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This is a controversial opinion, but I don't agree with the idea that big corporations should make an entry into every single adjacent market. If the company ha

by whack 6y ago

This is a controversial opinion, but I don't agree with the idea that big corporations should make an entry into every single adjacent market. If the company has core expertise and advantages that can deliver a decisive win in a known-lucrative market, then it's a no brainer. But if that's not the case, why run around chasing shadows everywhere, instead of focusing on harvesting the markets where you're already winning. "But if you don't expand into other markets, you'll eventually die!" Sure, but that's not a bad thing. The purpose of a corporation isn't to continue existing in perpetuity, but rather, to maximize returns for its investors. You found a gold mine? Great, go mine it until it runs dry, then close up shop and call it a day. There's no need to spend half your profits on a wild-goose chase for other gold mines (blackberry investing in self-driving cars anyone?) - if that's what I as an investor want, I can just use my dividends to invest in other companies or startups that are aiming to do exactly that. I'd rather invest in a company that sticks to the things that it can reliably excel at, and direct its profits back to me, so that I can then invest it in other companies that I trust in other fields. A company that is spending half its profits trying to be something it's not - that's my worst nightmare as an investor.

Invictus0 6y ago
No company operates this way. Companies are full of people optimizing for their own fortunes, and the company going under is not and will never be a part of those plans.
- weehoo 6y ago
  Many creative productions take on a similar structure to what he proposes. Many entities, some individuals, some partnerships, and some corporations, come together to produce a single work. The associations dissolve when the work is finished. Films, albums, festivals, etc.
masklinn 6y ago
> This is a controversial opinion, but I don't agree with the idea that big corporations should make an entry into every single adjacent market. If the company has core expertise and advantages that can deliver a decisive win in a known-lucrative market, then it's a no brainer. But if that's not the case, why run around chasing shadows everywhere, instead of focusing on harvesting the markets where you're already winning. The risk is that a competitor comes out of these adjacent markets and edges you out. That's what's looking likely to happen with ARM, which is slowly moving from embedded / cellphone to laptops and servers.
PaulDavisThe1st 6y ago
> The purpose of a corporation isn't to continue existing in perpetuity, but rather, to maximize returns for its investors. Society grants a group of people immunity from personal liability when they form an organization that has some chance of carrying out some useful work. The organization becomes a special kind of entity - a corporation. It can operate without its investors & officers fearing that their own wealth is on the line should something go wrong. Societies do this because it is widely believed that it would be impossible for various things to happen without it. That is, if personal liability was always in play, nobody would organize human organizations to try to accomplish difficult/dangerous tasks, and the same might also apply to unlikely-to-succeed-but-potentially-significant efforts. That's what the purpose of a corporation is, not maximising returns for its investors, which is a recent idea (dating back to the 1970s) and has nothing to do with why corporations exist.
- alisonkisk 6y ago
  True but offtopic or supportive of parents point, which is that running off on tangents is not the purpose of the corporation.
  - PaulDavisThe1st 6y ago
    By 2020, the "purpose of a corporation", both in the general sense of "what are corporations for?" and the specific sense (e.g. "what is Intel for?") has become fairly unclear. Maybe it actually is in the interests of <some-group> that Intel runs off on tangents. How would we establish that? Well, we'd have to have some understanding of what the purpose of the corporation is. I don't claim to have any special insight into that, I'm just pointing out that claiming that its purpose is maximising shareholder revenue is historically revisionist and inaccurate.
- golergka 6y ago
  > Societies do this because it is widely believed that it would be impossible for various things to happen without it. It is not society's business to allow or disallow different kinds of contracts between private parties. If I know that corporation's investors don't have personal liability and still decide to go into business with them, it's my personal decision to accept this risk and not society's. If I so please, I could go into even riskier deals, up to just gifting them my money. It could be a stupid decision, but it's my decision to make, not something that "society" can allow me to do – actually, not society, but it's worst enemy, the government. Of course, some governments act out of assumptions that you stated, but it's nothing more than just justification for tiranny.
djmips 6y ago
Hmmm. I do not agree because this is very much an unless they succeed kind of parable and then you can spin it another way. Apple is now a chip company? I guess avoid apple because them re-inventing themselves all the time is your worst nightmare as an investor.
xenocyon 6y ago
> The purpose of a corporation... to maximize returns for its investors. That's a common misunderstanding. "In nearly all legal jurisdictions, disinterested and informed directors have the discretion to act in what they believe to be the interest of the business corporate entity, even if this differs from maximizing profits for present shareholders. Usually maximizing shareholder value is not a legal obligation, but the product of the pressure that activist shareholders, stock-based compensation schemes and financial markets impose on corporate directors." [1] [1] https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_...
- colinmhayes 6y ago
  Lmao you're on this again. Stockholders control the company. Their goal and "purpose of a corporation" are synonyms, even if legally companies aren't forced to maximize profits. In fact, the legal requirements have nothing to do with the purpose of the company.
- whack 6y ago
  I was really hoping to avoid going off on this tangent. To be more precise, I was comparing existing-in-perpetuity vs maximizing-investor-returns, and the latter is a more important goal. Whether corporations should prioritize morality and employee/customer interests, is a whole other discussion that is best debated elsewhere.

by whack 6y ago

Invictus0 6y ago

No company operates this way. Companies are full of people optimizing for their own fortunes, and the company going under is not and will never be a part of those plans.

weehoo 6y ago
Many creative productions take on a similar structure to what he proposes. Many entities, some individuals, some partnerships, and some corporations, come together to produce a single work. The associations dissolve when the work is finished. Films, albums, festivals, etc.

masklinn 6y ago

> This is a controversial opinion, but I don't agree with the idea that big corporations should make an entry into every single adjacent market. If the company has core expertise and advantages that can deliver a decisive win in a known-lucrative market, then it's a no brainer. But if that's not the case, why run around chasing shadows everywhere, instead of focusing on harvesting the markets where you're already winning. The risk is that a competitor comes out of these adjacent markets and edges you out. That's what's looking likely to happen with ARM, which is slowly moving from embedded / cellphone to laptops and servers.

PaulDavisThe1st 6y ago

> The purpose of a corporation isn't to continue existing in perpetuity, but rather, to maximize returns for its investors. Society grants a group of people immunity from personal liability when they form an organization that has some chance of carrying out some useful work. The organization becomes a special kind of entity - a corporation. It can operate without its investors & officers fearing that their own wealth is on the line should something go wrong. Societies do this because it is widely believed that it would be impossible for various things to happen without it. That is, if personal liability was always in play, nobody would organize human organizations to try to accomplish difficult/dangerous tasks, and the same might also apply to unlikely-to-succeed-but-potentially-significant efforts. That's what the purpose of a corporation is, not maximising returns for its investors, which is a recent idea (dating back to the 1970s) and has nothing to do with why corporations exist.

alisonkisk 6y ago
True but offtopic or supportive of parents point, which is that running off on tangents is not the purpose of the corporation.
- PaulDavisThe1st 6y ago
  By 2020, the "purpose of a corporation", both in the general sense of "what are corporations for?" and the specific sense (e.g. "what is Intel for?") has become fairly unclear. Maybe it actually is in the interests of <some-group> that Intel runs off on tangents. How would we establish that? Well, we'd have to have some understanding of what the purpose of the corporation is. I don't claim to have any special insight into that, I'm just pointing out that claiming that its purpose is maximising shareholder revenue is historically revisionist and inaccurate.
golergka 6y ago
> Societies do this because it is widely believed that it would be impossible for various things to happen without it. It is not society's business to allow or disallow different kinds of contracts between private parties. If I know that corporation's investors don't have personal liability and still decide to go into business with them, it's my personal decision to accept this risk and not society's. If I so please, I could go into even riskier deals, up to just gifting them my money. It could be a stupid decision, but it's my decision to make, not something that "society" can allow me to do – actually, not society, but it's worst enemy, the government. Of course, some governments act out of assumptions that you stated, but it's nothing more than just justification for tiranny.

djmips 6y ago

Hmmm. I do not agree because this is very much an unless they succeed kind of parable and then you can spin it another way. Apple is now a chip company? I guess avoid apple because them re-inventing themselves all the time is your worst nightmare as an investor.

xenocyon 6y ago

> The purpose of a corporation... to maximize returns for its investors. That's a common misunderstanding. "In nearly all legal jurisdictions, disinterested and informed directors have the discretion to act in what they believe to be the interest of the business corporate entity, even if this differs from maximizing profits for present shareholders. Usually maximizing shareholder value is not a legal obligation, but the product of the pressure that activist shareholders, stock-based compensation schemes and financial markets impose on corporate directors." [1] [1] https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_...

colinmhayes 6y ago
Lmao you're on this again. Stockholders control the company. Their goal and "purpose of a corporation" are synonyms, even if legally companies aren't forced to maximize profits. In fact, the legal requirements have nothing to do with the purpose of the company.
whack 6y ago
I was really hoping to avoid going off on this tangent. To be more precise, I was comparing existing-in-perpetuity vs maximizing-investor-returns, and the latter is a more important goal. Whether corporations should prioritize morality and employee/customer interests, is a whole other discussion that is best debated elsewhere.