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Not why it can’t be done so much as why it isn’t done. Share buybacks allow companies to reward executives directly as their compensation is tied to stock price
by twobitshifter 1y ago
Not why it can’t be done so much as why it isn’t done. Share buybacks allow companies to reward executives directly as their compensation is tied to stock price. If we started not doing that, the priorities might shift, but those executives like things the way they are.
Before Tim Cook Apple had never done a buyback - Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. Wall Street did not approve of this position, but Jobs wasn’t one to listen to anybody, so it did not matter. Most CEOs are not going to take such a strong position when they, the stockholders, and every other executive can be guaranteed a financial reward through a buyback.
- bulletsvshumans 1y agoBut dividends also result in a concrete financial reward for all shareholders, yes?
- triceratops 1y ago> all shareholders That's the key phrase, they benefit all shareholders. Buybacks on the other hand only benefit the following shareholders: 1. those with regularly vesting stock options and stock grants - basically employees. For non-tech companies especially, this only means high-ranking employees 2. those who intend to sell - that is, soon-to-be-ex shareholders 3. those who borrow against their stock - typically high-net-worth individuals who own a lot of the stock Stock buybacks are thus a non-egalitarian way to return profits. To reward all shareholders equally, pay dividends.
- saulpw 1y agoCan't group #2 sell 4% of their holdings, thereby remaining shareholders, and delivering to themselves the tax-advantaged equivalent of a 4% dividend?
- nyeah 1y agoIf I'm reading it right, group #2 plan to sell 100% of their holdings during times of heavy buybacks. I think they intend to benefit as much as possible from whatever price increase might be driven by the buyback demand.
- terminalshort 1y agoYes. This is correct. Share buybacks are financially equivalent to a dividend from the company's perspective, and slightly better from the shareholder's perspective because they can choose when to take the dividend and pay capital gains tax instead of income tax on it.
- triceratops 1y agoQualified dividends (stock held more than 60 days) and long term capital gains are taxed at the same rate.
- terminalshort 1y agoGood point, but that only applies to individual, not corporate shareholders.
- barchar 1y agoAt any given point in time for an individual yes, but your cap gains rate can vary substantially over time. Also trusts are taxed fairly punitively. So it's still better for everyone since only those who need or want the income have to take it.
- triceratops 1y ago> Also trusts are taxed fairly punitively That only reinforces my viewpoint that buybacks advantage rich shareholders. > your cap gains rate can vary substantially over time It is 0% (up to like $100k for a couple filing jointly), 15% (up to about $580k), and 20% above that. Income tax has many more brackets than that and they kick in at way lower incomes. It's true that your income can vary substantially over time. It might be nice to do earn all your capital gains and dividends in retirement. You will likely need less income then to live on and can incur $100k/year in gains and dividends tax-free. On the other hand, remaining invested in a stock that does buybacks during your working years also concentrates your risk in that stock. So people will likely sell anyway and take some capital gains to diversify. And finally, if we want companies to improve productivity (read: fewer employees) then we can't solely tax labor to fund everything. We have to tax the part of the pie that's actually growing: this is represented by stock prices and dividends.
- fn-mote 1y agoCan you make this argument more rigorous? I’m just not following the connections here. It seems like your assumption is that a stock buyback is a short term gain. One of your arguments is that the strike price for options is set based on a certain amount of stock in circulation, and decreasing that amount will “artificially” raise the stock price, making the options more valuable. I agree that higher stock price benefits those with options, and I would even agree that it is possible that when those strike prices were valued, the valuation did not take into account the possible global change in the amount of stock (although a market would have included this valuation). I suppose the other part of the argument could be that R&D is good for the stock in the long term in a way that stock buybacks are not… the buybacks pumping up the price of the stock before it is driven into the dirt by competitors who do invest in R&D. There, I’ve done my best for your argument but I still don’t really believe that increased stock prices for everyone is not benefiting everyone more or less equally.
- nyeah 1y ago[flagged]
- terminalshort 1y ago[flagged]
- nyeah 1y agoHard to say for sure. I don't know either of them. But I'm not casting aspersions on the commenter. I'm responding directly to his implication that if he doesn't understand X then X is false. That's not a thing.
- terminalshort 1y ago[flagged]
- triceratops 1y ago> It seems like your assumption is that a stock buyback is a short term gain. My argument is a stock buyback isn't a gain for a long-term, buy-and-hold investor. Unless a) they sell some of the stock or b) it pays dividends they don't see the benefit of a higher stock price or reduced share count. Qualified dividends and long term capital gains are taxed at the same rate. So anyone who says "buybacks are more tax-advantaged" is leaving out the second part: "because you can borrow against a higher stock price without paying taxes". Since most (non-rich) people don't do that stock buybacks have the same tax (dis)advantage as dividends. If you know of a way to get tax-free money out of a higher stock price other than borrowing on margin, please tell me. I'd love to learn. > decreasing that amount will “artificially” raise the stock price It isn't "artificial". There are fewer shares in circulation/more demand for the shares. That legitimately translates into a higher price. But stock options and grants are generally given to employees and especially executives. So a reduced share count and higher share price is particularly good for them. > One of your arguments is that the strike price for options is set based on a certain amount of stock in circulation My argument was more that when employees are paid a significant portion of their compensation in stock they tend to sell much of it upon vest (sensibly) in order to diversify or even just to pay their bills. Ergo, being frequent sellers, they benefit from the higher stock price more than they would from regular dividend payments. A higher stock price directly translates into higher compensation. Wouldn't this be a powerful incentive for company management to prefer buybacks over dividends? > I suppose the other part of the argument could be that R&D is good for the stock in the long term I didn't say anything about R&D spending. A company should return as much profit to shareholders as it sees fit. I was rebutting the common, I believe simple-minded, argument that buybacks and dividends are completely equivalent. Even though the company spends the same amount of money, I think they are different in some very significant ways.
- RandomLensman 1y agoWhat is your definition of "benefit"? Assuming a buyback increases share prices, why would shareholders in general be indifferent?
- triceratops 1y agoBecause if I don't intend to sell right now, and the company is otherwise a healthy, going concern that can pay sustainable dividends, the actual share price is irrelevant to me. If anything, given my belief in the company, a lower share price is better. I can buy more shares!
- RandomLensman 1y agoIf you ever want to sell, getting in the limit nothing for the shares might matter, no? There are other things: for example, share based M&A or compensation or other investors with different preferences - no relevance or interaction?
- triceratops 1y ago> If you ever want to sell I already said that buybacks benefit sellers. > share based M&A or compensation All fair points. Share-based M&A can be good for investors. But if the stock price is going up because the company spent money on buybacks, then the company could also just pay cash for M&A and skip the buybacks. Higher compensation is good for employees who get paid stock and for upper management, who are nearly always paid largely in stock. There's an argument that's good for shareholders because of better retention. But if that were the case, why not just pay employees more cash?
- RandomLensman 1y agoAre there many investors that are never sellers (that is different from selling soon-ish)? Paying cash could be quite different than paying in shares for M&A. If owning/using shares makes no difference to cash (whether to employees or in M&A situations), why not do buybacks then if there is no difference between cash and shares anyway?
- overrun11 1y agoThis is just nonsense. Anyone can sell the stock if they wish, there is no privilege for the high-net worth. Additionally, shareholders benefit from reduced share count because it increases their claim on future profits thereby increasing compounding.
- triceratops 1y agoYou're mixing up points 2 and 3. Anyone can sell, but buybacks benefit mostly sellers. Borrowing against stock is mostly something for HNW people. > shareeholders benefit from reduced share count because it increases their claim on future profits So...dividends? Or when they eventually sell? What if I never want to sell?
- overrun11 1y agoBuybacks are still better if you want to hold forever and don't care about share price. With a dividend distribution you must pay taxes and reinvest the diminished proceeds. You end up with a smaller share of the company than in the buyback scenario. Example: A: Hold $10 of stock. Buyback of 1$ per share. You're left with $10 of stock. B: Hold $10 of stock. Dividend of 1$ per share. You're left with 9$ of stock and $1 cash - taxes payed. Once reinvested you have $9 + (1 * tax rate) in stock. You're making two mistakes: One is thinking that dividends are magic money that do not cause share prices to fall in exact accordance with the distribution and the other is that buybacks lift the share price somehow (they do not, see Modigliani-Miller).
- barchar 1y agoActually, normal people can do the borrowing thing. It's not really as necessary since you have normal employment income but you can do it and it can work. If you continually add more principle to your pile-o-stock than your monthly spending the growth will outpace your interest and you won't accumulate an unbounded amount of leverage. At least if your broker offers decent margin rates or you sell boxes. Well, also, your 401k and IRAs are probably superior to this strategy and can't be used as collateral as they're protected in bankruptcy. So it's not worth it until you fill those up.
- Tuna-Fish 1y ago4. Those who intend to re-invest all returns in to the stock, who avoid a taxable event when their ownership of the company goes up without having to first pay tax for the dividend. A stock buyback rewards all stockholders equally. Those who sell, get their reward in cash. Those who do not sell, get their reward in the proportion of their ownership of the company going up.
- nyeah 1y agoThere is supply and demand to consider. Buybacks create a tendency toward higher share prices, but only while they continue. That demand cuts off when the buybacks stop. If the buybacks are at a discount to whatever the stock turns out to have been worth at the time, then that benefits all the shareholders. That can be a great use of money for all shareholders. But buybacks at inflated prices benefit only exiting shareholders. Exiting shareholders tend to include hired management. Of course nobody really knows the valuation that well, so obviously there's a guessing game. This is pretty hard to argue against for anybody who agrees that valuation is a thing at all.
- jstanley 1y ago> Buybacks create a tendency toward higher share prices, but only while they continue. Buybacks increase the share price because you have a company that is worth (for sake of argument) the same as it was worth before, except now there are fewer shares available. A fixed market cap divided by fewer shares equals a higher share price. In the limit case imagine buying back all but 1 share. Now that 1 share represents the entire value of the company, so the share price would equal the market cap.
- mitthrowaway2 1y agoThe company is worth a bit less after the buyback, because it's given away some of its money, which was part of its valuation. But the effect should still be positive on the share price.
- 1y ago
- barchar 1y agoActually no, they have the same benefits as a dividend except they don't create a forced tax liability. Stock grants can actually include dividends. Even if you don't sell or borrow against it you benefit because you don't have that tax liability, and the money you woulda paid in taxes can continue to be invested.
- seanhunter 1y agoThis is simply untrue in every detail. All common stock is pari passu. A buyback of common benefits all common stock holders pro rata with their holdings. Similarly, vesting grants without buybacks harms the common holders by dilution. A buyback of the amount of vested is the least that is required to keep the common holders whole.
- overrun11 1y agoThe person you're responding to's argument is incoherent and not worth engaging in. The crux of it is that long term shareholders aren't benefited by buybacks because share price doesn't matter to them because they will never sell. Somehow however, dividends are good for them because they will not reinvest them for some reason? It doesn't make any sense.
- insane_dreamer 1y agodividends and capital gains are taxed differently
- triceratops 1y agoNot in the US.
- LunaSea 1y ago> But dividends also result in a concrete financial reward for all shareholders, yes? Yes, but less because in many countries dividends are taxed more than selling shares after a share price increase.
- xixixao 1y agoDumb maybe question: Why couldn’t the companies with excess profits just pay they employees more in salaries?
- nucleogenesis 1y agoThe only people who matter are shareholders. Employees are a means to the end of making money for the owners of the company whether through stocks or other kinds of ownership.
- nyeah 1y agoThey could, but then they'd have to report lower profits by the same amount. I want to actually defend this though: Corporate profit is a very narrow measure, by design. It was never intended to capture how well the nation is doing.
- Macha 1y agoThat would not make the share price number go up, which in turn means it doesn't make the leadership's net worth number go up, which means the leadership won't make that choice.
- fn-mote 1y agoThe leadership’s net worth is going up based on their compensation plan including stock options, regardless. If you are more explicit about your assumptions it might be easier to believe or refute the argument.
- ceejayoz 1y agoThat would set a precedent they don’t want. Investors and the Federal government have little interest in labor gaining power.
- vladms 1y agoCompanies are controlled by shareholders who appoint the board who appoint the CEO. If the CEO decides to pay employees more, the board will change him because shareholder put money to get money out, not to give to employees. Companies can give "shares" to employees, which means excess profits can be made dividends out of which employees "touch a bit". If you would have your own company (privately own and full control) you are of course free to share the excess profit as you see fit. Edit: and of course, share buy back avoids some taxes that you must pay, which in other schemes would have to be paid.
- helsinkiandrew 1y ago> Share buybacks allow companies to reward executives directly as their compensation is tied to stock price. To be fair share owners also like the stock price to go higher, they also like dividends (and higher dividends would tend to drive the stock price higher too), but an X% increase in share price caused by buybacks is favoured over an X% dividend because it isn’t immediately taxed.
- deleted 1y ago[deleted]
- cgh 1y agoAlso, I believe in the US ordinary dividends are taxed at the income tax rate which is much higher than the capital gains rate.
- boroboro4 1y agoIt doesn’t make sense to compare ordinary dividends to capital gains - either compare ordinary to short term gains or qualified to long term gains.
- ElevenLathe 1y agoWhy? These are just rules in a made-up game. They can be anything we want.
- deleted 1y ago[deleted]
- barchar 1y agoNo, most dividends are "qualified" and taxed at the long term capital gains rate, assuming you've held the underlying for a decent amount of time. Still, they're taxed, whereas buybacks allow the shareholders to control exactly when they take income. Also buybacks will tend to select for frequently traded shares with high cost basis, further reducing total taxes and selecting for longer term shareholders. They really are just better than dividends in every way.
- Uehreka 1y agoUnfortunately CEOs have to do buybacks at every opportunity, because otherwise shareholders will sue them for failing to maximize shareholder value. > Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. Wall Street did not approve of this position, but Jobs wasn’t one to listen to anybody, so it did not matter. (Head spins) wait what?! No! You’re not supposed to do that! If you fail to always maximize short term profits, people might start thinking CEOs actually have agency, and they won’t be able to hide behind the “maximizing shareholder value” excuse!
- hyperpape 1y ago> shareholders will sue them for failing to maximize shareholder value That's quite a bold claim. Do you have an example in which a company/CEO/board was sued specifically for not doing enough buybacks?
- bena 1y agoA lot of this comes back to Dodge v Ford. The Dodge brothers sued the Ford Motor Company because Ford wanted to cut prices and invest in the company while removing dividends to shareholders. The Dodges disagreed with this and sued. The courts found in favor of them. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
- mike_hearn 1y agoFord was an egregious case though. The court's judgement was surely correct but it also hardly matters for the real world. CEOs usually don't publicly announce they plan to literally and deliberately burn all their profits, even if it in reality they absolutely plan to spend it on vanity projects or whatever.
- bena 1y agoRegardless of what the intention was, shareholder primacy has roots in that judgment.
- terminalshort 1y agoIf companies want to reward executives directly they can cut out shareholders entirely and pay salaries and bonuses. If companies want to reward shareholders (including executives) they can pay dividends (which Apple did do under Jobs). Nothing about the priorities of companies changed with share buybacks.
- nyeah 1y agoFor one thing, buybacks aren't charged against profits. Compensation is.
- lotsofpulp 1y agoWhat does that even mean? Both stock buybacks and dividends are the distribution of profit. Compensation expenses (such as stock options, RSUs, etc) are accounted as expenses, which of course reduces profit.
- nyeah 1y ago[flagged]
- badpun 1y agoThe reality seems to be that only the genius founder is allowed to do any unorthodox moves as the CEO. Once he's out, the board selects a CEO that will basically continue business as usual without rocking the boat. The new CEO essentially won't have a mandate to use any controversial or original approach.
- JKCalhoun 1y agoAnd yet when Jobs returned to Apple he blew up ATG (the Advanced Technology Group) that gave us Quicktime, etc. He also shutdown Apple's research library (and gave all the books to Stanford, I believe). He seemed to have little patience for "scientists" — preferred engineers that shipped shit. I think that at best he saw research as expensive, at worst he saw it as elitist.
- dmix 1y agoWasn't Apple burning money when he joined?
- JKCalhoun 1y agoApple was giving away the Keys to the Kingdom by way of licensing Macintosh clones, among other things. If ATG were responsible for hemorrhaging cash I am not sure why they did not re-appear then when Apple was firing on all cylinders. Only Jony was crowned. And there's no way the library and its books were a cost — unless perhaps it was attracting snooty engineers who were reading Foley and van Dam when they should have been fixing bugs. ;-) (That actually might have been me.)
- UncleOxidant 1y agoAnd yet, he went to Xerox PARC and copied their research.
- WD-42 1y agoHe also didn’t seem to have an issue borrowing Unix, which obviously has a rich history of research and academia.
- pjmlp 1y agoIndeed, however many people are too young to remember that he looked down into UNIX, as a bunch of greybeards without taste. "Why We Have to Make UNIX Invisible." https://www.usenix.org/blog/vault-steve-jobs-keynotes-1987-usenix-atc https://www.usenix.org/blog/vault-steve-jobs-keynotes-1987-u... "That time I had Steve Jobs keynote at Unix Expo" > They said a Unix weenie was code for software engineers who hated what we were doing to Unix (the operating system we licensed)—putting a graphical user interface on it to dumb it down for grandmothers. They heckled Steve about his efforts to destroy it. His nightmare would be to speak to a crowd of them. From https://web.archive.org/web/20180628214613/https://www.cake.co/conversations/rZXhqtP/that-time-i-had-steve-jobs-keynote-at-unix-expo https://web.archive.org/web/20180628214613/https://www.cake.... The value proposition NeXT found on UNIX, was the same as Microsoft (after they let go of Xenix, thanks to MS-DOS golden goose deal with IBM), a means to an end, the market of companies and universities that wanted something with UNIX in the box. "NeXT marketing strategy video (1991)" https://www.youtube.com/watch?v=KRBIH0CA7ZU https://www.youtube.com/watch?v=KRBIH0CA7ZU Note that he wasn't at Apple when A/UX and MkLinux efforts took place.
- smaudet 1y agoMaybe some of these 2-brain cell executives should consider that their "buybacks" will be worthless when US throughput starts to be equally worthless compared to the rest of the world... Of course, I'm being a bit pejorative, they aren't thinking big picture at all, just concerned with what happens tomorrow not the day after... However, they are in part responsible for the nonsense happening at the moment wrt to American policy, it seems like a game who can light cash on fire the fastest ..
- whatevaa 1y agoOh they know. They just don't care.
- zaphar 1y agoI don't think they do know. Nor do I think most of the shareholders know. If they did they would know that they can make way more money with forward thinking and planning beyond a quarter. The lack of that is the clearest indication I can imagine that they do not know.
- fakedang 1y agoMost investors today are basically stock printer go brrr.... If one looks at US money printing in the past two decades, they'll find that the S&P's gains are basically just a mirror to the increased injection of dollars, a facade made to prop up the market. There really has been no actual growth compared to like Japan in the 1980s or China and India in the early 2000s, or Vietnam today. Just a few companies, mostly in tech, which are propping up the rest of the market.
- zaphar 1y agoWhich is kind of just one way of saying "They don't know".
- zarenor 1y agoSee, this is the thing. An investor isn't tied to the fortunes of any one company. An investor can bail when things go south, and investors who care enough to be writing to executives or the board are also the ones most sensitive to signals things are going badly. This is why 'activist' investing works - you can take on debt, or drive a debt-funded acquisition so that the immediate value of a share goes up, bail while people are buying the inflated price, and be running the con again while the debt kills the company. The execs are bound by the board, and don't feel empowered to fight these kinds of changes - often, they're replaced if they do (or as part of the board takeover). Long-run, this is bad for the companies this happens to, and the overall economy, but it's good short-run for investors, and savvy investors don't need to worry about long run, because at worst they can liquidate their position before the market catches up and sit in treasuries if there's no other good poaching target. The failure of anti-trust enforcement, of anyone to sue for long-term over short-term gains, the tax-advantaged position of stock-centered comp, and the acceptance of even debt-funded buybacks all work together to reinforce this failure state.
- BurningFrog 1y agoShare buybacks is not some weird loophole that allows executives to get paid. Companies are always allowed to reward their executives and other employees by giving them money, stock options, or other rewards.
- noobermin 1y agoIsn't corportate csuite compensation the highest it's ever been? This isn't that great of an argument.
- ludicrousdispla 1y ago> Jobs was always thinking Apple could do better with the money in R&D Turns out Jobs was right, relevant article from 2006: https://appleinsider.com/articles/06/01/16/apples_jobs_says_michael_dell_should_eat_his_own_words https://appleinsider.com/articles/06/01/16/apples_jobs_says_...
- runako 1y agoScale matters. From TFA: > pushed the company's market capitalization to $72.13 billion This, on annual revenue of ~$19B. Apple today is closing in on 2x that revenue every month now. Quarterly net profit exceeds annual revenue in 2006. The Apple Watch group is roughly half the size of the whole company in 2006. At some point, it became clear that the business throws off vastly more cash than can be productively used in R&D (here I will note that Apple's recent profit gusher is already net of investments in things like the Titan car project, Vision, and all the other stuff they work on but never release).
- AnthonyMouse 1y ago> Share buybacks allow companies to reward executives directly as their compensation is tied to stock price. If we started not doing that, the priorities might shift, but those executives like things the way they are. This isn't right but it's adjacent. Executives don't need buybacks to get whatever compensation. Their compensation is negotiated and you can write the contract to make it whatever. However, paying dividends is a taxable event, which means shareholders don't like it. You have to pay the tax on the dividend immediately instead of when you sell the shares, even if you just use the money to buy more shares. Buybacks don't work like that unless you're the one who sells your shares in the buyback. Which you can be if you'd rather have the money immediately (and pay the tax) than de facto increase your holdings in the company. If transferring money to shareholders as dividends forces them to realize taxable gains before they want to then they'd prefer the company keep the money and invest it in something internally instead. Buybacks give them away around that. But that's not necessarily bad. The shareholders (the ones who sold their shares) get the money instead and then invest it in something else, ideally a different company so that the existing large company doesn't get even bigger. Also, when the company keeps the money, it doesn't have to use it for R&D at all. Companies often use it to acquire other companies, which is the worst. You don't really want a tax incentive to make big companies bigger.
- treyd 1y ago> Companies often use it to acquire other companies, which is the worst. We also used to enforce antitrust law.
- walkabout 1y agoChicago school assholes backed by economic-right postwar "think tanks" managed to radically shift our standard for "harm" in anti trust enforcement, back in the '70s, though a combo of lobbying and positioning their folks in the right places. The result was that it became nearly impossible to take anti-trust action. That's why it seems like we suddenly stopped enforcing it—we did. This was followed shortly by a shift way to the right by Democrats on economic issues (among other things—listen to Clinton in the '90s talk about crime or schools or lots of other topics some time, he sounds exactly like a Republican) after Reagan's landslide, which put any hope of reversing that bad course on hold indefinitely. The first notable push-back on that state of affairs was Lina Khan under Biden, who ever so slightly course-corrected us back toward healthy market competition in the tiniest of ways, and every business bro reacted like she was committing mass murder. Meanwhile, we need that times ten for at least a decade just to get us back to something resembling functioning markets. At this point I doubt we'll see a shift back toward reasonable market regulation... ever. Plutocrat capture of the levers of power is so complete that the only way I expect the US to see serious anti-trust action ever again is as a tool of corruption.
- rjmunro 1y agoThe whole point of owning shares is to share in a company’s profits. In simple terms, you make money through dividends or buybacks. Without that, there’s really no reason to own the stock. Sure, prices go up and down, and you can try to profit from that, but if a company never plans to return money to shareholders, there’s nothing real behind the price. Eventually you’d just be holding on until the company fades away or goes bankrupt. Buybacks are just another way of giving profits back to shareholders—an alternative to dividends with different tax implications. Their purpose isn't to "allow companies to reward executives directly", they are just an alternative way for shareholders to share in the profits. A company could tie executives compensation to the amount of dividend if it wanted. That might be a good idea.
- sholain 1y agoShare buybacks are are at least nominally a financially neutral exercise - it generally does not benefit either shareholders or executives. They can however signal 'strength' in stock price by creating more demand and signalling to the market that the company itself which has 'insider information' believes the stock price is worth less than the price they're bought for. It's a fair point about Jobs - but - Jobs was never sitting on more money than the economies of most nations. Jobs Apple was a consumer product company, Tim Cook Apple is a Private Equity Operating Entity in a way. Their financial operations dictate as much about their valuation as anything else.
- NickC25 1y agoThe train of thought here is that product people innovate and launch companies, but operations & finance people have no idea how to innovate or create new products. Putting in a finance/ops person as the CEO will stagnate a company from a product standpoint.
- creer 1y ago> Jobs was always thinking Apple could do better with the money in R&D > Jobs wasn’t one to listen to anybody, so it did not matter. It did matter. Jobs was wrong. Apple indeed couldn't do better. It's not even that Apple couldn't produce R&D results worth all this money. Apple couldn't even manage to spend at that pace. Steve Jobs' projects could and did use a lot of money but nowhere near that pace. And the pace of earnings got better still after Jobs. Jobs was right on another aspect which was that this pile of money provided Apple solid, safe ground. Apple was safe from any risk of a few years of bad earnings. That was very costly safety. It took a different CEO to finally work to reverse the damage. That project has taken many years and (arguably) isn't finished yet. And that's in parallel to massive increases in R&D. It doesn't do a lot of basic science - I expect. But it does or funds a lot of engineering and applied science. that's the point of the article, that in the up-to-recently US system, corporations even with lots of earnings didn't have to.