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> Government is far worse than the private sector at long term planning. How many public companies have needed bailouts after spending most of their profits on

> Government is far worse than the private sector at long term planning. How many public companies have needed bailouts after spending most of their profits on stock buybacks, again? > Mostly, governments optimize for things to look good on the next election day. With 4 year terms, that's an average 2 years planning horizon. As opposed to public companies and the quarterly earnings cycle?

AbrahamParangi 6y ago
Bailouts are public failures, not private failures. Businesses are doing what they should in fighting tooth and nail to survive. The market is doing what it should in killing businesses too stupid or greedy to survive. It is the government doing the wrong thing by saving the incompetent. If the government bails out idiots, what's the point in being smart?
- Ygg2 6y ago
  Bailouts are public. But that doesn't mean there aren't bailouts of private sector. If government doesn't bailout idiots like e.g. private banks, their entire economy can collapse. That means no pensions, no jobs, and destroyed economy.
  - kwhitefoot 6y ago
    Governments could bail out the victims instead, that is the pensioners, the employees.
    - Ygg2 6y ago
      That's true, however it's both easier and politicaly good move to bail out banks. Easier because you don't have to see who had which plan and how to bail out each person on it. Plus banks are both more powerful and easier to return the favor than the victims.
- domador 6y ago
  Are airlines idiots? Aren't they more like victims of extremely unfortunate circumstances? Do we want to lose commercial air travel for a few years? If airlines are worth helping out and saving, then maybe so are certain other businesses. While we're at it, let's work on toning down the greed part, which as it is was already destroying society even before this crisis.
  - AbrahamParangi 6y ago
    What makes you think that allowing the holders of airline bonds and equity to take a bath will result in commercial air travel disappearing? Edit: I should be clear. Yes they're idiots. There is no reward without risk. Stock buybacks make businesses fragile. They're functionally equivalent to selling insurance. They provide predictable returns with high probability and absolute ruin with low probability. They've been playing Russian Roulette for years and it turned out a bullet was in the chamber this time.
bhupy 6y ago
> How many public companies have needed bailouts after spending most of their profits on stock buybacks, again? Setting aside for the moment the general agreement that bailouts are bad, and a policy failure rather than a market failure...maybe another question to ask is: what percentage of the GDP comprises public companies that needed bailouts after spending most of their profits on stock buybacks? One of the advantages of decentralized planning is that there is no single point of failure — some subset of corporations are always efficiently providing for consumers. Governments that are large and centralized enough are single points of failure, and it's really hard to correct that once such failures occur. > As opposed to public companies and the quarterly earnings cycle? But Value Investing is a big part of the market, and it's fundamentally a long-run investment strategy. Some of the most successful and impactful companies don't pay dividends, or operate on losses with the expectation of profits at some time in the distant future. Even the argument that Governments are good at doing big things without the expectation of profit seems to be under scrutiny. NASA's planned SLS moon mission is a bit of a disaster — way over budget and way behind schedule. Because the boosters aren't reusable, each launch is expected to cost $1B (with a B) dollars — EACH launch! Meanwhile SpaceX's target cost-per-launch is $50M. SLS is unlikely to fly until at least 2021[1]. Meanwhile, SpaceX is building a factory that will manufacture 1 Starship (capable of going to the Moon), every 72 hours[2]. I don't even need to go down the F-35 rabbit hole. [1] https://arstechnica.com/science/2019/07/nasas-large-sls-rocket-unlikely-to-fly-before-at-least-late-2021/ https://arstechnica.com/science/2019/07/nasas-large-sls-rock... [2] https://arstechnica.com/science/2020/03/inside-elon-musks-plan-to-build-one-starship-a-week-and-settle-mars/ https://arstechnica.com/science/2020/03/inside-elon-musks-pl...
- jlbnjmn 6y ago
  Institutions are groups of people with rules. People not following rules will ruin any form of governance, public or private. The best way to improve any group of people is by being an example. Thank you for your exemplary insight.
kian 6y ago
On the contrary, I'd say that public companies accurately forecasted that regardless of their shenanigans they'd be bailed out by the government, and acted accordingly in a long-term fashion. That's why, at some point, it will be critical to the future viability of our institutions and way of life to let companies fail when they make catastrophic mistakes, no matter how large they are. One strong slap from reality, and nobody there to back them up, will be a sufficient signal to engender long-term planning that doesn't rely on the public's largesse. Corporate corpses are the best fertilizer for the institutions we need to build going forward.

AbrahamParangi 6y ago

Bailouts are public failures, not private failures. Businesses are doing what they should in fighting tooth and nail to survive. The market is doing what it should in killing businesses too stupid or greedy to survive. It is the government doing the wrong thing by saving the incompetent. If the government bails out idiots, what's the point in being smart?

Ygg2 6y ago
Bailouts are public. But that doesn't mean there aren't bailouts of private sector. If government doesn't bailout idiots like e.g. private banks, their entire economy can collapse. That means no pensions, no jobs, and destroyed economy.
- kwhitefoot 6y ago
  Governments could bail out the victims instead, that is the pensioners, the employees.
  - Ygg2 6y ago
    That's true, however it's both easier and politicaly good move to bail out banks. Easier because you don't have to see who had which plan and how to bail out each person on it. Plus banks are both more powerful and easier to return the favor than the victims.
domador 6y ago
Are airlines idiots? Aren't they more like victims of extremely unfortunate circumstances? Do we want to lose commercial air travel for a few years? If airlines are worth helping out and saving, then maybe so are certain other businesses. While we're at it, let's work on toning down the greed part, which as it is was already destroying society even before this crisis.
- AbrahamParangi 6y ago
  What makes you think that allowing the holders of airline bonds and equity to take a bath will result in commercial air travel disappearing? Edit: I should be clear. Yes they're idiots. There is no reward without risk. Stock buybacks make businesses fragile. They're functionally equivalent to selling insurance. They provide predictable returns with high probability and absolute ruin with low probability. They've been playing Russian Roulette for years and it turned out a bullet was in the chamber this time.

bhupy 6y ago

> How many public companies have needed bailouts after spending most of their profits on stock buybacks, again? Setting aside for the moment the general agreement that bailouts are bad, and a policy failure rather than a market failure...maybe another question to ask is: what percentage of the GDP comprises public companies that needed bailouts after spending most of their profits on stock buybacks? One of the advantages of decentralized planning is that there is no single point of failure — some subset of corporations are always efficiently providing for consumers. Governments that are large and centralized enough are single points of failure, and it's really hard to correct that once such failures occur. > As opposed to public companies and the quarterly earnings cycle? But Value Investing is a big part of the market, and it's fundamentally a long-run investment strategy. Some of the most successful and impactful companies don't pay dividends, or operate on losses with the expectation of profits at some time in the distant future. Even the argument that Governments are good at doing big things without the expectation of profit seems to be under scrutiny. NASA's planned SLS moon mission is a bit of a disaster — way over budget and way behind schedule. Because the boosters aren't reusable, each launch is expected to cost $1B (with a B) dollars — EACH launch! Meanwhile SpaceX's target cost-per-launch is $50M. SLS is unlikely to fly until at least 2021[1]. Meanwhile, SpaceX is building a factory that will manufacture 1 Starship (capable of going to the Moon), every 72 hours[2]. I don't even need to go down the F-35 rabbit hole. [1] https://arstechnica.com/science/2019/07/nasas-large-sls-rocket-unlikely-to-fly-before-at-least-late-2021/ https://arstechnica.com/science/2019/07/nasas-large-sls-rock... [2] https://arstechnica.com/science/2020/03/inside-elon-musks-plan-to-build-one-starship-a-week-and-settle-mars/ https://arstechnica.com/science/2020/03/inside-elon-musks-pl...

jlbnjmn 6y ago
Institutions are groups of people with rules. People not following rules will ruin any form of governance, public or private. The best way to improve any group of people is by being an example. Thank you for your exemplary insight.

kian 6y ago

On the contrary, I'd say that public companies accurately forecasted that regardless of their shenanigans they'd be bailed out by the government, and acted accordingly in a long-term fashion. That's why, at some point, it will be critical to the future viability of our institutions and way of life to let companies fail when they make catastrophic mistakes, no matter how large they are. One strong slap from reality, and nobody there to back them up, will be a sufficient signal to engender long-term planning that doesn't rely on the public's largesse. Corporate corpses are the best fertilizer for the institutions we need to build going forward.