4 ms·

Many shareholders (of medium to large-cap, publicly traded companies) seem to only be interested in short-term gains, not longer term. Some claim to be interes

• chii 8y ago
  Because long term, we are all dead. Profits today can be easily invested in another short term profit project tomorrow. Therefore, I say long term should be done by a foundation that has the explicit goal to achieve, rather than a corp whose sole purpose is to make profit.
  • pluma 8y ago
    > rather than a corp whose sole purpose is to make profit So we've all now universally accepted the Friedman doctrine? You're aware that the Friedman doctrine isn't held as an inherent truth everywhere and by everyone, right? Not every culture sees corporations as having the sole moral duty of maximising shareholder value with no regard for societal wellbeing.
    • imglorp 8y ago
      Actually neither! There is one level more pessimistic than Friedman, which is Greenspan's parting realization. [1] So it's three layers of theft now. Public corps ... Society's wellbeing < shareholder's value < executive's value So you get these axemen who show up, extract whatever they can from the corporation, and then walk away from the ruins for the next thief, if anything is left. They're TWO layers removed from society. 1. https://www.nytimes.com/2008/10/24/business/economy/24panel.html https://www.nytimes.com/2008/10/24/business/economy/24panel....
• tryptophan 8y ago
  Could you actually give an example of the short term mentality? I keep hearing it repeated over and over and over but nobody actually points to an example or study or anything.
  • coupdejarnac 8y ago
    Fine, I got you fam. At the last large corporation I worked at, they got rid of most of the inside embedded device engineers and outsourced design to India and Japan. The reasoning was probably something like we spend $X on engineering staff here, whereas we could spend $Y to outsource development of the same products, where $Y < $X. Whoever made that decision made a fat bonus and left. The time necessary to determine the real value of that decision takes a few years, after that guy was gone. Anyway, most of the outsourcing ended up being a huge waste of money and put one of our flagship products a year behind schedule. The company has since moved embedded development back inside.
  • pluma 8y ago
    Toys 'R' Us was doing fine and making stable profits but the company was run to the ground in an attempt to push online sales for a chance of massive growth. It's not so much that the market favors "short term" growth. The market favors high-risk high-growth (which usually only works short term and requires an exit) over low-risk low-growth (which is usually fairly stable in the long run).
  • short_sells_poo 8y ago
    Part of the problem I think is that big investment companies and institutions (pension funds and asset managers) rebalance their portfolios in ever shorter intervals. The game has sped up dramatically. This means that big investors reevaluate their portfolio composition ever more frequently and thus companies have a shrinking leeway in sacrificing short term gains for long term prospects. A company whose stock is ouperformed by a competitor purely because of short term tricks runs the risk that their company will be downweighted at the next rebalancing time. This then results in further selling pressure on the stock. It's all a feedback loop really. This is further exacerbated by using the same quantitative models across many investment companies, resulting in herd behavior and clustering. There are other considerations for sure, but I see the above as at least part of the problem.
• skookumchuck 8y ago
  > The market does not seem to be good at optimizing for long-term outcomes, bluntly. The S&P500 has done extremely well, long term.