15 ms·

Apple and Google embody two alternative models of capitalism

158 points by nthuser 9y ago

jtraffic 9y ago
> they embody two alternative models of capitalism, and the one that wins out will shape the future of the economy. Even in such a vague form, this is a touch sensationalist. The impact of 'the one that wins' may be negligible. There also may be no winner.
- MR4D 9y ago
  I originally thought that too, until I read through the entire article. Technically, the "one" that wins is not the company, but the style of how they treat shareholders. Effectively, these two companies embody fairly different points on the spectrum of shareholder control: Google being effectively a public closely-held company; Apple being a public widely-held company. True, Google has millions of shareholders, but the _control_ is closely held, hence why I am using that term. The control that shareholders (and activists and raiders) can have on Apple is significantly different than on Google. And that is what the article is about. Over time, the market could adjust from the Apple model (which is the status quo in public companies) to the Google model. The implications are tremendous, as the idea of a public company that is closely-held over the long term hasn't really been done before.
  - itcmcgrath 9y ago
    Except, given that both models ended up #1, and #2 respectively, doesn't it imply that both models can work and other factors are more important in success? Following that, doesn't it imply that shareholders should/will care more about those other factors?
    - johnsmith21006 9y ago
      But Google is also 22 years younger? Google passed $100b market cap at age 7 and Apple at 29. Google other as in non ad revenues in 2016 at age 18 is greater than all of Apple revenues when they were the same age. Plus Google grew income by 29% last quarter and Apple earnings have declined over the last two years.
- williamstein 9y ago
  Agreed. The article assumes that business/investment/etc. is a zero-sum game.
  - JCzynski 9y ago
    Not exactly. It says that "which strategy for growth is best?" has only one answer. Which is true.
auserperson 9y ago
I don't respect any article about the future of economy that does not take into consideration climate change, sustainability and the anthropocene. Capitalism will have to change dramatically soon, our world is collapsing. But sure. let's talk about apple vs google. I am not a fan of capitalism, but I'm not even criticizing capitalism per se, only that all big companies nowadays are existing in a world and way of producing that will for sure destroy itself in at max 100 years. So that is the future. Not Apple way of managing. I feel like saying wake up sheepele, because that's how it feels reading an article like that. I have no idea what will happen and hope for the best, but let's start accepting that we know major changes are needed and are going to happen whether we plan them or not. Climate change/mass extinction/deforestation/etc is not just about polar bears, is about our energy and ways of consumption and production of goods.
- auserperson 9y ago
  got a -1 from a trump voter.
- JCzynski 9y ago
  Capitalism won't change. It has no reason to; those changes don't affect the underlying processes of the economy, they just change the circumstances and incentives.
  - auserperson 9y ago
    It has to change enough to the point we call it something else. It's agreed by most analysis of Earth System Science that we are going to need to "grow less" from a capitalist/contemporary economics perspective. Our view of production right now is the same since the industrial revolution. So yeah, if we are going to keep on something close to the capitalist framework, it is not enough to change circumstances but the framework and its view of progress itself. So call it what you want, but we need a fundamental change in our economic system to survive climate change without killing half the world population.
HugoDaniel 9y ago
"Google is, like Apple, making loads of money. From 2013 to March 2017, it generated $114 billion in operating cash flow. How much has the company distributed to shareholders? In contrast to Apple’s 72 percent payout rate, Google has only distributed 6 percent of that money to shareholders." Apple is way older than Google, maybe this has an influence in both diff. approaches...
_nalply 9y ago
When I read the title I thought about the difference that Apple is selling to users and Google to advertisers. These are two different ways of capitalisms, too.
- Kurtz79 9y ago
  Well, they really are two different business models, not really two different models of capitalism. The title is a bit pompous, but the article does actually relate the policies of the two companies with a basic concept of capitalism (allocation of capital).
  - _nalply 9y ago
    Well you are right... But at least the business model of users being goods is a new take on capitalism.
thedevil 9y ago
tldr: Google founders have more voting rights than Apple executives. In case you didn't know, this impacts corporate behavior, especially dividends. I thought this would be about the way each interacted with customers, which is far more interesting.
- lostboys67 9y ago
  Which Wall Streat and the City don't like on UK media company that has this dual share class structure got kicked out of the FTSE index for this.
frgtpsswrdlame 9y ago
It's worth mentioning on a post like this that there is no legal (or historical) basis for the idea that maximizing shareholder value is the primary concern of a corporation. See these two sources: https://hbr.org/2010/04/the-myth-of-shareholder-capitalism https://hbr.org/2010/04/the-myth-of-shareholder-capitalism [pdf] http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?artic...
- eldavido 9y ago
  This is a good point and I think it explains a sea change in US business. In the late 80s, business went from being pretty clubby and centrally planned (think big 4 auto companies, lots of union control, with big cross-industry labor bargains) to being a lot more competitive, with shareholders getting a lot more power. Offhand I think it's a combination of globalization (requiring businesses to be "tougher") of both capital and customers, the increasing financialization of the US economy, and the birth of modern PE firms and other activists capable of putting more pressure on admittedly pretty lazy and nest-feathering managers. (Have you watched Mad Men? Two martini lunches? I wouldn't want employees at my company doing that!)
- ajc-sorin 9y ago
  I came here to mention this, but thank you for doing so already - and providing sources! One thing I would suggest you may want to add for clarification: certain agents of corporations have fiduciary responsibilities to act in the best interest of the shareholder, which generally means to not lose money. So while "maximizing" shareholder value has no legal basis, increasing shareholder value year over year is a legal responsibility, although this is definitely a gray area.
- jpttsn 9y ago
  So what if there isn't? I see this trope thrown around a lot. I find it suspiciously vacuous: it seems like an attempt to dress up political opinions as "research." It's as trite as saying "there is no historical basis for the idea that getting a higher salary is the primary concern of an employee." What would that add to a discussion about wages? If you think corporations should do something differently, why not just say so, and say what?
l5870uoo9y 9y ago
> More importantly, though, how do these strategies impact the lives of everyday people? A capitalist system aims for the efficient allocation of capital, and indeed, workers have a better shot at seeing median wages increase when money is being put to its most productive use. So to an extent, how they fare under each system has to do with who is deciding where and how profits get invested. When managers reallocate profits, that reallocation benefits from the capabilities and knowledge that companies have built over decades, but suffers from the possibly poor incentives of managers. When investors are the ones reallocating profits, however, the scope of the reallocation can be broader, theoretically leading to more innovation; at the same time, those investors don’t have preexisting organisational capabilities and they may suffer from their own short-term time horizons. In the end the economist unwillingly reveals that the actual ramifications are highly theoretical (bordering on non-sense) and and leaves the reader only to conclude that this won't as stated "decide the future of capitalism". In discussing the future economy I would be much more inclined to ask: "How do we create a model where wealth and power is distributed broadly across society?", "What constitute infrastructure in a modern economy?", "How do know we aren't underperforming?" and so on.
deleted 9y ago
[deleted]
wageslaving 9y ago
The issue with yielding to investors is that investors are primarily interested in making money for themselves, rather than growing the companies they are investing in. An investor will always vote to have large companies take loans in order to purchase the hundreds of millions of dollars worth shares they just purchased back a 25% increase over their current market value, or get a lump sum in the form of the newly issued dividends as it was in Apple's case. And then they take the money they made, reinvest in another large company they can leverage and do it again. There's absolutely no reason to seek growth based returns which carry risk while this approach is available. Dividends and stock-buybacks represent a no-value-created system of incentives for the richest people in the world, directly extracting the surplus value of laborers at the expense of workers and long-term investors. Only when a company starts to topple does there seem to be any interest in moving into new markets or improving their existing lines of business.
eldavido 9y ago
There is so much wrong with this article I hardly know where to begin. First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even if they don't, their governments do. Huge pension funds like CalPERS are heavily invested in the stock market, which matters because (a) many state employees rely on them for income, and even if you don't work for the state, (b) your taxes are directly tied to the investment performance of these funds. Bottom line, it's complete folly to suggest the stock market is a "rich person's problem" even if you're poor. Anyone invested in the S&P 500 is going to have a large position (relatively) in Apple. Second, this article makes no mention of Google's hiring of Ruth Porat or the recent moves to put better capital allocation processes in place. I, for one, wish Google would behave more like Apple. I think it shows admirable restraint that Apple can pay so much cash out without wasting it on dumb things. Third, it's just a sloppy article in general. They make no mention of whether the "performance" of the two includes the cash thrown off by dividends, which in Apple's case, is significant. They also didn't mention the complex back-story of why the Irish subsidiary is used [1], nor any of the academic finance research suggesting that "Short-term" decision making actually benefits investors long-term. [1] https://stratechery.com/2016/apples-eu-tax-problem-how-apple-pays-taxeseventually-everyone-is-a-loser/ https://stratechery.com/2016/apples-eu-tax-problem-how-apple...
- mfringel 9y ago
  You seem to be asserting that anyone who owns any stock is completely aligned with the interests of the respective corporation, regardless of proportionality. To wit, If I own (say) $5k of Amazon stock as the result of being invested in a mutual fund, that is not sufficient cause for me to take time out of my day to call my representatives and actively lobby for Amazon.
  - digi_owl 9y ago
    Never mind that owning stock via pension funds etc gives one little say in corporate operations.
spectrum1234 9y ago
I was expecting this to be about open source vs closed source. After reading this, I really wish it had been.
deleted 9y ago
[deleted]
shmerl 9y ago
I wonder if it influences Apple's common nasty behavior.
theonemind 9y ago
Apple got to this point by notoriously never paying out dividends. Paying out dividends obviously takes away money usable for growth. I don't see any competition between these two models. You issue stock to get capital to compete with other behemoths. If not for having contributed cash to the endeavor, the investors function more like parasites that want to extract the maximum they can from the host. Such massive payouts will probably stop Apple from becoming a major conglomerate with varied tech/science/engineering interests in the distant future and limit them to high end consumer electronics. They got to this point by acting more like Google, and they will likely degrade like HP or IBM now. A very silly article comparing two companies with similar money-management history and acting like some competition exists between the models because investors recently got an upper hand with Apple. They wouldn't have gotten their market position doing this. It strikes me like comparing two athletes when one recently acquired a disability and suggesting that the disability contributed to their historical success and suggests some new model for the sport going forward.
skywhopper 9y ago
I'm disappointed that two other large pieces of the economic puzzle are left out: workers and government. Corporations have more cash than they know what to do with? That means that 1) wages are too low, and 2) taxes are too low. More specific to Apple's case, the hoarding of cash overseas to avoid paying US taxes on it is one of many poisonous symptoms of our international capitalism. The amount of tax Apple would pay if those profits did come to the US would make a not-inconsequential dent in the federal deficit. The whole take-on-debt-to-pay-dividends strategy is so skeevy that while I don't doubt it's legal, it's very questionably ethical. All that said, I think US tax policy contributes to the problem. During the Bush administration, an effort was made to argue that taxes on dividends amounted to double taxation because the corporation had already paid taxes on that money, so why should the investors also pay tax on it. And while dividend income was not made tax free, it is now (or at least was for a while, I haven't kept up) taxed at a significantly lower rate than "earned" income. But the fix that makes the most sense to me, and which would solve Apple's problem, is to exempt corporations from paying taxes on the money they then pay out as dividends, and tax the individuals earning the dividends their normal marginal tax rate. This would encourage corporations to pay more dividends, end the "double" taxation, solve some percentage of off-shore hoarding, increase US government revenue, and put more money into the economy and not in corporate bank accounts.
- krick 9y ago
  I guess this may be not popular opinion here, but I don't see anything wrong with legally avoiding taxes. It might be wrong that the whole system is convoluted enough that this would be very hard for your average honest citizen, but easy enough for resourceful corporation, if anything. But avoiding taxes seems only logical, if you think you can manage and allocate resources better than your government. And rest assured: somebody always does. So the reward inequality of the people who make wealth seems a larger concern here. But then, if everybody makes lots of money in capitalistic system -- nobody really does. So, no, I'm pretty sure that system is corrupt in its essence, but is working just as intended too.
  - robotresearcher 9y ago
    > if you think you can manage and allocate resources better than your government. This phrase gets used from time to time to give some moral or net efficiency argument for avoiding taxes. I don't think it's useful. A corporation and government have completely different responsibilities and constituencies. Of course Apple can allocate resources better for Apple than the government would choose to, because Apple has no duty to care about most of the issues the government is tasked with. > And rest assured: somebody always does. We only have to consider the bizarrely inefficient US healthcare system compared to the rest of the developed world to see that 'always' is not true.
johnsmith21006 9y ago
Google broke $100B market cap at seven years old. Apple mail did it at 29 years old. Google never has declined for a single quarter YoY since day 1. Not a single time. Apple had $2.33 EPS for Q2 2015 and for Q2 2017 reported $1.90 EPS. So declined over the last 2 years. Google other revenues (non ad) were over $10B for 2016 and growing at 50%. Apple total revenues in 2004 when it was 28 years old were less than just Google other. Just sayin. Btw, Google holds the record of getting to $100B cap faster than any other. Even accounting for inflation.
mschuster91 9y ago
There is a third way of capitalism: the Musk way. Whatever money he made, he invested it in a way that benefits society: - by building a payment service that's way cheaper and easier than e.g. Western Union or banks - by using literally every last cent in his pockets to make SpaceX work (which benefits the whole world in terms of cheap, reliable, environmentally-friendly, russian-free § launches as well as the planned Mars colony) - by launching the maybe most successful pure electric car, which soon goes into mass-market price range This is what I as a socialist see as the one example of capitalism that actually WORKS. § not meant to be racist at all, but political - given the obvious tensions between Russia and the Western world, e.g. by Russian meddling in US elections, financing at least the German and French neonazi parties and invading Ukraine, it's simply unacceptable to depend on Russia honoring their rocket engine delivery contracts.
gaius 9y ago
Neither pay their taxes
- bkohlmann 9y ago
  If they are violating the law, they will be sued by the government and forced to pay what they owe just as any tax payer who violates the law. As it stands, they are paying what taxes they owe as allowed by our existing tax code. Out of curiosity, what, in your estimation, is the legal amount they have failed to remit?
  - nisa 9y ago
    3.6 billion dollar - https://www.bloomberg.com/news/articles/2016-12-21/google-lowered-2015-taxes-by-3-6-billion-using-dutch-sandwich https://www.bloomberg.com/news/articles/2016-12-21/google-lo... but sure - it's somewhat legal or not illegal but don't pretend it's not sketchy.
- urda 9y ago
  They absolutely pay their taxes. They have a duty to their shareholders to not only pay said taxes, but the exact amount in taxes. Do you seriously expect them to pay more in taxes beyond what is legally required of them? Please avoid these "low effort" comments here on Hacker News, they do not work here.
stretchwithme 9y ago
How can anybody look at how much Apple executives are currently taking home and think that lush perks are being limited by large shareholders?
wffurr 9y ago
"As companies continue to generate more profits than they need to fund their own growth, the question becomes: Who will decide what to do with all those profits—managers or investors?" That's not the question that comes to my mind at all. Why limit it to just managers and investors? What about employees? Citizens of the countries that enabled these companies to make all that money in the first place? That agglomeration of wealth is just absurd and frankly immoral.

158 points by nthuser 9y ago

> they embody two alternative models of capitalism, and the one that wins out will shape the future of the economy. Even in such a vague form, this is a touch sensationalist. The impact of 'the one that wins' may be negligible. There also may be no winner.

MR4D 9y ago
I originally thought that too, until I read through the entire article. Technically, the "one" that wins is not the company, but the style of how they treat shareholders. Effectively, these two companies embody fairly different points on the spectrum of shareholder control: Google being effectively a public closely-held company; Apple being a public widely-held company. True, Google has millions of shareholders, but the _control_ is closely held, hence why I am using that term. The control that shareholders (and activists and raiders) can have on Apple is significantly different than on Google. And that is what the article is about. Over time, the market could adjust from the Apple model (which is the status quo in public companies) to the Google model. The implications are tremendous, as the idea of a public company that is closely-held over the long term hasn't really been done before.
- itcmcgrath 9y ago
  Except, given that both models ended up #1, and #2 respectively, doesn't it imply that both models can work and other factors are more important in success? Following that, doesn't it imply that shareholders should/will care more about those other factors?
  - johnsmith21006 9y ago
    But Google is also 22 years younger? Google passed $100b market cap at age 7 and Apple at 29. Google other as in non ad revenues in 2016 at age 18 is greater than all of Apple revenues when they were the same age. Plus Google grew income by 29% last quarter and Apple earnings have declined over the last two years.
williamstein 9y ago
Agreed. The article assumes that business/investment/etc. is a zero-sum game.
- JCzynski 9y ago
  Not exactly. It says that "which strategy for growth is best?" has only one answer. Which is true.

auserperson 9y ago

I don't respect any article about the future of economy that does not take into consideration climate change, sustainability and the anthropocene. Capitalism will have to change dramatically soon, our world is collapsing. But sure. let's talk about apple vs google. I am not a fan of capitalism, but I'm not even criticizing capitalism per se, only that all big companies nowadays are existing in a world and way of producing that will for sure destroy itself in at max 100 years. So that is the future. Not Apple way of managing. I feel like saying wake up sheepele, because that's how it feels reading an article like that. I have no idea what will happen and hope for the best, but let's start accepting that we know major changes are needed and are going to happen whether we plan them or not. Climate change/mass extinction/deforestation/etc is not just about polar bears, is about our energy and ways of consumption and production of goods.

auserperson 9y ago
got a -1 from a trump voter.
JCzynski 9y ago
Capitalism won't change. It has no reason to; those changes don't affect the underlying processes of the economy, they just change the circumstances and incentives.
- auserperson 9y ago
  It has to change enough to the point we call it something else. It's agreed by most analysis of Earth System Science that we are going to need to "grow less" from a capitalist/contemporary economics perspective. Our view of production right now is the same since the industrial revolution. So yeah, if we are going to keep on something close to the capitalist framework, it is not enough to change circumstances but the framework and its view of progress itself. So call it what you want, but we need a fundamental change in our economic system to survive climate change without killing half the world population.

HugoDaniel 9y ago

"Google is, like Apple, making loads of money. From 2013 to March 2017, it generated $114 billion in operating cash flow. How much has the company distributed to shareholders? In contrast to Apple’s 72 percent payout rate, Google has only distributed 6 percent of that money to shareholders." Apple is way older than Google, maybe this has an influence in both diff. approaches...

_nalply 9y ago

When I read the title I thought about the difference that Apple is selling to users and Google to advertisers. These are two different ways of capitalisms, too.

Kurtz79 9y ago
Well, they really are two different business models, not really two different models of capitalism. The title is a bit pompous, but the article does actually relate the policies of the two companies with a basic concept of capitalism (allocation of capital).
- _nalply 9y ago
  Well you are right... But at least the business model of users being goods is a new take on capitalism.

thedevil 9y ago

tldr: Google founders have more voting rights than Apple executives. In case you didn't know, this impacts corporate behavior, especially dividends. I thought this would be about the way each interacted with customers, which is far more interesting.

lostboys67 9y ago
Which Wall Streat and the City don't like on UK media company that has this dual share class structure got kicked out of the FTSE index for this.

frgtpsswrdlame 9y ago

It's worth mentioning on a post like this that there is no legal (or historical) basis for the idea that maximizing shareholder value is the primary concern of a corporation. See these two sources: https://hbr.org/2010/04/the-myth-of-shareholder-capitalism https://hbr.org/2010/04/the-myth-of-shareholder-capitalism [pdf] http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?artic...

eldavido 9y ago
This is a good point and I think it explains a sea change in US business. In the late 80s, business went from being pretty clubby and centrally planned (think big 4 auto companies, lots of union control, with big cross-industry labor bargains) to being a lot more competitive, with shareholders getting a lot more power. Offhand I think it's a combination of globalization (requiring businesses to be "tougher") of both capital and customers, the increasing financialization of the US economy, and the birth of modern PE firms and other activists capable of putting more pressure on admittedly pretty lazy and nest-feathering managers. (Have you watched Mad Men? Two martini lunches? I wouldn't want employees at my company doing that!)
ajc-sorin 9y ago
I came here to mention this, but thank you for doing so already - and providing sources! One thing I would suggest you may want to add for clarification: certain agents of corporations have fiduciary responsibilities to act in the best interest of the shareholder, which generally means to not lose money. So while "maximizing" shareholder value has no legal basis, increasing shareholder value year over year is a legal responsibility, although this is definitely a gray area.
jpttsn 9y ago
So what if there isn't? I see this trope thrown around a lot. I find it suspiciously vacuous: it seems like an attempt to dress up political opinions as "research." It's as trite as saying "there is no historical basis for the idea that getting a higher salary is the primary concern of an employee." What would that add to a discussion about wages? If you think corporations should do something differently, why not just say so, and say what?

l5870uoo9y 9y ago

> More importantly, though, how do these strategies impact the lives of everyday people? A capitalist system aims for the efficient allocation of capital, and indeed, workers have a better shot at seeing median wages increase when money is being put to its most productive use. So to an extent, how they fare under each system has to do with who is deciding where and how profits get invested. When managers reallocate profits, that reallocation benefits from the capabilities and knowledge that companies have built over decades, but suffers from the possibly poor incentives of managers. When investors are the ones reallocating profits, however, the scope of the reallocation can be broader, theoretically leading to more innovation; at the same time, those investors don’t have preexisting organisational capabilities and they may suffer from their own short-term time horizons. In the end the economist unwillingly reveals that the actual ramifications are highly theoretical (bordering on non-sense) and and leaves the reader only to conclude that this won't as stated "decide the future of capitalism". In discussing the future economy I would be much more inclined to ask: "How do we create a model where wealth and power is distributed broadly across society?", "What constitute infrastructure in a modern economy?", "How do know we aren't underperforming?" and so on.

deleted 9y ago

[deleted]

wageslaving 9y ago

The issue with yielding to investors is that investors are primarily interested in making money for themselves, rather than growing the companies they are investing in. An investor will always vote to have large companies take loans in order to purchase the hundreds of millions of dollars worth shares they just purchased back a 25% increase over their current market value, or get a lump sum in the form of the newly issued dividends as it was in Apple's case. And then they take the money they made, reinvest in another large company they can leverage and do it again. There's absolutely no reason to seek growth based returns which carry risk while this approach is available. Dividends and stock-buybacks represent a no-value-created system of incentives for the richest people in the world, directly extracting the surplus value of laborers at the expense of workers and long-term investors. Only when a company starts to topple does there seem to be any interest in moving into new markets or improving their existing lines of business.

eldavido 9y ago

There is so much wrong with this article I hardly know where to begin. First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even if they don't, their governments do. Huge pension funds like CalPERS are heavily invested in the stock market, which matters because (a) many state employees rely on them for income, and even if you don't work for the state, (b) your taxes are directly tied to the investment performance of these funds. Bottom line, it's complete folly to suggest the stock market is a "rich person's problem" even if you're poor. Anyone invested in the S&P 500 is going to have a large position (relatively) in Apple. Second, this article makes no mention of Google's hiring of Ruth Porat or the recent moves to put better capital allocation processes in place. I, for one, wish Google would behave more like Apple. I think it shows admirable restraint that Apple can pay so much cash out without wasting it on dumb things. Third, it's just a sloppy article in general. They make no mention of whether the "performance" of the two includes the cash thrown off by dividends, which in Apple's case, is significant. They also didn't mention the complex back-story of why the Irish subsidiary is used [1], nor any of the academic finance research suggesting that "Short-term" decision making actually benefits investors long-term. [1] https://stratechery.com/2016/apples-eu-tax-problem-how-apple-pays-taxeseventually-everyone-is-a-loser/ https://stratechery.com/2016/apples-eu-tax-problem-how-apple...

mfringel 9y ago
You seem to be asserting that anyone who owns any stock is completely aligned with the interests of the respective corporation, regardless of proportionality. To wit, If I own (say) $5k of Amazon stock as the result of being invested in a mutual fund, that is not sufficient cause for me to take time out of my day to call my representatives and actively lobby for Amazon.
- digi_owl 9y ago
  Never mind that owning stock via pension funds etc gives one little say in corporate operations.

spectrum1234 9y ago

I was expecting this to be about open source vs closed source. After reading this, I really wish it had been.

deleted 9y ago

[deleted]

shmerl 9y ago

I wonder if it influences Apple's common nasty behavior.

theonemind 9y ago

Apple got to this point by notoriously never paying out dividends. Paying out dividends obviously takes away money usable for growth. I don't see any competition between these two models. You issue stock to get capital to compete with other behemoths. If not for having contributed cash to the endeavor, the investors function more like parasites that want to extract the maximum they can from the host. Such massive payouts will probably stop Apple from becoming a major conglomerate with varied tech/science/engineering interests in the distant future and limit them to high end consumer electronics. They got to this point by acting more like Google, and they will likely degrade like HP or IBM now. A very silly article comparing two companies with similar money-management history and acting like some competition exists between the models because investors recently got an upper hand with Apple. They wouldn't have gotten their market position doing this. It strikes me like comparing two athletes when one recently acquired a disability and suggesting that the disability contributed to their historical success and suggests some new model for the sport going forward.

skywhopper 9y ago

I'm disappointed that two other large pieces of the economic puzzle are left out: workers and government. Corporations have more cash than they know what to do with? That means that 1) wages are too low, and 2) taxes are too low. More specific to Apple's case, the hoarding of cash overseas to avoid paying US taxes on it is one of many poisonous symptoms of our international capitalism. The amount of tax Apple would pay if those profits did come to the US would make a not-inconsequential dent in the federal deficit. The whole take-on-debt-to-pay-dividends strategy is so skeevy that while I don't doubt it's legal, it's very questionably ethical. All that said, I think US tax policy contributes to the problem. During the Bush administration, an effort was made to argue that taxes on dividends amounted to double taxation because the corporation had already paid taxes on that money, so why should the investors also pay tax on it. And while dividend income was not made tax free, it is now (or at least was for a while, I haven't kept up) taxed at a significantly lower rate than "earned" income. But the fix that makes the most sense to me, and which would solve Apple's problem, is to exempt corporations from paying taxes on the money they then pay out as dividends, and tax the individuals earning the dividends their normal marginal tax rate. This would encourage corporations to pay more dividends, end the "double" taxation, solve some percentage of off-shore hoarding, increase US government revenue, and put more money into the economy and not in corporate bank accounts.

krick 9y ago
I guess this may be not popular opinion here, but I don't see anything wrong with legally avoiding taxes. It might be wrong that the whole system is convoluted enough that this would be very hard for your average honest citizen, but easy enough for resourceful corporation, if anything. But avoiding taxes seems only logical, if you think you can manage and allocate resources better than your government. And rest assured: somebody always does. So the reward inequality of the people who make wealth seems a larger concern here. But then, if everybody makes lots of money in capitalistic system -- nobody really does. So, no, I'm pretty sure that system is corrupt in its essence, but is working just as intended too.
- robotresearcher 9y ago
  > if you think you can manage and allocate resources better than your government. This phrase gets used from time to time to give some moral or net efficiency argument for avoiding taxes. I don't think it's useful. A corporation and government have completely different responsibilities and constituencies. Of course Apple can allocate resources better for Apple than the government would choose to, because Apple has no duty to care about most of the issues the government is tasked with. > And rest assured: somebody always does. We only have to consider the bizarrely inefficient US healthcare system compared to the rest of the developed world to see that 'always' is not true.

johnsmith21006 9y ago

Google broke $100B market cap at seven years old. Apple mail did it at 29 years old. Google never has declined for a single quarter YoY since day 1. Not a single time. Apple had $2.33 EPS for Q2 2015 and for Q2 2017 reported $1.90 EPS. So declined over the last 2 years. Google other revenues (non ad) were over $10B for 2016 and growing at 50%. Apple total revenues in 2004 when it was 28 years old were less than just Google other. Just sayin. Btw, Google holds the record of getting to $100B cap faster than any other. Even accounting for inflation.

mschuster91 9y ago

There is a third way of capitalism: the Musk way. Whatever money he made, he invested it in a way that benefits society: - by building a payment service that's way cheaper and easier than e.g. Western Union or banks - by using literally every last cent in his pockets to make SpaceX work (which benefits the whole world in terms of cheap, reliable, environmentally-friendly, russian-free § launches as well as the planned Mars colony) - by launching the maybe most successful pure electric car, which soon goes into mass-market price range This is what I as a socialist see as the one example of capitalism that actually WORKS. § not meant to be racist at all, but political - given the obvious tensions between Russia and the Western world, e.g. by Russian meddling in US elections, financing at least the German and French neonazi parties and invading Ukraine, it's simply unacceptable to depend on Russia honoring their rocket engine delivery contracts.

gaius 9y ago

Neither pay their taxes

bkohlmann 9y ago
If they are violating the law, they will be sued by the government and forced to pay what they owe just as any tax payer who violates the law. As it stands, they are paying what taxes they owe as allowed by our existing tax code. Out of curiosity, what, in your estimation, is the legal amount they have failed to remit?
- nisa 9y ago
  3.6 billion dollar - https://www.bloomberg.com/news/articles/2016-12-21/google-lowered-2015-taxes-by-3-6-billion-using-dutch-sandwich https://www.bloomberg.com/news/articles/2016-12-21/google-lo... but sure - it's somewhat legal or not illegal but don't pretend it's not sketchy.
urda 9y ago
They absolutely pay their taxes. They have a duty to their shareholders to not only pay said taxes, but the exact amount in taxes. Do you seriously expect them to pay more in taxes beyond what is legally required of them? Please avoid these "low effort" comments here on Hacker News, they do not work here.

stretchwithme 9y ago

How can anybody look at how much Apple executives are currently taking home and think that lush perks are being limited by large shareholders?

wffurr 9y ago

"As companies continue to generate more profits than they need to fund their own growth, the question becomes: Who will decide what to do with all those profits—managers or investors?" That's not the question that comes to my mind at all. Why limit it to just managers and investors? What about employees? Citizens of the countries that enabled these companies to make all that money in the first place? That agglomeration of wealth is just absurd and frankly immoral.