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I was pretty against this way of thinking a decade ago, now I cannot deny this might be the solution for most problems on predatory capitalism.

by Xunjin 3y ago

nostrademons 3y ago
I'm not sure that this by itself would help. The root issue is the double-edged sword of liquidity. If you have the ability to "take the money and run", it creates a strong incentive to do things which increase the amount of money you can take now, and then offload the consequences onto problems that will surface long after you have run. Cash is actually worse than stock, because you literally get the money now and have no incentive and no mechanism to see it increase in value later. Much of the reason for stock-based compensation is to align incentives between the executive and shareholders so that their time horizon at least encompasses their vesting period. To really fix the problem, you need to destroy liquidity for decision-makers. Basically make it unprofitable to switch companies or retire, so that a.) they are forced to stay with the company and live with the consequences of their decisions and b.) they don't gain anything from short-term revenue bumps anyway. This was sorta the system that was in place in the 1950s & 1960s, where the top marginal tax rate was 90% so the government took all your money above a certain max anyway, and as a result companies invested in seniority-based perks like more vacation time, private jet use, employer-funded health insurance, etc. But this...destroys liquidity, which makes the companies and economic system less resilient to outside changes. This is what happened to U.S. industry in the 1970s, when they found they were uncompetitive with new Japanese firms, or to the housing market today, where we've built a system that offered great suburban living to Boomers but now can't adapt to the incoming Millennial population.
- lostlogin 3y ago
  On one level these are both imposed rules (ie regulation), but this is an approach I haven’t heard before and I like it. It would also help a fleet of other problems, like underfunded public institutions and infrastructure.
- Xunjin 3y ago
  That's a great analysis, maybe in the first suggestion, instead of force someone being at the same company, there could be a law that will be a crime doing this behaviour.

I was pretty against this way of thinking a decade ago, now I cannot deny this might be the solution for most problems on predatory capitalism.

by Xunjin 3y ago

I was pretty against this way of thinking a decade ago, now I cannot deny this might be the solution for most problems on predatory capitalism.

nostrademons 3y ago

I'm not sure that this by itself would help. The root issue is the double-edged sword of liquidity. If you have the ability to "take the money and run", it creates a strong incentive to do things which increase the amount of money you can take now, and then offload the consequences onto problems that will surface long after you have run. Cash is actually worse than stock, because you literally get the money now and have no incentive and no mechanism to see it increase in value later. Much of the reason for stock-based compensation is to align incentives between the executive and shareholders so that their time horizon at least encompasses their vesting period. To really fix the problem, you need to destroy liquidity for decision-makers. Basically make it unprofitable to switch companies or retire, so that a.) they are forced to stay with the company and live with the consequences of their decisions and b.) they don't gain anything from short-term revenue bumps anyway. This was sorta the system that was in place in the 1950s & 1960s, where the top marginal tax rate was 90% so the government took all your money above a certain max anyway, and as a result companies invested in seniority-based perks like more vacation time, private jet use, employer-funded health insurance, etc. But this...destroys liquidity, which makes the companies and economic system less resilient to outside changes. This is what happened to U.S. industry in the 1970s, when they found they were uncompetitive with new Japanese firms, or to the housing market today, where we've built a system that offered great suburban living to Boomers but now can't adapt to the incoming Millennial population.

lostlogin 3y ago
On one level these are both imposed rules (ie regulation), but this is an approach I haven’t heard before and I like it. It would also help a fleet of other problems, like underfunded public institutions and infrastructure.
Xunjin 3y ago
That's a great analysis, maybe in the first suggestion, instead of force someone being at the same company, there could be a law that will be a crime doing this behaviour.