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The next round of flogging and lawsuits will come long after most of the people involved are gone, having already received their accolades and bonuses for "solv

The next round of flogging and lawsuits will come long after most of the people involved are gone, having already received their accolades and bonuses for "solving" the problem. Incentives for a corporation are not the same as the incentives for the people, and the corporation's decisions are made by people who follow their own incentives.

eru 3y ago
Yes, but it's the job of people who have fiduciary duties to the shareholders to design the incentives in such a way that they align. That's eg why top executives get so many shares (or call options on shares).
- andrewflnr 3y ago
  Yeah, it's their job. What's your point? Are they actually doing it? Signs point to no. But maybe the real problem is that most of today's shareholders will be gone by then, too. They benefit from juicing the stock and selling high, leaving the cost for some other sucker down the road. They have no incentive to find uncomfortable truths either. I think short-term ownership is one of the roots of a lot of today's economic ills.
  - eru 3y ago
    > Yeah, it's their job. What's your point? Are they actually doing it? Signs point to no. The share price today already reflects the long term outlook for the stock. If you can 'juice' the stock and sell it high, that's a job well done. > I think short-term ownership is one of the roots of a lot of today's economic ills. Why? A change in ownership doesn't affect how stock are valuated. If it's eg widely know that a company is going down in five years (because eg their industry is declared illegal), the price will already drop today. It's just a standard backwards induction argument. Btw, with the stratospheric rise of passive index investing, truly long term ownership has never really been more widespread than today.
    - andrewflnr 3y ago
      And yet, stock prices can swing very rapidly as new info comes out, or as circumstances change. Almost like, despite everyone's best effort, they're at best a very crude approximation of future value.
      - eru 3y ago
        Current stock prices are our best predictor of future stock prices. You are right that they are still a predictor with a lot of variance. Stock prices should change as new information comes in, yes. I don't see any contradiction here with what I wrote earlier.
        andrewflnr 3y ago
        You don't see the contradiction with > The share price today already reflects the long term outlook for the stock. as an excuse for artificially inflating the stock price? In a context where we're specifically expecting new-but-honestly-predictable information to push it down later?
        eru 3y ago
        There can only be predictable news-that-pushes-the-shareprice-lower, if all the people who trade the stock are idiots. You just need eg a few short-sellers who anticipate those predictable news. They can make a killing by selling the stock at the higher price now and buying it back at the lower price later. If enough people take this opportunity to make easy money, that brings the share price down today as if the news had already dropped. So, how do you want to 'artificially' inflate the stock price? Especially how do you want to do it in a way that doesn't require everyone in the market to be idiots only?
        andrewflnr 3y ago
        If this story was true, we would never see large swings in stock price, because they would already be priced in. But we do. Stock price is simply not an accurate enough predictor to create the incentives we want. (The most obvious reason this is nonsense is that sometimes the future fall is only predictable to people inside the company. Short sellers don't help here. We need another incentive for those people to do the right thing.)
- jeromegv 3y ago
  This same duty was there already for decades and it didn’t prevent them from destroying the environment. I don’t think it’s the gotcha argument you think it is. In the end their growth was bigger than any lawsuit.
  - eru 3y ago
    What's a "gotcha argument"? If the growth was bigger than the lawsuit, then from the corporations point of view, the earlier executives made the right decisions. We were talking about aligning interests of executives and long term shareholders. You seem to be talking about aligning interests of those shareholders and interests of the environment or so? That's an important topic, too, but it's not the same.

eru 3y ago

Yes, but it's the job of people who have fiduciary duties to the shareholders to design the incentives in such a way that they align. That's eg why top executives get so many shares (or call options on shares).

andrewflnr 3y ago
Yeah, it's their job. What's your point? Are they actually doing it? Signs point to no. But maybe the real problem is that most of today's shareholders will be gone by then, too. They benefit from juicing the stock and selling high, leaving the cost for some other sucker down the road. They have no incentive to find uncomfortable truths either. I think short-term ownership is one of the roots of a lot of today's economic ills.
- eru 3y ago
  > Yeah, it's their job. What's your point? Are they actually doing it? Signs point to no. The share price today already reflects the long term outlook for the stock. If you can 'juice' the stock and sell it high, that's a job well done. > I think short-term ownership is one of the roots of a lot of today's economic ills. Why? A change in ownership doesn't affect how stock are valuated. If it's eg widely know that a company is going down in five years (because eg their industry is declared illegal), the price will already drop today. It's just a standard backwards induction argument. Btw, with the stratospheric rise of passive index investing, truly long term ownership has never really been more widespread than today.
  - andrewflnr 3y ago
    And yet, stock prices can swing very rapidly as new info comes out, or as circumstances change. Almost like, despite everyone's best effort, they're at best a very crude approximation of future value.
    - eru 3y ago
      Current stock prices are our best predictor of future stock prices. You are right that they are still a predictor with a lot of variance. Stock prices should change as new information comes in, yes. I don't see any contradiction here with what I wrote earlier.
      - andrewflnr 3y ago
        You don't see the contradiction with > The share price today already reflects the long term outlook for the stock. as an excuse for artificially inflating the stock price? In a context where we're specifically expecting new-but-honestly-predictable information to push it down later?
        eru 3y ago
        There can only be predictable news-that-pushes-the-shareprice-lower, if all the people who trade the stock are idiots. You just need eg a few short-sellers who anticipate those predictable news. They can make a killing by selling the stock at the higher price now and buying it back at the lower price later. If enough people take this opportunity to make easy money, that brings the share price down today as if the news had already dropped. So, how do you want to 'artificially' inflate the stock price? Especially how do you want to do it in a way that doesn't require everyone in the market to be idiots only?
        andrewflnr 3y ago
        If this story was true, we would never see large swings in stock price, because they would already be priced in. But we do. Stock price is simply not an accurate enough predictor to create the incentives we want. (The most obvious reason this is nonsense is that sometimes the future fall is only predictable to people inside the company. Short sellers don't help here. We need another incentive for those people to do the right thing.)
jeromegv 3y ago
This same duty was there already for decades and it didn’t prevent them from destroying the environment. I don’t think it’s the gotcha argument you think it is. In the end their growth was bigger than any lawsuit.
- eru 3y ago
  What's a "gotcha argument"? If the growth was bigger than the lawsuit, then from the corporations point of view, the earlier executives made the right decisions. We were talking about aligning interests of executives and long term shareholders. You seem to be talking about aligning interests of those shareholders and interests of the environment or so? That's an important topic, too, but it's not the same.