3 ms·

Not trying to pick on your comment but I'm always frustrated when someone points out "obligations to shareholders". I wish people would push back on this more.

Not trying to pick on your comment but I'm always frustrated when someone points out "obligations to shareholders". I wish people would push back on this more. Sony's obligation when building and selling the PlayStation is to the end user customer. Not the shareholder. Because if Sony has only the shareholder in mind then a gaming console is probably the wrong market to be in from a pure profit perspective. Sony's obligation is to the gamer who wants a competitive, performant console. If they put out a next-gen console that has no games to play nobody will buy it and end up with no profits. Organizations have it backwards if they think they should be catering to their shareholders. Shareholders expectations should be that Sony has expertise in the field of consoles and I'm investing in Sony with the understanding that I want to invest in that. When I buy Sony stock I don't think Sony has bringing me a few more points in profits first over doing the right thing and building the best product for the end user. I hope that my investing in them allows them to better continue to innovate and bring compelling products to the market. Milton Friedman's doctrine was a failed turning point in business thinking [0] and unfortunately pervasive in people's perspective today. Prominent shareholders often have different motives than that of delighting the customer. Motives that are very short term profit driven. Such a toxic way to purport value. [0] https://en.m.wikipedia.org/wiki/Friedman_doctrine https://en.m.wikipedia.org/wiki/Friedman_doctrine

kergonath 6y ago
Thanks. There should be such a comment every time someone mentions “but they have to maximise profit” and “think of the shareholder”. This point of view is not rooted in any law or legal principle and is just the Wall Street version of “might makes right”.
- WanderPanda 6y ago
  Of course it is rooted in law, natural law. Imagine a company makes a decent profit and then decides its goal is not to make so much profit anymore? What do you think would happen? I would vouch for Parkinsons Law kicking in instantly. This would just end up in a waste of resources and misery overall
  - kergonath 6y ago
    I think I see what you mean, but natural law is something else entirely. Under that framework, maximising profit for the few at the expense of the rest of society is unjust. https://en.m.wikipedia.org/wiki/Natural_law https://en.m.wikipedia.org/wiki/Natural_law
    - WanderPanda 6y ago
      Ah didn‘t know that, thanks! (was translating literally from german)
      - kergonath 6y ago
        There’s a bit more here, also interesting: https://acoup.blog/2019/12/12/collections-a-trip-through-cicero-natural-law https://acoup.blog/2019/12/12/collections-a-trip-through-cic... We could use a revival of these ideas (which were the foundation of the enlightenment) in our era of blasé cynicism. Then, if I understood, your point goes back to “might makes right”, as in, we have the power, we might as well take the money, and to hell with long term prospects or society. It is unfortunate that these people have so much influence over the rest of us. It is also a demonstration that optimising private interests does not result in public good, that is, the invisible hand of the market is utter bollocks.
- stjohnswarts 6y ago
  Yeah I think people are growing tired of this attitude. If you want to be a part of society and be a "person" in the eyes of the law you have to be a good citizen as well. Doctors have to follow a credo in addition to making $$ as do lawyers, engineers, etc. Thus it's time that if company's want to be legal "persons" they need to accept some responsibility for long term viability of their place in society beyond "shareholder value". I really hope that is a philosophy that more people take to heart.
WanderPanda 6y ago
I read this "Motives that are very short term profit driven." everywhere but never came to an explanation why that would be the case (something above anecdotal level). In my understanding DCF is just the natural way to put it. Maybe the discounting rate can depend a bit on the shareholder, but in large the investment horizon of most players should be quite far, given the current "risk-free" return.
- windexh8er 6y ago
  I don't think you need to look much further than the ridiculous analysis of quarterly earnings to support that idea.
andrepd 6y ago
The more I read about Friedman the more I'm convinced he's one of the most harmful thinkers/politicians of the past 75 years.

kergonath 6y ago

Thanks. There should be such a comment every time someone mentions “but they have to maximise profit” and “think of the shareholder”. This point of view is not rooted in any law or legal principle and is just the Wall Street version of “might makes right”.

WanderPanda 6y ago
Of course it is rooted in law, natural law. Imagine a company makes a decent profit and then decides its goal is not to make so much profit anymore? What do you think would happen? I would vouch for Parkinsons Law kicking in instantly. This would just end up in a waste of resources and misery overall
- kergonath 6y ago
  I think I see what you mean, but natural law is something else entirely. Under that framework, maximising profit for the few at the expense of the rest of society is unjust. https://en.m.wikipedia.org/wiki/Natural_law https://en.m.wikipedia.org/wiki/Natural_law
  - WanderPanda 6y ago
    Ah didn‘t know that, thanks! (was translating literally from german)
    - kergonath 6y ago
      There’s a bit more here, also interesting: https://acoup.blog/2019/12/12/collections-a-trip-through-cicero-natural-law https://acoup.blog/2019/12/12/collections-a-trip-through-cic... We could use a revival of these ideas (which were the foundation of the enlightenment) in our era of blasé cynicism. Then, if I understood, your point goes back to “might makes right”, as in, we have the power, we might as well take the money, and to hell with long term prospects or society. It is unfortunate that these people have so much influence over the rest of us. It is also a demonstration that optimising private interests does not result in public good, that is, the invisible hand of the market is utter bollocks.
stjohnswarts 6y ago
Yeah I think people are growing tired of this attitude. If you want to be a part of society and be a "person" in the eyes of the law you have to be a good citizen as well. Doctors have to follow a credo in addition to making $$ as do lawyers, engineers, etc. Thus it's time that if company's want to be legal "persons" they need to accept some responsibility for long term viability of their place in society beyond "shareholder value". I really hope that is a philosophy that more people take to heart.

WanderPanda 6y ago

I read this "Motives that are very short term profit driven." everywhere but never came to an explanation why that would be the case (something above anecdotal level). In my understanding DCF is just the natural way to put it. Maybe the discounting rate can depend a bit on the shareholder, but in large the investment horizon of most players should be quite far, given the current "risk-free" return.

windexh8er 6y ago
I don't think you need to look much further than the ridiculous analysis of quarterly earnings to support that idea.

andrepd 6y ago

The more I read about Friedman the more I'm convinced he's one of the most harmful thinkers/politicians of the past 75 years.