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Business schools teach efficiency. Efficient as in 'put in a dollar, what gets you the most back in the shortest time period?' It is oriented to appeasing stock
by Eisenstein 4y ago
Business schools teach efficiency. Efficient as in 'put in a dollar, what gets you the most back in the shortest time period?' It is oriented to appeasing stockholders (investors), who want to see earnings grow. If your company is losing money, cut cost centers and maximize revenue to up the profits for the quarter so that the stock doesn't go down. This usually means cutting jobs, defunding research, and making things cheaper. Another way to accomplish this is to sell off specialized parts of the company for a quick cash infusion. Another big thing is the need to quantify -- you need to be able to put the numbers on a chart and if you can't then it is worthless. R&D cannot be quantified like that so it, along with things like IT and information security are seen as cost sinks ready to be slashed.
All of these add up to have terrible effects on companies that rely on research and having a workforce of highly trained professionals who are entrenched in your institutional knowledge. For example, you can't just fire a materials science engineer who is a specialist in silicon crystal seeding to save money one quarter and then hire another one when needed.
- NeverFade 4y ago> It is oriented to appeasing stockholders (investors), who want to see earnings grow. This strategy appeases short-term shareholders, at the cost of significantly penalizing long-term holders. It's not a simple case of "appeasing shareholders".
- Eisenstein 4y agoMaybe I should have said 'stock traders'?
- NeverFade 4y agoMy point is that shareholder capitalism doesn't necessarily lead to the short-term focus you describe. Shareholders can in fact be the group with the longest-term focus of all. They can still be there and care about the company long after the current C-suite are all gone.
- Eisenstein 4y agoI don't think I have communicated what I meant. Stock traders would be people who trade stocks looking for return on investment through trading, not from investing in a company by holding stock.
- NeverFade 4y agoSure, but there's no fundamental reason for them to be the primary shareholders. The average holding time in the 1970s was 5 years.
- nitwit005 4y agoWhile it's certainly possible for that to be true, it isn't in reality. The average holding period of a stock is 5.5 months. People have proposed to not give people voting power as shareholders until they've held the stock for a period, because there is this huge population of investors that care nothing for the long term viability of thr company.