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People like to claim these things anecdotally but if you sit down for a few minutes and think about it then it doesn't really make sense. By doing something lik

by nv-vn 6y ago

People like to claim these things anecdotally but if you sit down for a few minutes and think about it then it doesn't really make sense. By doing something like that you'd sacrifice current growth, and since money today is worth more than money in the future cutting dead weight now would be more valuable to the shareholders (not to mention the fact that the losses accumulate each year as cash being drained from your accounts). The reality is probably that companies are making a bet on some far fetched technology, so for example Fuschia or the developers behind it could lead to something insanely profitable, but there's only a 20% chance. If you're in a good year then the investment is worthwhile because the expected value is still positive. If you're in a bad year you can't afford to wait for the investment to pan out (not to mention your risk model goes totally out of whack; if the market is doing poorly consumers won't shell out cash for this new tech) so you have to cut costs in that area.

ImaCake 6y ago
I like the insight in this comment, but I worry that you subscribe to the idea that there is any kind of sanity in buisness decisions in a large org. As a researcher pleb mucking around in the undergrowth of a university organisation, many of the decisions admin makes don't make any strategic sense if the university is considered as a rational machine looking out for it's own good. If instead, the university is seen as being controlled by a bunch of self serving sociopaths looking to get a leg-up on the competition, the insane decisions admin makes suddenly become a lot more understandable.
c3534l 6y ago
Shareholders are not rational, and CEOs believe shareholders to be even more irrational than they actually are. There's plenty of research showing that CEOs do things they think looks good to investors, despite evidence to the contrary. What happens to come to mind is research of FIFO v. LIFO inventory. One understates income at the benefit of having a lower tax liability, and the other overstates income to investors at the cost of paying more in taxes. Statistically, investors punish CEOs for leaving tax cuts on the table for an amount greater than the value of the supposed tax savings, while CEOs insist the opposite is true and that investors are rewarding them for overstating income. Managing your books is widespread and commonplace. People downsize, hide liabilities, massage earnings, and do irrational things regardless of not just long-term consequences, but often on the basis of perceived consequences. In this particular case, though, you're probably right. Android itself was one of those whacky ideas that no one expected to gain any traction. Google funds moonshot projects as a matter of company culture and self-identity and it seems to actually make them money. Of course, the possibility still exists to cut them for short-term gain and I doubt no one factors that into their equation at all.
earthboundkid 6y ago
The Xbox: figment of the imagination because markets are rational.

by nv-vn 6y ago

ImaCake 6y ago

I like the insight in this comment, but I worry that you subscribe to the idea that there is any kind of sanity in buisness decisions in a large org. As a researcher pleb mucking around in the undergrowth of a university organisation, many of the decisions admin makes don't make any strategic sense if the university is considered as a rational machine looking out for it's own good. If instead, the university is seen as being controlled by a bunch of self serving sociopaths looking to get a leg-up on the competition, the insane decisions admin makes suddenly become a lot more understandable.

c3534l 6y ago

Shareholders are not rational, and CEOs believe shareholders to be even more irrational than they actually are. There's plenty of research showing that CEOs do things they think looks good to investors, despite evidence to the contrary. What happens to come to mind is research of FIFO v. LIFO inventory. One understates income at the benefit of having a lower tax liability, and the other overstates income to investors at the cost of paying more in taxes. Statistically, investors punish CEOs for leaving tax cuts on the table for an amount greater than the value of the supposed tax savings, while CEOs insist the opposite is true and that investors are rewarding them for overstating income. Managing your books is widespread and commonplace. People downsize, hide liabilities, massage earnings, and do irrational things regardless of not just long-term consequences, but often on the basis of perceived consequences. In this particular case, though, you're probably right. Android itself was one of those whacky ideas that no one expected to gain any traction. Google funds moonshot projects as a matter of company culture and self-identity and it seems to actually make them money. Of course, the possibility still exists to cut them for short-term gain and I doubt no one factors that into their equation at all.

earthboundkid 6y ago

The Xbox: figment of the imagination because markets are rational.