4 ms·

Investors are owners. They own the company. You're saying the owners of the company are annoying to the people working for the company.

by txsh 8y ago

raverbashing 8y ago
Yes, but it's different Say you buy a car with someone, you'll use it for 80% of the time, and the other person would use it for the remaining 20% Would you agree if the other owner would spend his 20% driving recklessly, redlining the engine just because the car is his? And in public companies you don't even get to pick who is buying that minor percentage
- function_seven 8y ago
  Now look at it from the other side. You're the 20% owner of that car and you begin to realize the primary owner is neglecting oil changes and abusing the engine. Just because you use it on weekends doesn't mean your complaints are unreasonable. Activist investors aren't always wrong. It may have lead to Ballmer's ouster at MS for example. Or earning Dell shareholders more money when Mr. Dell took it private. https://www.forbes.com/sites/nathanvardi/2013/09/03/valueact-hedge-funds-huge-microsoft-victory/#8d9fe8318ae4 https://www.forbes.com/sites/nathanvardi/2013/09/03/valueact...
  - lefstathiou 8y ago
    I am a little conflicted on this. This a complex topic so I won’t fully develop the point but I can see a rational basis for CEOs to not treat their companies as a “shared” resource and I would argue that when an investment is made in a company there is an implicit understanding that you are being invited to participate in the economic opportunity but not so much in the control. To work off your analogy, it is akin to “going along for the ride” as opposed to sharing the car. Yes, you own 20% of the car but you agreed that someone else would do the driving and chart the course. If you don’t like the way they are driving, get out and hop into another car. I think it is a bit much to be a minority investor and expect the entire operation to retool when that is a significantly more expensive proposition for the company than it is for you to simply exit the position and buy someone else’s stock. Again, I am not totally confident in this view...
jernfrost 8y ago
When we hear the word "owner" we associate that with full ownership, as if you own a car, house or whatever and take care of it and use it. This kind of ownership is much closer to lending money to someone. While they are technically owners, emotionally speaking the arrangement is much more as if Elon Musk owns the company and the "owners" lent him money. Elon Musk is the person who has built the company and spent a considerable amount of time working in it, putting his heart and soul into the company. An investor can jump in at any time and become an "owner". Does not mean an investor has the same emotional attachment to the company. Say you build a house with lots of efforts over many years and live there for decades. To pay the bills you sell ownership shared in the house to investors. What happens to that house is going to matter a lot more to you than the investor. It is not without reason that family run companies often outperform stock owned companies. When you have an attachment to a company beyond mere short term profit, that is a stronger bond.
- jacquesm 8y ago
  > This kind of ownership is much closer to lending money to someone. No it isn't. It's 'fractional ownership', a mechanism designed to defray the risks of a single venture across multiple people because the risks were larger than any single individual could bear. The case that created it was the India runs with ships that could carry more valuable cargo than any individual could afford to buy or insure. Spreading that risk through fractional ownership eventually led to the stockmarket. So it absolutely not at all like lending someone money.
  - walshemj 8y ago
    And also to the railroads a lot of the capital that built Americas railroads was from UK Investment Trusts (some of which still exist) with mainly middle class shareholders
  - jernfrost 8y ago
    I thought it was abundantly clear that I know that. In context it should have been clear that I was referring to the psychological aspects of it. To the person starting a company, it will not "feel" very different from borrowing money from someone. What you are talking about are the concrete technical differences. We have no disagreement on those. From the perspective of a person starting a company, he has to decide how to obtain money for building the company. He can borrow or he can issue stocks. Both methods give him money. The difference is in how the risk is spread and how the benefits are spread. The person starting a stock company can't pay profits to himself without also doing so in equal measure to other stock owners. With the bank he only has to pay the interest on the loan.
kelnos 8y ago
Common wisdom around here is that the founders of a private company are generally in a much better position to decide what's best for the company than the investors/VCs. (Which I agree with, though as with everything, there are certainly exceptions.) If anything, that should be more true when dealing with most investors in public companies, not less.

Investors are owners. They own the company. You're saying the owners of the company are annoying to the people working for the company.

by txsh 8y ago

Investors are owners. They own the company. You're saying the owners of the company are annoying to the people working for the company.

raverbashing 8y ago

Yes, but it's different Say you buy a car with someone, you'll use it for 80% of the time, and the other person would use it for the remaining 20% Would you agree if the other owner would spend his 20% driving recklessly, redlining the engine just because the car is his? And in public companies you don't even get to pick who is buying that minor percentage

function_seven 8y ago
Now look at it from the other side. You're the 20% owner of that car and you begin to realize the primary owner is neglecting oil changes and abusing the engine. Just because you use it on weekends doesn't mean your complaints are unreasonable. Activist investors aren't always wrong. It may have lead to Ballmer's ouster at MS for example. Or earning Dell shareholders more money when Mr. Dell took it private. https://www.forbes.com/sites/nathanvardi/2013/09/03/valueact-hedge-funds-huge-microsoft-victory/#8d9fe8318ae4 https://www.forbes.com/sites/nathanvardi/2013/09/03/valueact...
- lefstathiou 8y ago
  I am a little conflicted on this. This a complex topic so I won’t fully develop the point but I can see a rational basis for CEOs to not treat their companies as a “shared” resource and I would argue that when an investment is made in a company there is an implicit understanding that you are being invited to participate in the economic opportunity but not so much in the control. To work off your analogy, it is akin to “going along for the ride” as opposed to sharing the car. Yes, you own 20% of the car but you agreed that someone else would do the driving and chart the course. If you don’t like the way they are driving, get out and hop into another car. I think it is a bit much to be a minority investor and expect the entire operation to retool when that is a significantly more expensive proposition for the company than it is for you to simply exit the position and buy someone else’s stock. Again, I am not totally confident in this view...

jernfrost 8y ago

When we hear the word "owner" we associate that with full ownership, as if you own a car, house or whatever and take care of it and use it. This kind of ownership is much closer to lending money to someone. While they are technically owners, emotionally speaking the arrangement is much more as if Elon Musk owns the company and the "owners" lent him money. Elon Musk is the person who has built the company and spent a considerable amount of time working in it, putting his heart and soul into the company. An investor can jump in at any time and become an "owner". Does not mean an investor has the same emotional attachment to the company. Say you build a house with lots of efforts over many years and live there for decades. To pay the bills you sell ownership shared in the house to investors. What happens to that house is going to matter a lot more to you than the investor. It is not without reason that family run companies often outperform stock owned companies. When you have an attachment to a company beyond mere short term profit, that is a stronger bond.

jacquesm 8y ago
> This kind of ownership is much closer to lending money to someone. No it isn't. It's 'fractional ownership', a mechanism designed to defray the risks of a single venture across multiple people because the risks were larger than any single individual could bear. The case that created it was the India runs with ships that could carry more valuable cargo than any individual could afford to buy or insure. Spreading that risk through fractional ownership eventually led to the stockmarket. So it absolutely not at all like lending someone money.
- walshemj 8y ago
  And also to the railroads a lot of the capital that built Americas railroads was from UK Investment Trusts (some of which still exist) with mainly middle class shareholders
- jernfrost 8y ago
  I thought it was abundantly clear that I know that. In context it should have been clear that I was referring to the psychological aspects of it. To the person starting a company, it will not "feel" very different from borrowing money from someone. What you are talking about are the concrete technical differences. We have no disagreement on those. From the perspective of a person starting a company, he has to decide how to obtain money for building the company. He can borrow or he can issue stocks. Both methods give him money. The difference is in how the risk is spread and how the benefits are spread. The person starting a stock company can't pay profits to himself without also doing so in equal measure to other stock owners. With the bank he only has to pay the interest on the loan.

kelnos 8y ago

Common wisdom around here is that the founders of a private company are generally in a much better position to decide what's best for the company than the investors/VCs. (Which I agree with, though as with everything, there are certainly exceptions.) If anything, that should be more true when dealing with most investors in public companies, not less.