12 ms·

I was actually thinking "Satya, you know that Berkshire is you end game here... right?" I agree, but I think MSFT (and friends) are in this predicament no matt

I was actually thinking "Satya, you know that Berkshire is you end game here... right?" I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? That said, I don't really think BRK is the end game. For one thing, Berkshire is kind of an exception. There are plenty of smaller conglomerates that are actually like Berkshire, but most pretend not to be conglomerates. They pretend to be far more cohesive & synergetic than Berkshire. Also, Alphabet shows that synergies can be easy to find. Youtube, Android... This generation's acquisitions need to be 10X bigger than that. But... these companies are in uncharted waters. No company has wielded free resources at the scale that MSFT now operates. They aren't the only one currently, but they don't have predecessors... unless we go back to VOC or somesuch. OTOH... Satya is accidentally in the same position Buffet intentionally sought: Sitting on a pile of capital that must be allocated.

pedrocr 6y ago
> I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? Returning money to shareholders is the common solution for when you don't know how to grow more and profitability in the businesses you're already in and don't have any particular advantage in entering new ones. I'm not saying that's what they should be doing but sitting on a pile of capital that you don't know what to do with isn't a new problem that we need to invent new solutions for.
- dalbasal 6y ago
  "Returning money to shareholders" is largely a consequence macroeconomic policy or state of affairs. It is, evidently, not actually a choice that CEOs currently have in practice. Dividends and/or buybacks are one of the powers shareholders do tend to wield, in practice. They want to invest more, not less. Also, IDK if it is a common solution. Nothing is really common at MSFT-scale. A free cash flow like Google, Alphabet, etc. is almost unprecedented. Meanwhile, I do actually think that this is better for shareholders. IMO "Synergies" is a term somewhere between euphemism and a boomerism but for the purpose of "shareholder value" it doesn't matter. At Monopoly/Unicorn/FAANG scale, there are big opportunities for synergy. Think Google-Android. Why is Nuance being owned by Alphabet less efficient than being traded independently or owned by private investors? Why is Alphabet owning vanguard more efficient than owning Nuance? The answer to those question can have no actual impact on reality. If the acquired business is cash generative, they can left to their devices. If the parent company doesn't borrow, then "efficiency" never becomes explicit. Explicit efficiency is relative to cost of borrowing. Implicit efficiency is implied by share prices... and at this point things get foggy.
- nemothekid 6y ago
  My own uneducated position is that is a new problem because shareholders don't want their money back. Shareholders have been piling money into stocks [1], so if you gave them the money back they would likely just put it right back into Microsoft (or, more likely, it would signal that Microsoft doesn't know what to do with the money, so people would pull out of Microsoft to invest somewhere else). [1] https://finance.yahoo.com/news/more-money-poured-stocks-past-095127730.html https://finance.yahoo.com/news/more-money-poured-stocks-past...
  - intuitionist 6y ago
    If they reinvested the dividend right back in MSFT then MSFT can give its owners a tax break and get the same economic result by buying back shares.
kelnos 6y ago
> I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? Well, they can just stop growing, and continue doing what works. If that thing stops working (or they have a good belief that it will stop working before too long), they have two options: 1) do nothing, and gradually wind the company down and return capital to shareholders so they can reinvest it elsewhere, or 2) pivot, and accept that the things they are pivoting to will be a rounding error in their finances for years while they grow. Obviously this is disastrous in our current economic system; a company that tried this would watch its stock price fall into the toilet before too long. But absent that, why not? Consolidation is what will bring us to a corporate-run dystopia. I would much rather the world be filled mostly with small and medium sized businesses, with every market open to a lot of competition and even cooperation (on standards, not on prices). But I know, that's just a pipe dream, and humans generally suck at cooperation when money is involved.
- dalbasal 6y ago
  >> a company that tried this would watch its stock price fall into the toilet.. But absent that, why not? lol >> Consolidation is what will bring us to a corporate-run dystopia. I would much rather the world be filled mostly with small and medium sized businesses... The alternative to that is trust busting, perhaps. I was commenting on the market logic, so to speak. If we're optimistic, maybe it'll be a corporate-run utopia. Zuck's not great, but I think this generation is kinder than the Carnegie/Rockefeller days. Look... if Bezos, Zuck, and such continue on trend, they'll soon be very rich. Bigger than the Rockefeller. Their companies will be one par with the VOC/EIC in terms of market cap, but I don't know if it's really comparable to that. Google/FB are sketchy, if trust-busting comes into play. Advertising is sensitive to both regulation and trustbusting. A ban on snooping, manipulation and overly vigorous advertising would hurt advertising. Trust-busting, like separating adwords from google, hurts advertising monopolies too. Meanwhile, what happens if a regulator messes up and breaks FB? Would the world lack for social messaging media? If Ford stops making cars, fewer cars are made in the world. If fewer FB likes happen, more sploosh sploshes happen and all is well in the world... More likely though, no help is coming. That being the case, I think the tech bros aren't the worst candidates for trillionaire status. Someone had to be it. I'm glad it isn't the real estate bros.

pedrocr 6y ago

> I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? Returning money to shareholders is the common solution for when you don't know how to grow more and profitability in the businesses you're already in and don't have any particular advantage in entering new ones. I'm not saying that's what they should be doing but sitting on a pile of capital that you don't know what to do with isn't a new problem that we need to invent new solutions for.

dalbasal 6y ago
"Returning money to shareholders" is largely a consequence macroeconomic policy or state of affairs. It is, evidently, not actually a choice that CEOs currently have in practice. Dividends and/or buybacks are one of the powers shareholders do tend to wield, in practice. They want to invest more, not less. Also, IDK if it is a common solution. Nothing is really common at MSFT-scale. A free cash flow like Google, Alphabet, etc. is almost unprecedented. Meanwhile, I do actually think that this is better for shareholders. IMO "Synergies" is a term somewhere between euphemism and a boomerism but for the purpose of "shareholder value" it doesn't matter. At Monopoly/Unicorn/FAANG scale, there are big opportunities for synergy. Think Google-Android. Why is Nuance being owned by Alphabet less efficient than being traded independently or owned by private investors? Why is Alphabet owning vanguard more efficient than owning Nuance? The answer to those question can have no actual impact on reality. If the acquired business is cash generative, they can left to their devices. If the parent company doesn't borrow, then "efficiency" never becomes explicit. Explicit efficiency is relative to cost of borrowing. Implicit efficiency is implied by share prices... and at this point things get foggy.
nemothekid 6y ago
My own uneducated position is that is a new problem because shareholders don't want their money back. Shareholders have been piling money into stocks [1], so if you gave them the money back they would likely just put it right back into Microsoft (or, more likely, it would signal that Microsoft doesn't know what to do with the money, so people would pull out of Microsoft to invest somewhere else). [1] https://finance.yahoo.com/news/more-money-poured-stocks-past-095127730.html https://finance.yahoo.com/news/more-money-poured-stocks-past...
- intuitionist 6y ago
  If they reinvested the dividend right back in MSFT then MSFT can give its owners a tax break and get the same economic result by buying back shares.

kelnos 6y ago

> I agree, but I think MSFT (and friends) are in this predicament no matter what. What's the alternative? Well, they can just stop growing, and continue doing what works. If that thing stops working (or they have a good belief that it will stop working before too long), they have two options: 1) do nothing, and gradually wind the company down and return capital to shareholders so they can reinvest it elsewhere, or 2) pivot, and accept that the things they are pivoting to will be a rounding error in their finances for years while they grow. Obviously this is disastrous in our current economic system; a company that tried this would watch its stock price fall into the toilet before too long. But absent that, why not? Consolidation is what will bring us to a corporate-run dystopia. I would much rather the world be filled mostly with small and medium sized businesses, with every market open to a lot of competition and even cooperation (on standards, not on prices). But I know, that's just a pipe dream, and humans generally suck at cooperation when money is involved.

dalbasal 6y ago
>> a company that tried this would watch its stock price fall into the toilet.. But absent that, why not? lol >> Consolidation is what will bring us to a corporate-run dystopia. I would much rather the world be filled mostly with small and medium sized businesses... The alternative to that is trust busting, perhaps. I was commenting on the market logic, so to speak. If we're optimistic, maybe it'll be a corporate-run utopia. Zuck's not great, but I think this generation is kinder than the Carnegie/Rockefeller days. Look... if Bezos, Zuck, and such continue on trend, they'll soon be very rich. Bigger than the Rockefeller. Their companies will be one par with the VOC/EIC in terms of market cap, but I don't know if it's really comparable to that. Google/FB are sketchy, if trust-busting comes into play. Advertising is sensitive to both regulation and trustbusting. A ban on snooping, manipulation and overly vigorous advertising would hurt advertising. Trust-busting, like separating adwords from google, hurts advertising monopolies too. Meanwhile, what happens if a regulator messes up and breaks FB? Would the world lack for social messaging media? If Ford stops making cars, fewer cars are made in the world. If fewer FB likes happen, more sploosh sploshes happen and all is well in the world... More likely though, no help is coming. That being the case, I think the tech bros aren't the worst candidates for trillionaire status. Someone had to be it. I'm glad it isn't the real estate bros.