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That's the eternal lifecycle of most companies Is that an eternal lifecycle? Or is it merely one of the unintended consequences of a largely unregulated finan
by CountSessine 11y ago
That's the eternal lifecycle of most companies
Is that an eternal lifecycle?
Or is it merely one of the unintended consequences of a largely unregulated financial market that doesn't have the patience for research and development?
I keep thinking about acquisitions like Tek's and the incredible value that was accumulated over decades that's being destroyed in favour of a quick return and I keep thinking that 'market efficiency' doesn't lead to a lot of wealth.
Unless you manage a hedge-fund, I guess. Even then, though - they'll only be able to pick the meat off of the bones of western industry for so long - sooner or later the corpse will be picked clean and all of that wealth and technology will have migrated east. And no one in the east is so tolerant of that sort of selfish wealth-destruction and corporate vandalism as we are.
- tsotha 11y agoThe financial markets have patience for R&D that actually pays off. Look at how much money companies like IBM and Intel are spending on shrinking design rules. Heck, IBM does a lot of research in a lot of areas.
- yummyfajitas 11y agoThe large unregulated financial market has plenty of patience for R&D by Amazon, Google, Facebook, Uber, etc. They just don't have patience for R&D by Danaher. Assuming you were investing, would you personally be more likely to park your money in Danaher or Uber?
- CountSessine 11y agoWhat kind of R&D is Uber doing?
- shard 11y agoAren't they researching self driving cars?
- CountSessine 11y agoRight you are. I didn't know this. They are indeed researching self-driving cars.
- digi_owl 11y agoThe only reason they get a "pass" is because their share price is too high for junk bond strip mining.
- yummyfajitas 11y agoTheir share price is high because greedy wall st types believe that they will make lots of money in the long term.
- sergiosgc 11y agoAmazon, Google and Facebook have protected themselves from the "limited time horizon" of the market. They have either small floats or class B shares, guaranteeing that the long term vision of the company is grounded on effective control by the ones steering the vision. Managing future value is challenging. It's easy to say that the market is thirsty for value now. However, if you submit to a golden "invest in the future" strategy, your company may be inefficient (from an investor's perspective): Returns will be lower than what you can get elsewhere, meaning that the company should release funds to investors instead of investing internally. On the other hand, if you submit to maximizing local (in the time axis) returns, you'll surely forego disruptive jumps, their gains on efficiency and the future profit they entail. It's not a simple problem.
- yummyfajitas 11y agoThe "protection" GOOG/AMZN/FB have may prevent hostile takeovers by Wall St if share prices drop, but it can't keep share prices high. Given a choice, you have $10k to spend on either Uber, Facebook or Danaher shares. Danaher will continue to invest in the future, rather than being gutted. Where do you park your money?
- brc 11y agoWhat are you suggesting? That companies be required to invest a portion of their earnings in r&d or be delisted? Market efficiency leads to a massive burgeoning of wealth - for investors, producers and consumers. Look at everything around you. All produced by market efficiency ruthlessly killing off poorly managed, run or outdated products and companies. The siren song of 'dem markets done me wrong' is a pleasant place to submit to - nothing soothes the soul like a blame-figure to pin the ills of the world on - but I would suggest thinking it through a bit further. For a start, hedge funds have nothing to do with conglomerates acquiring businesses and failing to understand that business.
- CountSessine 11y agoWhat are you suggesting? That companies be required to invest a portion of their earnings in r&d or be delisted? What I'm suggesting is that the cost of entering and leaving a position in equities is now so low that it's become difficult to be an income investor, especially when there are so many growth investors seeking positions. And its only income investors who want R&D - growth investors carry axes to shareholder meetings. Market efficiency leads to a massive burgeoning of wealth - for investors, producers and consumers. Look at everything around you. All produced by market efficiency ruthlessly killing off poorly managed, run or outdated products and companies. I know that 'creative destruction' is a popular valley trope, but everything around you was actually the product of a whole lot of expensive R&D which is difficult to do now in 2015 unless you own a market and can tell your own investors, blindly demanding quarterly price growth, to go fuck off for a bit. We have equity markets filled with investors all maximizing their portfolios by selling mom's and dad's silverware and china. Maybe Tek's name and reputation really is worth more in the next 5 years than the company itself. Fire the engineers and run lean until the market passes you by and you close up shop. But is that actually creating wealth? Killing off 'poorly managed companies' isn't creating wealth - it's a crude form of arbitrage. Real wealth always comes from new technology. For a start, hedge funds have nothing to do with conglomerates acquiring businesses and failing to understand that business. Hedge funds are a symptom of the same problem, which is that no one wants to be an income investor when there's more money in selling mom's and dad's house.