4 ms·

Partly, but it was Milton Friedman at the University of Chicago who helped lay the framework for the "shareholder primacy" theory that really paved the way for

Partly, but it was Milton Friedman at the University of Chicago who helped lay the framework for the "shareholder primacy" theory that really paved the way for the poor longterm corporate management of the last couple of decades.

kjghkjghkjgh 4y ago
"Shareholder primacy" led to the invention of modern vaccines and mRNA discoveries. Was this a poor longterm corporate investment?
- pinewurst 4y ago
  Why is that true? It certainly led to the crippling of general corporate scientific research.
- thfuran 4y ago
  Did it really? Wasn't the research leading to mRNA vaccines performed in a grant-funded university lab?
  - kjghkjghkjgh 4y ago
    It was Moderna and they are not a grant funded university lab
    - thfuran 4y ago
      They didn't do the foundational research. They licensed a patent that came out of research from University of Pennsylvania and applied it to COVID.
      - x-complexity 4y ago
        > They didn't do the foundational research. They licensed a patent that came out of research from University of Pennsylvania and applied it to COVID. Incremental research is still research. Application research is still research. The over-emphasis on foundational research from the media & the general public has led to a myopic view of "revolution"-ism, wherein incremental progress in science is considered to be worthless relative to incremental improvements. The discovery of penicillin was a medical breakthrough, but that doesn't mean that the industrial scale-up of penicillin production was comparatively worthless. In fact, in this specific case, the opposite is true: The benefits of penicillin wouldn't have been received if everyone thought that research into scaling up its production was worthless.
        thfuran 4y ago
        Moderna spent a few months on it before they had a vaccine ready for trials. The lab spent just under a decade building on decades of prior research. It's pretty clear who did the bulk of the work when it comes to the mRNA discoveries, and it wasn't Moderna or its shareholders.
    - hkt 4y ago
      In almost every sector of the economy, companies partner with suitable university departments and then oddly enough the universities never get any patents, but the companies do. This is due to how our intellectual property laws work, not any special kind of magic that having shareholders will yield.
- rurp 4y ago
  Do those account for a significant portion of the effect, or are you just cherry picking a couple nice instances? The word modern is doing some heavy lifting as well; shareholder primacy certainly isn't responsible for most of the overall benefit from vaccines.
- modo_mario 4y ago
  I'd say it leads to things like an average overinvestment in things that benefit shareholders rather than things that might benefit the company or society over the long term. Weirdly timed stock buybacks instead of money going to R&D or attracting talent and the like.
samdcbu 4y ago
and then in 2017 Friedman’s former department was renamed the Kenneth C. Griffin Department of Economics after he donated 150m
- smcin 4y ago
  I thought you were going for parody, but that's fact: https://economics.uchicago.edu/content/historical-information https://economics.uchicago.edu/content/historical-informatio...
oatmeal1 4y ago
As if CEOs wouldn't be trying to max their stock value without the word of Milton Friedman
- AnthonyMouse 4y ago
  The real problem is that "shareholders" stopped being people and started being large funds. When the shareholders are people with a long-term stake in the company, like the founders, they can make long-term decisions or choose not to want the absolute most profit-maximizing thing because actually they're already pretty rich and maybe some things are more important. When they're fund managers, they want quarterly profits because that's how they get their bonus, and their fund may not even own shares in that company in a year's time.
  - eru 4y ago
    Who says large funds don't have long-term stakes and can't help make long-term decisions? Fund managers want perhaps to see quarterly profits for their fund, but that's not the same thing as quarterly profits at the underlying companies. Your fund can also profit, if the stock prices of the underlying companies rise. To give some existence proofs, have a look at how Amazon, Microsoft, Google, Tesla etc had rising share prices long before they ever returned any money to shareholders. Or how shortly into the covid pandemic market prices for stocks recovered, even though the pandemic wasn't over at all: that was purely based on investors looking to the longer term future. > [...] and their fund may not even own shares in that company in a year's time. For that to happen, they need to sell the company to someone else, and that other person will pay more for a company with a bright future.
    - lordnacho 4y ago
      The funds managers all own the same companies and thus have little interest in having them compete with each other. This is why almost every sector of the economy is dominated by a few large firms.
    - AnthonyMouse 4y ago
eru 4y ago
Huh? Shareholder primacy might be a good idea, but it's an aspiration at best. In practice, companies are run for the benefit of their managers. Especially when they talk about something like 'stakeholder capitalism', because it's inevitable the managers that decide which stakeholders to listen to and how to balance their interests.

kjghkjghkjgh 4y ago

"Shareholder primacy" led to the invention of modern vaccines and mRNA discoveries. Was this a poor longterm corporate investment?

pinewurst 4y ago
Why is that true? It certainly led to the crippling of general corporate scientific research.
thfuran 4y ago
Did it really? Wasn't the research leading to mRNA vaccines performed in a grant-funded university lab?
- kjghkjghkjgh 4y ago
  It was Moderna and they are not a grant funded university lab
  - thfuran 4y ago
    They didn't do the foundational research. They licensed a patent that came out of research from University of Pennsylvania and applied it to COVID.
    - x-complexity 4y ago
      > They didn't do the foundational research. They licensed a patent that came out of research from University of Pennsylvania and applied it to COVID. Incremental research is still research. Application research is still research. The over-emphasis on foundational research from the media & the general public has led to a myopic view of "revolution"-ism, wherein incremental progress in science is considered to be worthless relative to incremental improvements. The discovery of penicillin was a medical breakthrough, but that doesn't mean that the industrial scale-up of penicillin production was comparatively worthless. In fact, in this specific case, the opposite is true: The benefits of penicillin wouldn't have been received if everyone thought that research into scaling up its production was worthless.
      - thfuran 4y ago
        Moderna spent a few months on it before they had a vaccine ready for trials. The lab spent just under a decade building on decades of prior research. It's pretty clear who did the bulk of the work when it comes to the mRNA discoveries, and it wasn't Moderna or its shareholders.
  - hkt 4y ago
    In almost every sector of the economy, companies partner with suitable university departments and then oddly enough the universities never get any patents, but the companies do. This is due to how our intellectual property laws work, not any special kind of magic that having shareholders will yield.
rurp 4y ago
Do those account for a significant portion of the effect, or are you just cherry picking a couple nice instances? The word modern is doing some heavy lifting as well; shareholder primacy certainly isn't responsible for most of the overall benefit from vaccines.
modo_mario 4y ago
I'd say it leads to things like an average overinvestment in things that benefit shareholders rather than things that might benefit the company or society over the long term. Weirdly timed stock buybacks instead of money going to R&D or attracting talent and the like.

samdcbu 4y ago

and then in 2017 Friedman’s former department was renamed the Kenneth C. Griffin Department of Economics after he donated 150m

smcin 4y ago
I thought you were going for parody, but that's fact: https://economics.uchicago.edu/content/historical-information https://economics.uchicago.edu/content/historical-informatio...

oatmeal1 4y ago

As if CEOs wouldn't be trying to max their stock value without the word of Milton Friedman

AnthonyMouse 4y ago
The real problem is that "shareholders" stopped being people and started being large funds. When the shareholders are people with a long-term stake in the company, like the founders, they can make long-term decisions or choose not to want the absolute most profit-maximizing thing because actually they're already pretty rich and maybe some things are more important. When they're fund managers, they want quarterly profits because that's how they get their bonus, and their fund may not even own shares in that company in a year's time.
- eru 4y ago
  Who says large funds don't have long-term stakes and can't help make long-term decisions? Fund managers want perhaps to see quarterly profits for their fund, but that's not the same thing as quarterly profits at the underlying companies. Your fund can also profit, if the stock prices of the underlying companies rise. To give some existence proofs, have a look at how Amazon, Microsoft, Google, Tesla etc had rising share prices long before they ever returned any money to shareholders. Or how shortly into the covid pandemic market prices for stocks recovered, even though the pandemic wasn't over at all: that was purely based on investors looking to the longer term future. > [...] and their fund may not even own shares in that company in a year's time. For that to happen, they need to sell the company to someone else, and that other person will pay more for a company with a bright future.
  - lordnacho 4y ago
    The funds managers all own the same companies and thus have little interest in having them compete with each other. This is why almost every sector of the economy is dominated by a few large firms.
  - AnthonyMouse 4y ago

eru 4y ago

Huh? Shareholder primacy might be a good idea, but it's an aspiration at best. In practice, companies are run for the benefit of their managers. Especially when they talk about something like 'stakeholder capitalism', because it's inevitable the managers that decide which stakeholders to listen to and how to balance their interests.