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Why is it never good enough to just have an ongoing business that works? Unless The Escapist was really losing money or about to go bankrupt, I don't know why

Why is it never good enough to just have an ongoing business that works? Unless The Escapist was really losing money or about to go bankrupt, I don't know why it needed to be messed with. It's not a "growth" project, it's a journalistic outlet. Who cares if it "grows"?

r0ckarong 3y ago
Because "investors" expect returns on their investment and the more investors you pull in, the more money you need to generate. At some point it's no longer about how to run the business well or how to make "enough" money for yourself and your people but how to keep the investors (whom typically don't live off of their one investment) from pulling the foundation for your only livelihood out from under you if you don't deliver enough returns.
Drakim 3y ago
Somebody in the new management probably needed to stir things up and show that they have a vision and direction that will take the company to new heights, which includes drastic measures like firing those holding the company back, or who were unwilling to be reduced in compensation and scope.
- runeofdoom 3y ago
  This. Over two decades, I have yet to see new senior management who didn't feel compelled to 'make their mark' on their new territory by changing something significant. Occassionally, they'll actually do something useful, but usually they take something that worked and break it.
  - jstarfish 3y ago
    I don't think it's incompetence or egomania anymore; I think it's outright sadism. Some of these corporate sociopaths (Shkreli) don't even try to conceal their intentions because nothing ever happens to any of them anyway. It wasn't the hijinks with the Epi-pen pricing that sent Shkreli to prison. Find something sentimental to someone, and smash it while they watch. People can't coordinate resistance against you when they're emotional. Hurt them deep enough and they give up. Then you can replace them with sycophants.
monero-xmr 3y ago
Plenty of journalists have joined Substack, started podcasts, etc. They quickly realize that’s a business as well, and there’s no escaping the hustle and grind.
- M2Ys4U 3y ago
  There's a difference between running a profitable business and running a business that has continuous growth.
  - ketzo 3y ago
    Every business’s highest cost - labor - will tend to grow every year. So will the cost of most other inputs. If you stop pursuing some amount of continuous growth or price increase, you stop making money.
    - ip26 3y ago
      3% higher expenses and 3% higher revenues to compensate is not what people mean by “a growth company”.
      - ketzo 3y ago
        No, but it is the dictionary definition of “continuously pursuing growth.”
k1ns 3y ago
Why maintain a perfectly good and profitable business when you could suck every possible resource dry and be the CEO that boosted profits by 3%? /s Silicon Valley, VC culture, American industry in general, has all jaded my view of "business" people.
cool_dude85 3y ago
>Who cares if it "grows"? Investors who want to make money and do not particularly care how.
lvspiff 3y ago
Without growth you would need to increase price to continue to pay for workers who want a COLA increase. Increase price and you hemorrhage customers without a growth path. Even if you kept your staff at the same level paying someone the same amount yearly would still lead to decreasing revenue due to the cost of taxes, benefits, etc increasing. In the long run the only way to run a business is to increase growth or increase cost to consumers. Since the escapist mostly ran off ad revenue (although they did have subscriptions that im guessing helps) unless they increased viewership they likely they weren't hitting the metrics they wanted. by no means does this means let go of the guy leading the team who is your likely biggest draw -- thats just stupid
- Exoristos 3y ago
  This seems pretty disingenuous. Keeping up with costs is just part of stable profitability and in no way implies growth at the rate modern investors demand.
  - pixl97 3y ago
    The problem here is you're looking at the system as individual parts instead of the entire system. Lets imagine an entire economic system that was steady state. Why would profitability have to increase? Instead we have a system that profit must increase, and profit must increase in every component of the system constantly due to inflationary practices.
    - thereddaikon 3y ago
      That's not how that works. Raising profits is not the same as raising prices to match inflation.
      - pixl97 3y ago
        Raising profits can cause inflation. https://www.npr.org/2023/05/19/1177180972/economists-are-reconsidering-how-much-corporate-profits-drive-inflation https://www.npr.org/2023/05/19/1177180972/economists-are-rec... >He found that in 2021, corporate profits could account for about double that, nearly 60% of inflation, meaning it was not costs driving inflation. It was corporate profits. Now, some economists hear this and think this is proof that companies were just using inflation as an excuse to gouge customers.
ska 3y ago
> Who cares if it "grows"? Did they raise any money?
jeffwask 3y ago
It's the VC wheel. You buy a successful outfit. Saddle it with the acquisition debt. It's no longer profitable because of debt service. You need more revenue in a thin margin business. You start alienating users and dumping unrealistic expectations on employees. Company goes boom or dies like a wet fart. I mean it was purchased by a company that unironically calls itself Gamurs Group.
- StressedDev 3y ago
  Venture Capitalists do not buy existing profitable companies. They fund startups. You are thinking of private equity or leveraged buyout companies. In private equity, private equity companies buy a company (typically on credit). The private equity company hopes to make a return on its investment. I also doubt there are a lot of deals where a previously profitable company is unprofitable after the deal. There are two reasons for this. One, it's bad business. Two, very few people are going to lend money for this type of acquisition. If it does happen, it was either probably a mistake or an error.
  - finite_depth 3y ago
    [dead]
  - Beldin 3y ago
    > I also doubt there are a lot of deals where a previously profitable company is unprofitable after the deal. Perhaps - but the fact that a trick has become well-known where companies are acquired only to be burdened with debt from the acquisition is rather telling. And that is not helping profitability. As someone who's less into business / financial news than eg. curling news, I know of a ridiculous amount of companies where this happened. So I really do not doubt this is a common strategy.
hnthrowaway0315 3y ago
Because why not experiment if others get shit when it goes bad? I'd do it too...
dathinab 3y ago
The problem is if companies are bought by credit. Companies bind a lot of money (in assets but also less concrete goods like people and expertise). If you buy a company you need to pay for all of that even including _"potential"_ even if realizing that potential also would likely destroy the company. So if you pay for it with liquidity that would "just" bind liquidity. But if you pay for it with credit you now have to _pay of the credit_ or at least pay the interests. So if the company made 100x€ profit every month but you have to pay 200x€ in interests every month to pay it of after 20 years then the investor loses 100x€ every month. Now that is the investor not the company and after 20 years they would make 100x€ profit, but for most investors that would be a major losing deal (I mean ignoring interests on interest, inflation etc. that would be 40€ until crossing even!). In such situation the investor has a few choices, one paying of the additional 100€ with profit from a different company bought before where any interests are payed of. But humans only life so long, which brings us to the other solution: Forcefully raise the profit from 100x to 200x to pay of interests squeezing out the company, then either resell a "now more profitable company" for more money or if the value of the company falls have some shenanigans ready to tax write of the loss in value.... Worse similar to a mortgage you can take on a house you can (at least in the US) make a contract where you get a credit you have to use to buy a company (or more like the lender directly pays a part of the cost) and the insurance for the credit is the company itself leading to a situation where the company basically now has to itself pay the 200x interests instead of the buyer. (example Twitter). Now I'm gross oversimplifying things, but basically our financial system is so messed up that if a sustainable company gets bought there is a good chance it gets fucked up soon afterwards in one way or another. This in turn is not sustainable for the industry as a whole. Now you might argue what has that to do with this case as not a person but another journalistic outlet bought them, well that other outlet is for profit and is likely to act as much as described above as a person. Buy, squeeze, resell or buy gut-out and write of is as much a case there then if a unrelated 3rd party would have bought it, and gut-out works much better if the buyer is from the same industry branch.
johnbellone 3y ago
> Who cares if it "grows"? I understand what you're trying to say here, but it's extremely naive. For one, the employees definitely care, because they want their pay to keep up with cost of living. The owners want the business to be successful so they get a return on their investment. > Why is it never good enough to just have an ongoing business that works? Unfortunately, as soon as you employee people it is never good enough to make sure the business operates without growth. Unless, of course, you're wealthy enough to fund the business through the hard times.
- ivraatiems 3y ago
  We're not talking about "grow a few percent a year, combined with price increases, to combat inflation." We're talking about "grow massively in a way that makes the founders of the company rich." That's what I am unconcerned about. Being so concerned about attaining wealth that you sacrifice the value of what you already have in a misguided attempt to do so is the naive thing.
tinus_hn 3y ago
If you put $10000000 in a company and it’s not making money and it’s not growing, you’re losing money because you could be investing that money in something that does make money, if only a bank account with interest. That’s why people care if it grows.
yterdy 3y ago
Conspiracy theory (well, SAC theory): The people who own everything made a bunch of bad bets over the past few years, essentially on margin. Payments are due. They're squeezing everyone who will put up with it because the alternative is economic devastation.

r0ckarong 3y ago

Because "investors" expect returns on their investment and the more investors you pull in, the more money you need to generate. At some point it's no longer about how to run the business well or how to make "enough" money for yourself and your people but how to keep the investors (whom typically don't live off of their one investment) from pulling the foundation for your only livelihood out from under you if you don't deliver enough returns.

Drakim 3y ago

Somebody in the new management probably needed to stir things up and show that they have a vision and direction that will take the company to new heights, which includes drastic measures like firing those holding the company back, or who were unwilling to be reduced in compensation and scope.

runeofdoom 3y ago
This. Over two decades, I have yet to see new senior management who didn't feel compelled to 'make their mark' on their new territory by changing something significant. Occassionally, they'll actually do something useful, but usually they take something that worked and break it.
- jstarfish 3y ago
  I don't think it's incompetence or egomania anymore; I think it's outright sadism. Some of these corporate sociopaths (Shkreli) don't even try to conceal their intentions because nothing ever happens to any of them anyway. It wasn't the hijinks with the Epi-pen pricing that sent Shkreli to prison. Find something sentimental to someone, and smash it while they watch. People can't coordinate resistance against you when they're emotional. Hurt them deep enough and they give up. Then you can replace them with sycophants.

monero-xmr 3y ago

Plenty of journalists have joined Substack, started podcasts, etc. They quickly realize that’s a business as well, and there’s no escaping the hustle and grind.

M2Ys4U 3y ago
There's a difference between running a profitable business and running a business that has continuous growth.
- ketzo 3y ago
  Every business’s highest cost - labor - will tend to grow every year. So will the cost of most other inputs. If you stop pursuing some amount of continuous growth or price increase, you stop making money.
  - ip26 3y ago
    3% higher expenses and 3% higher revenues to compensate is not what people mean by “a growth company”.
    - ketzo 3y ago
      No, but it is the dictionary definition of “continuously pursuing growth.”

k1ns 3y ago

Why maintain a perfectly good and profitable business when you could suck every possible resource dry and be the CEO that boosted profits by 3%? /s Silicon Valley, VC culture, American industry in general, has all jaded my view of "business" people.

cool_dude85 3y ago

>Who cares if it "grows"? Investors who want to make money and do not particularly care how.

lvspiff 3y ago

Without growth you would need to increase price to continue to pay for workers who want a COLA increase. Increase price and you hemorrhage customers without a growth path. Even if you kept your staff at the same level paying someone the same amount yearly would still lead to decreasing revenue due to the cost of taxes, benefits, etc increasing. In the long run the only way to run a business is to increase growth or increase cost to consumers. Since the escapist mostly ran off ad revenue (although they did have subscriptions that im guessing helps) unless they increased viewership they likely they weren't hitting the metrics they wanted. by no means does this means let go of the guy leading the team who is your likely biggest draw -- thats just stupid

Exoristos 3y ago
This seems pretty disingenuous. Keeping up with costs is just part of stable profitability and in no way implies growth at the rate modern investors demand.
- pixl97 3y ago
  The problem here is you're looking at the system as individual parts instead of the entire system. Lets imagine an entire economic system that was steady state. Why would profitability have to increase? Instead we have a system that profit must increase, and profit must increase in every component of the system constantly due to inflationary practices.
  - thereddaikon 3y ago
    That's not how that works. Raising profits is not the same as raising prices to match inflation.
    - pixl97 3y ago
      Raising profits can cause inflation. https://www.npr.org/2023/05/19/1177180972/economists-are-reconsidering-how-much-corporate-profits-drive-inflation https://www.npr.org/2023/05/19/1177180972/economists-are-rec... >He found that in 2021, corporate profits could account for about double that, nearly 60% of inflation, meaning it was not costs driving inflation. It was corporate profits. Now, some economists hear this and think this is proof that companies were just using inflation as an excuse to gouge customers.

ska 3y ago

> Who cares if it "grows"? Did they raise any money?

jeffwask 3y ago

It's the VC wheel. You buy a successful outfit. Saddle it with the acquisition debt. It's no longer profitable because of debt service. You need more revenue in a thin margin business. You start alienating users and dumping unrealistic expectations on employees. Company goes boom or dies like a wet fart. I mean it was purchased by a company that unironically calls itself Gamurs Group.

StressedDev 3y ago
Venture Capitalists do not buy existing profitable companies. They fund startups. You are thinking of private equity or leveraged buyout companies. In private equity, private equity companies buy a company (typically on credit). The private equity company hopes to make a return on its investment. I also doubt there are a lot of deals where a previously profitable company is unprofitable after the deal. There are two reasons for this. One, it's bad business. Two, very few people are going to lend money for this type of acquisition. If it does happen, it was either probably a mistake or an error.
- finite_depth 3y ago
  [dead]
- Beldin 3y ago
  > I also doubt there are a lot of deals where a previously profitable company is unprofitable after the deal. Perhaps - but the fact that a trick has become well-known where companies are acquired only to be burdened with debt from the acquisition is rather telling. And that is not helping profitability. As someone who's less into business / financial news than eg. curling news, I know of a ridiculous amount of companies where this happened. So I really do not doubt this is a common strategy.

hnthrowaway0315 3y ago

Because why not experiment if others get shit when it goes bad? I'd do it too...

dathinab 3y ago

The problem is if companies are bought by credit. Companies bind a lot of money (in assets but also less concrete goods like people and expertise). If you buy a company you need to pay for all of that even including _"potential"_ even if realizing that potential also would likely destroy the company. So if you pay for it with liquidity that would "just" bind liquidity. But if you pay for it with credit you now have to _pay of the credit_ or at least pay the interests. So if the company made 100x€ profit every month but you have to pay 200x€ in interests every month to pay it of after 20 years then the investor loses 100x€ every month. Now that is the investor not the company and after 20 years they would make 100x€ profit, but for most investors that would be a major losing deal (I mean ignoring interests on interest, inflation etc. that would be 40€ until crossing even!). In such situation the investor has a few choices, one paying of the additional 100€ with profit from a different company bought before where any interests are payed of. But humans only life so long, which brings us to the other solution: Forcefully raise the profit from 100x to 200x to pay of interests squeezing out the company, then either resell a "now more profitable company" for more money or if the value of the company falls have some shenanigans ready to tax write of the loss in value.... Worse similar to a mortgage you can take on a house you can (at least in the US) make a contract where you get a credit you have to use to buy a company (or more like the lender directly pays a part of the cost) and the insurance for the credit is the company itself leading to a situation where the company basically now has to itself pay the 200x interests instead of the buyer. (example Twitter). Now I'm gross oversimplifying things, but basically our financial system is so messed up that if a sustainable company gets bought there is a good chance it gets fucked up soon afterwards in one way or another. This in turn is not sustainable for the industry as a whole. Now you might argue what has that to do with this case as not a person but another journalistic outlet bought them, well that other outlet is for profit and is likely to act as much as described above as a person. Buy, squeeze, resell or buy gut-out and write of is as much a case there then if a unrelated 3rd party would have bought it, and gut-out works much better if the buyer is from the same industry branch.

johnbellone 3y ago

> Who cares if it "grows"? I understand what you're trying to say here, but it's extremely naive. For one, the employees definitely care, because they want their pay to keep up with cost of living. The owners want the business to be successful so they get a return on their investment. > Why is it never good enough to just have an ongoing business that works? Unfortunately, as soon as you employee people it is never good enough to make sure the business operates without growth. Unless, of course, you're wealthy enough to fund the business through the hard times.

ivraatiems 3y ago
We're not talking about "grow a few percent a year, combined with price increases, to combat inflation." We're talking about "grow massively in a way that makes the founders of the company rich." That's what I am unconcerned about. Being so concerned about attaining wealth that you sacrifice the value of what you already have in a misguided attempt to do so is the naive thing.

tinus_hn 3y ago

If you put $10000000 in a company and it’s not making money and it’s not growing, you’re losing money because you could be investing that money in something that does make money, if only a bank account with interest. That’s why people care if it grows.

yterdy 3y ago

Conspiracy theory (well, SAC theory): The people who own everything made a bunch of bad bets over the past few years, essentially on margin. Payments are due. They're squeezing everyone who will put up with it because the alternative is economic devastation.