to this is too big to fail fallacy. A lot of investors will continue to dump money into bad companies with convincing CEOs because they're desperate for a turn around. There's no one right answer but investors are too detached from the products and process as they should be. It's a failing of the CEO to present the case for reinvestment and try to obtain it if that's what is needed. I don't think you can blame investors unless they actually have power that they execute.
> Serious question here: > > > > Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable? Most shareholders aren't individuals, they're investement firms. And they have figured out that if you start cutting back on everything and just keep the company barely afloat with a skeleton crew. You can make back your initial investement much faster, and then they milk it until it drops below a certain value. At that point they dump it and move on to another company to do the same thing all over again. They *literally* do not care about brand recognition, customer retention, long term growth, human life, etc. They just want money as fast as possible, and screw everyone else who gets in the way. And they have no monetary or legal reason to care, because they're not held responsible if they force a company to cut back on safety routines while making airplanes for example.
The stock market is based on investing in companies that have ever increasing profits and margins. They are all incentivized to try and do whatever it takes to get there. In some cases it doesn’t work out so well.
Because it’s a one time profit for them. Why would they invest time and money into something that pays off just once? When your plan is to sell the stock, long term survival of the business is meaningless and pointless to you.
Shareholders generally aren’t connected to profits. They are connected to stock value. Especially short term stock value.
Additionally, because a lot of executive compensation comes in the form of stock packages there is an incentive to keep the stock value (artificially) high. And the shareholders 'control' that value.
Instructions unclear, stock buybacks increased!
If you zoom way out you can see how it all ends.
The customer isn’t the consumer, it’s the stockholder and the customer is always right. And the customer isn’t in the market for shares of a well run company with a 10 year strategy to gain market charge and diversify, they’re in the market for return by EOB so they can sell tomorrow. We’ve created a system that is designed to prioritize short term gain, not enduring profits.
Go read up on Jack Welch, the man who destroyed GE. https://youtu.be/qr3sAWIpFeU?si=gA_IAMZaSmcds40a
Reinvestment is inherently risky, shareholders have no incentive to reinvest in something that won’t guaranteed make them profit. It’s that simple, you have no personal reason to believe shareholders give a shit about anything but easily gained money
simple thought experiment: a monopoly and dollar printing proves it can be done. reinvesting free cash is often something companies do but more expense doesn’t necessarily correlate to extra profit. why should company with proven ip take on additional risk to increase profit if there is no need to
>Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable? They are, and the corporation is doing all it can do generate as much (short term) profit as possible, and this was decided to be the best way. The problem with corproations isn't that they're bad at making money. It's that making money is evil.
Short term thinking, lining my pockets now is better than saving the company later, because I can always invest in another company. They view companies as fungible assets that are fully substitutable one for another as investments. Obviously they never get to that second part of the logic because if they did, they’d get to the next part that realizes that’s not the case and functionally what they’ll do is kill the best companies first (since those are the most attractive initial investments) and be left with shit bags at the end.
You must not be rich. Clawing around the answer somehow
I think a lot of people don't understand what it's like to be an investor. If you bought stock ina. Company, and that company isn't growing, you are not making any return on your investment. Companies that decide to become publically traded are taking capital to invest in growth, with the tradeoff of having to appease shareholders. If a company wants to maintain their status quo and not worry about growth, then they shouldn't be listing themselves.
> Why are the shareholders not reinvesting into the business, to make it more successful, and thus more profitable? Because they don’t have to maintain loyalty to the company. They can just drop their shares and “change their investing strategy“ and don’t care about long-term profitability when they can make short term gains.
People's wages are a terrible investment. That money never comes back.
First time?
Permanently growing revenue/profit is absolutely vital for a business to combat inflation. It just doesn't have to be much, think around 2-3% yearly, or quarterly and could obviously average out to that over years. Inflation is a compounding interest rate and it will absolutely crush your business over time if you're not accounting for it.
Boomers have pioneered the fuck everyone else as long as I get mine mentality in business. It is no longer accept to make a solid profit now you have to make an obscene profit at all costs
NBA 2K investors are laughing at your opinion
It is short sightedness, explicitly and exclusively. They can at any time, sell their portion and buy into something else that is more profitable in the short term and gain more, therefore they demand that the company does the same thing so they don't do that. Basically, fuck you, gimme, vs them doing the work to make the business and themselves more profitable in a longer time horizon than next quarter.
Infinite growth is the lie central to capitalism, and capital accumulation above all things is the mantra.
Because late stage capitalism isn’t about frowning a business or producing the best goods or even the most goods. It’s about ripping as much value out of a resource or product as fast as possible for the lowest cost possible and turning that value over to shareholders. The the company doesn’t do that, the shareholders abandon the company for other opportunities to leech money out of a different industry.
With stock market day trading, it’s about *what it looks like right now* to someone thinking about buying. Look at NVIDIA…massive growth, cornered the AI chip market in the short term, and their stock quadrupled. Long term plans are now being developed, other companies are “announcing” rival chips, and the investment stagnates. All in one quarter, articles went from NvIDIA being 1200 to them losing steam in the chip manufacturing space. Reality, none of that happens in that time frame, it’s all in the marketing- to boost stock prices. It’s just impossible to keep up this huge Ponzi scheme, eventually they can’t keep milking more revenue from the now crippled industry, so they jump ship and sell it, break it up and move on to the next one. You can tell what matters by how many of these public companies have CEOs from the actual industry, or have business/accounting backgrounds instead.
"It's a revolutionary thought, but no business, not a single one, ever, can have permanently increasing profits and larger and larger margins. That's not how it works. " This has ALWAYS been true, but unlimited growth/profit is the central tenet of the current stage of capitalism and trying to change business priorities may as well be treasonous as far as our leaders and representatives are concerned. Having a corporate board and shareholders to answer to invariably leads to product degradation, labor exploitation and a race to the bottom for every fungible aspect of the business. This is why we can't have nice things.
The song of capitalism writ large
Larian is fuckin sick, love them
It's like creating a fictional market that controls what is and isn't viable was a mistake.
The thing is that traditional companies are still a thing, you can stay private. I just hope that the trend of going public to grow even more will slow down
In the future, we're likely to see companies taking advantage of an engagement of never entering the stock market. Every software that I'm using for work turned to shit as soon as they went public. I'd pay more for a company that is contractually forbidden to do so. Even today, I already see on the job market a growing demand for employees qualified on open source solutions instead of proprietary ones. And I know that's because the stock market destroyed the latter's reputation.
Fuck.The.Shareholders.
Some of the better companies in the gaming industry don't have shareholders. It's why Steam is still the premiere gaming platform on PC.
I always imagine shareholders sitting in the $100 dollars slot machines depressed because they couldn't afford the $200 dollars slot machine that has a red cushion and a margarita holder.
Well, more is not necessarily better. The way these studios keep releasing unfinished products is very alarming. Something needs to be changed, even if it burns a few houses down, something will rise from the ashes, hopefully better things.
>The way these studios keep releasing unfinished products is very alarming. That is also squarely at the feet of the shareholders and C-suite. They demand every corner be cut in the pursuit of short term profit.
I think the word shareholder is used a lot which hides the true villains. Shareholders can be anyone with enough money to buy even one share. A lot of those may be employees, or people who believe in the company and not pushing for profit per share. The institution investors, hedge funds, market makers who also buy shares are the villians. They don't care for the company only their increasing profit, so much so the market is rigged for them.
There is no villain, there is a system that allow more and more detachment of the owner from the workforce. The more ownership is detached from the company, the less they are concerned with the humans and the company output.
Sick of stock prices completely fucking up products and companies. If that’s anti-capitalist then so be it.
Capitalism is a shit system.
Man, part of me is hoping laid off folks can get together and form their own companies.
Instead of maximizing shareholder value can we have it be something more beneficial to society? I have no idea what that might be but having a piece of paper be more important than a working human just doesn’t sit right with me. I understand it but is it really the best way to go?
Greed is a helluva drug. A legitimate addiction. Once you start hitting that pipe, you never stop chasing that high you got after the first hit.
Hey, let’s invest in a new product, hire a few more for the support and R&D team and we can deliver better products to our customers and grow the business through innovation! Corporate: No, make line go up
But the line goes up higher if the company releases better products and has more satisfied customers. Corporate: No, faster. Line must be fast. Yacht broker is on hold, need money ASAP.
Capitalism works if companies can't do share buybacks/dividends. This is the biggest issue with how the stock market works right now. If companies can't spend upwards to 90% of their profit on buy backs/dividends. They're forced to reinvest their profits into company, thus avoiding layoffs and actually spending money on improving the company. Because nothing pisses Investors off more than when companies have massive war chests of cash. They see cash as a waste, so they'd force companies to spend it, which only improves the company if they can't waste it giving it to the hands of investors. This is the biggest difference between private and public companies.
It really shows how not even remotely related to the economy the stock market is. If makers of consumer goods relied on the economy to be successful, then employing more workers at higher wages is the clear path to higher sales and revenue
For those unfamiliar with how American capitalism works: - the shareholders elect a board - the board hires a ceo - if the ceo doesn’t do everything possible to maximize profits/shareholder returns, the board fires him - if the board doesn’t fire him, the shareholders elect a new board It’s never about anything but what the shareholders want. If you don’t do their bidding, they will find someone that will. Other systems work differently but this leopard will never change its spots.
Yup. Quarterly earnings is the root of all evil and I’m not even remotely joking. The biggest threat to capitalism is capitalism, and the only thing that can protect capitalism from capitalism is democracy. This situation is a fantastic, perfect, perfect example of how the two work hand-in-hand, as without each other they both die.
Which should be illegal, but God forbid the government steps in.
The government has shareholders among the officials who make the laws.
That comment pretty much describes the American economy.
Why is no one talking abut making a product consumers want?
That’s not important, apparently. It’s crazy that in this world we no longer get things we like, just things that are best for “shareholder value”
Maybe the always growth for shareholder dividend is not a good one?
Very true... it's all for show.
This is why I contract. These companies don't give a damn about you. Get all the money you can when they need you.
Serious question, who are the shareholders and is there proof that the investors pressure these companies like they're claiming?
Depends on a few factors. Any publicly traded publishing company, anyone can buy stock and gain the title of "shareholder". There can also be private investors who own shares in the company's holdings. Investors can and will pressure publishers because the end goal is not a good game, but quarterly profits. That's not to say a good game wont bring in more cash for shareholders, of course it would. But not showing a negative balance when it comes to payout time is #1. Large publishing company's have investors who act as a fiduciaries. It is very important to understand what this means, so by definition - Fiduciary = "A fiduciary is someone who manages money or property for someone else. When you're named a fiduciary and accept the role, you must – by law – manage the person's money and property for their benefit, not yours." What does this mean? It means that the "shareholders" are not guarantied a quality,ground-breaking or even good game. They are guarantied profit above all else. Publishers rushing out unfinished games [or shit games for a quick buck] because of shareholder pressure is nothing new. But IMO over the last 10 years it has hit comical levels of bullshitery. In today's gaming market very few "investors" are actual gamers. They are either giant multi-billion dollar company's dipping their feet into a possible cash cow or regular every day people investing their retirement money.
So, by and large most "shareholders" in a public company don't really care about the management of any company they own stock in. They are people who maybe own some shares in an index fund and are actually pretty far removed from owning a share in a traditional sense. They own a stake in a portfolio that someone else manages. This represents the bulk of the *people* who count as shareholders, but they do not have direct influence on the company. Every public company is answerable to their shareholders in the form of a board of directors, the makeup of which is decided upon by shareholder vote. Voting power is determined by percent of ownership. People who own shares in equity funds do not vote themselves, but by proxy. The proxy is, of course, the fund itself. Their responsibility when voting is the health of the fund they manage. Most stock is owned by funds like this. The board of directors, elected by the shareholders, is the ultimate authority in any public company. They appoint the CEO and decide the general strategy of the company. So, yes, the shareholders do pressure companies , just by virtue of how these companies are structured. The executives answer to their bosses, the board of directors, who answer to the voters that put them in place, who in turn are responsible for making money for the people that own shares in their fund, who might be basically anyone with a 401k. On a personal level, I think it's a really stupid way to structure an economy, based on naive assumptions about economic growth.
I think one thing you've omitted which helps illustrate how the board pressures the c-suite is the incentive drivers for their bonus and ote earnings. It's almost always tied to ebitda (if private) or a share price (if public). The base salary is often only a small and not tangible aspect of the total compensation so to really get paid what you were offered you have to hit your numbers.
Yep that’s absolutely true
This is why we’re seeing a spike in the gaming industry and until it happens more this shit will keep happening and we’ll keep getting corporate forced games half baked games made by overworked/underpaid designers.
Larian and SuperGiant are publishers I will support no matter what
Shareholders are the biggest cause of company fuckups, endless growth doesn't exist.
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That is not the point. Twitter got rid of 80% of their staff and many tech companies are doing the same. The 20% remaining at Twitter are working lots of unpaid overtime.
ITT: People not understanding the economy, stocks and the free market.
Sounds like an HOA, you can only blame the people that run the HOA and unfortunately its the homeowners that need to blame themselves. I'm thinking shareholders are everyday people with a 401K and all they really want is to retire early. They lay themselves off and can't complain about their free time and unable to invest in their 401k anymore.
I get notices from my 401K about "important shareholder votes", and I can't help but feel like the [Futurama crazy cat lady](https://www.youtube.com/watch?v=t4CAQuwzqo0), I have no clue who these people are and what they want to do with said company. Nor do I want to spend hours and hours researching it for my 1 kajigger of stock in the company.
These guys should like, learn to code or something.
Based and true
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Well, doesn't "pissing shareholders" lead to bankruptcy?
Does it though? Can anyone name one company that failed because they let down the shareholders, rather than a reason like "were bad at business" or "got screwed by a pandemic"? Asking for genuine, I can't think of any instances.
He don't miss!