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A CEO's/company's job is to maximize instantaneous shareholder value. Anything else is a waste of time, since investors are assumed to take long-term vs short-t

A CEO's/company's job is to maximize instantaneous shareholder value. Anything else is a waste of time, since investors are assumed to take long-term vs short-term risk preference into their own hands. The company is essentially a machine that investors can dip into and dip out of at any time, so it doesn't make sense to make decisions to move the stock price over a pre-planned certain time horizon. The reason companies invest in any long-term projects at all is because the net present value of those projects affects the stock price.

lolinder 3y ago
That certainly feels like how they're acting, but what about the actual incentive structures cause it to be this way? Why does the company benefit from being a good machine for generating short-term profits for short-term investors?
- godelski 3y ago
  This is what I'm trying to get at with my questions. I think it is easy to give an answer of short term thinking and move on. But that's not a real answer. I want to understand the incentive structures that have led to this (and this "Goodhart's Hell") situation and if it's unstable as I presume. There's a specific concern because of the large sentiment that the big difference between industry and academia is that in industry your products have to actually work. Ignoring the weird premise and ignoring the different TRL context, I'm not convinced that industry needs to actually make usable products. Aren't we also all complaining about how shit isn't working adequately? Google failing at seemingly simple things, and decreased quality of search. Amazon being a shitty monopoly and exploiting that to be anti-consumerism and not dealing with obvious spam and product manipulation that could be detected by a Naive Bayes filter. Or Twitter being overrun with spam bots that also could trivially be detected from a Naive Bayes filter or my block list, but blocking them actually decreases the visibility of my tweets so I'm actively encouraged by the platform to let these bots exist and follow me and like my comments. And why would investors want this? I don't buy that there's an exclusive desire for quarterly profits and that Wallstreet does look for a diversification of their portfolios for long term blue chip stocks as well as short term gambles. That it'd require absolute insanity for a CEO or board to allow short term incentives to drive a well established company. I really do think there's something going on but we're afraid to ask the deeper questions because we don't know the answers but I want to be encouraging that discussion even if it is thinking out loud. But maybe that insanity exists and this frustration is a result of a demonstration of it. But I don't want to believe that because I think humans are capable of so much more. That even the average person is better than an LLM but there's just issues of communication. Because even idiocracy is driven by incentive structures so I don't buy the "lol people dumb" argument, even if using better words and wrapped up in a nice bow.

lolinder 3y ago

That certainly feels like how they're acting, but what about the actual incentive structures cause it to be this way? Why does the company benefit from being a good machine for generating short-term profits for short-term investors?

godelski 3y ago
This is what I'm trying to get at with my questions. I think it is easy to give an answer of short term thinking and move on. But that's not a real answer. I want to understand the incentive structures that have led to this (and this "Goodhart's Hell") situation and if it's unstable as I presume. There's a specific concern because of the large sentiment that the big difference between industry and academia is that in industry your products have to actually work. Ignoring the weird premise and ignoring the different TRL context, I'm not convinced that industry needs to actually make usable products. Aren't we also all complaining about how shit isn't working adequately? Google failing at seemingly simple things, and decreased quality of search. Amazon being a shitty monopoly and exploiting that to be anti-consumerism and not dealing with obvious spam and product manipulation that could be detected by a Naive Bayes filter. Or Twitter being overrun with spam bots that also could trivially be detected from a Naive Bayes filter or my block list, but blocking them actually decreases the visibility of my tweets so I'm actively encouraged by the platform to let these bots exist and follow me and like my comments. And why would investors want this? I don't buy that there's an exclusive desire for quarterly profits and that Wallstreet does look for a diversification of their portfolios for long term blue chip stocks as well as short term gambles. That it'd require absolute insanity for a CEO or board to allow short term incentives to drive a well established company. I really do think there's something going on but we're afraid to ask the deeper questions because we don't know the answers but I want to be encouraging that discussion even if it is thinking out loud. But maybe that insanity exists and this frustration is a result of a demonstration of it. But I don't want to believe that because I think humans are capable of so much more. That even the average person is better than an LLM but there's just issues of communication. Because even idiocracy is driven by incentive structures so I don't buy the "lol people dumb" argument, even if using better words and wrapped up in a nice bow.