4 ms·

One of the things that I think about with buybacks is sort of the 'second-degree' implications. The company is buying its equity, what are the parties selling d

One of the things that I think about with buybacks is sort of the 'second-degree' implications. The company is buying its equity, what are the parties selling doing with the money? And so you delve into a subjective area. Part of me feels that there is a literal 'passing of the buck' where the company sort of dilutes and distributes sort of, societal investment responsibility, which is where even my own philosophy solicits an internal eyeroll. The problem I have with buybacks is that I agree it is frequently a signal that 'a company has no uses for a bunch of cash on hand'. But does society suffer when businesses are so wed to capital efficiency? Does society benefit from corporate investment, period? Are earnest investments beneficial to society even if they don't work out? Basically, how does the money distributed from buybacks impact society, and could that be improved?

DSMan195276 5y ago
> But does society suffer when businesses are so wed to capital efficiency? Does society benefit from corporate investment, period? Are earnest investments beneficial to society even if they don't work out? I'm not sure if this is exactly what you're getting at, but I think there's an argument to be made that companies are a bit too comfortable with simply giving cash back to shareholders rather than using it to improve their position, I think effectively the interests of the company and the interests of the shareholders aren't aligned in this situation. When you give it to shareholders in the form of buybacks, there's no guarantee you'll ever be getting it back, and like we saw in 2020 the times you most want to have a lot of cash are the same times investors aren't really interested in buying your stock. > Basically, how does the money distributed from buybacks impact society, and could that be improved? This one is somewhat easier to answer, because the majority of stocks are owned by the wealthy (a quick google suggests the top 1% own 40% of stocks, and bottom 80% only own ~7% of stocks). How they then use that money is a different matter, which would depend on a lot of other stuff and the economy at the time.

DSMan195276 5y ago

> But does society suffer when businesses are so wed to capital efficiency? Does society benefit from corporate investment, period? Are earnest investments beneficial to society even if they don't work out? I'm not sure if this is exactly what you're getting at, but I think there's an argument to be made that companies are a bit too comfortable with simply giving cash back to shareholders rather than using it to improve their position, I think effectively the interests of the company and the interests of the shareholders aren't aligned in this situation. When you give it to shareholders in the form of buybacks, there's no guarantee you'll ever be getting it back, and like we saw in 2020 the times you most want to have a lot of cash are the same times investors aren't really interested in buying your stock. > Basically, how does the money distributed from buybacks impact society, and could that be improved? This one is somewhat easier to answer, because the majority of stocks are owned by the wealthy (a quick google suggests the top 1% own 40% of stocks, and bottom 80% only own ~7% of stocks). How they then use that money is a different matter, which would depend on a lot of other stuff and the economy at the time.