4 ms·

>I hear this all the time, and it's absurd. The high P/Es of innumerable companies (like Amazon) are compelling evidence that investors are well aware of the lo

by hugh4 11y ago

>I hear this all the time, and it's absurd. The high P/Es of innumerable companies (like Amazon) are compelling evidence that investors are well aware of the long game companies play and they approve of it. The sorts of people who invest in Amazon are, anyway. Still, it's true. Growth companies think long term. But the moment a company (or other organisation) gets into trouble it starts thinking short term. When you've got to lay off 20% of your workforce, you pick the ones whose absence won't be felt for many years. But really, the reason that companies don't invest in pure science is not that the value is too far in the future but that the value is too diffuse to capture.

WalterBright 11y ago
I've seen what happens to companies that think short term. They think they're fooling the investors, and some of them manage it for a while (Enron). But when the investors do get wise, the stock tanks, every time. If you are better than other investors at knowing which companies are secretly eating their seed corn, you can make a fortune shorting their stocks. CEO compensation is often tied to short term stock values. But those short term stock values ARE a reflection of the long term prospects of those values, not last quarter's profit. I've seen a lot of share prices tank when a blowout profit was announced, because along with it investors got hints that there were big problems looming.
mtdewcmu 11y ago
>> But really, the reason that companies don't invest in pure science is not that the value is too far in the future but that the value is too diffuse to capture. I think so. A lot of the research at Xerox PARC and Bell Labs failed to generate much profit for their parent companies, although it was of great benefit to society, so why should companies continue to operate that way? It's a market failure. The federal government probably needs to pick up the slack and fund more basic research.

by hugh4 11y ago

WalterBright 11y ago

I've seen what happens to companies that think short term. They think they're fooling the investors, and some of them manage it for a while (Enron). But when the investors do get wise, the stock tanks, every time. If you are better than other investors at knowing which companies are secretly eating their seed corn, you can make a fortune shorting their stocks. CEO compensation is often tied to short term stock values. But those short term stock values ARE a reflection of the long term prospects of those values, not last quarter's profit. I've seen a lot of share prices tank when a blowout profit was announced, because along with it investors got hints that there were big problems looming.

mtdewcmu 11y ago

>> But really, the reason that companies don't invest in pure science is not that the value is too far in the future but that the value is too diffuse to capture. I think so. A lot of the research at Xerox PARC and Bell Labs failed to generate much profit for their parent companies, although it was of great benefit to society, so why should companies continue to operate that way? It's a market failure. The federal government probably needs to pick up the slack and fund more basic research.