4 ms·

But isn't this the exact point of operation, controlling and finance in any large corporation wants to find? Extract from bottom to the top until it breaks and

But isn't this the exact point of operation, controlling and finance in any large corporation wants to find? Extract from bottom to the top until it breaks and then hope to steer back a tiny little bit and keep operating in that state? Finance never did produce, it's whole purpose is to extract. Run a gasoline engine to lean and it will start to heat and stutter... As for the growth, in a peaceful society you can grow as much as the amount of people you supply, so without war there will probably no other way than saying goodbye to growth.

HPsquared 5y ago
I don't know about that, with P/E ratios as high as they are I think investors assume companies will have an infinite lifespan.
- nradov 5y ago
  With P/E ratios as high as they are I think investors are desperate and don't have anywhere else to put their capital.
dfxm12 5y ago
No company wants it to break to the point of "meltdown". From a practical view, it loses too much money. From a (maybe, maybe not) cynical sense, it makes it too obvious how much they're extracting from the bottom and invites action from the government or workers.
Zigurd 5y ago
Naive finance works that way. Sophisticated finance prices-in downside risk.
- nradov 5y ago
  Sure that's the theory. But how do you accurately price in risk for rare events? The uncertainty is so large that any price you set is effectively just a guess.
  - krageon 5y ago
    You guess based on data and do your best, that is more or less how all expert opinion works. An actuarial table also doesn't tell you anything about what will happen, but it allows you to do your best.
  - Zigurd 5y ago
    Insurance and derivatives are supposed to find prices for rare events. And if an organization can't insure or securitize a risk it should make them think real hard about mitigation.
- toss1 5y ago
  Yes, but with finance based on transitory MBA executive suites job-hopping around the corporate world, the right play is to price in the risk during your term and a bit after, so the 10-year risk is ignored, but if you can strip everything out of redundancy, product development, etc., the numbers will look better for a while, you get your bonus package, and move to the next opportunity/victim. When things have been built to last, there is a lot of "fat" that can be cut - for a while. The numbers will always look better - until they don't. When the music stops, the "lean" "financial engineers" will be long gone, and those still there will have not the slightest clue how to re-start a culture of serious product/service development or robust operations, and the corp falls into a death spiral. If you are a trader, you DGAF. If you are an investor, watch for numbers improving without product and operations improving, and new markets being opened.
  - Zigurd 5y ago
    I was not disagreeing. The biggest problems come where finance is not sophisticated and management is seduced by cost cutting. Those often go hand in hand.

HPsquared 5y ago

I don't know about that, with P/E ratios as high as they are I think investors assume companies will have an infinite lifespan.

nradov 5y ago
With P/E ratios as high as they are I think investors are desperate and don't have anywhere else to put their capital.

dfxm12 5y ago

No company wants it to break to the point of "meltdown". From a practical view, it loses too much money. From a (maybe, maybe not) cynical sense, it makes it too obvious how much they're extracting from the bottom and invites action from the government or workers.

Zigurd 5y ago

Naive finance works that way. Sophisticated finance prices-in downside risk.

nradov 5y ago
Sure that's the theory. But how do you accurately price in risk for rare events? The uncertainty is so large that any price you set is effectively just a guess.
- krageon 5y ago
  You guess based on data and do your best, that is more or less how all expert opinion works. An actuarial table also doesn't tell you anything about what will happen, but it allows you to do your best.
- Zigurd 5y ago
  Insurance and derivatives are supposed to find prices for rare events. And if an organization can't insure or securitize a risk it should make them think real hard about mitigation.
toss1 5y ago
Yes, but with finance based on transitory MBA executive suites job-hopping around the corporate world, the right play is to price in the risk during your term and a bit after, so the 10-year risk is ignored, but if you can strip everything out of redundancy, product development, etc., the numbers will look better for a while, you get your bonus package, and move to the next opportunity/victim. When things have been built to last, there is a lot of "fat" that can be cut - for a while. The numbers will always look better - until they don't. When the music stops, the "lean" "financial engineers" will be long gone, and those still there will have not the slightest clue how to re-start a culture of serious product/service development or robust operations, and the corp falls into a death spiral. If you are a trader, you DGAF. If you are an investor, watch for numbers improving without product and operations improving, and new markets being opened.
- Zigurd 5y ago
  I was not disagreeing. The biggest problems come where finance is not sophisticated and management is seduced by cost cutting. Those often go hand in hand.