We've been in one long cycle since 1998, continuing with the .com bubble and the GFC and finally Covid. With each one we've had to print more and do more to get out of it. Where it ends is anybodies guess...but each crisis requires a larger response
The purpose of a company isn't to employ people. It's to take raw inputs, including employee labor, and turn that into outputs that people want. Employee relief comes in the form of voting with their feet or if they're critical inputs into what the black box produces
Amusing. The purpose of a company was originally exactly that: to employ people and provide services and value to the community they existed in. I mean, this is still the exact reason politicians cite when providing incentives to companies - bringing jobs to their cities/states.
I'm pretty sure I don't like this new definition; it feels like it's based on greed, not value.
> purpose of a company was originally exactly that: to employ people and provide services and value to the community they existed in
This describes charities, trusts and local governments. Maybe artisans. The East India companies weren’t trying to “provide services and value” to anyone but their owners. Even going back to Roman times, civic duty and commercial interests were distinct parts of peoples’ work. You were expected to do both. But the unification of the two pursuits appears to be more modern.
Shareholders are not the only stakeholders who should be considered in a company.
"The purpose of a corporation is to ... create value over the long-term, which requires consideration of the stakeholders ... (shareholders, employees, customers, suppliers, creditors and communities) ..."
That's not historically accurate. Historically, the purpose of a company was to be a vehicle that a passive partner could invest capital into an enterprise providing a return on investment, such that an active partner (who did not) could manage it [1].
I do not see historical support for your claim that the purpose of a company was "to employ people and provide services and value to the community they existed in" even if that would be an ideal social outcome (and one which I'd personally prefer to see everywhere).
The purpose of a corporation is to conduct a lawful, ethical, profitable and sustainable business in order to create value over the long-term, which requires consideration of the stakeholders that are critical to its success (shareholders, employees, customers, suppliers, creditors and communities) ...
Business corporations are perhaps the most influential organizations in society and have long been recognized as important contributors to the common good. Society grants corporations unique privileges in order to harness their great capacities to serve its needs.
It's not clear how those 4 quotes are supposed to relate to each other without added interpretation. Is there something more you'd like say?
For what it's worth, I don't know if any of those sources cover broad economic trends across history. I do find them in pursuit of noble goals for the early 2020s.
But in this case, my opinion is that there's a bit of a gulf there in between "this is how I would like things to work" and "this is how things have worked today/in the past/for a long time".
The reason companies are given legal standing and privilege is because they serve a useful social function, in addition to being a legal nicety for investment. If companies don’t serve useful social purposes we can change the law to withdraw those privileges.
That's incorrect. They are given legal standing and privilege because they serve a useful /economic/ function (tax base).
The social function is downstream from this, and it's also what creates friction to actually /change the law/ to withdraw those privileges -- you do it at the risk of hemorrhaging that tax base which funds the governing apparatus.
I think you have a narrower definition of ‘social’ function. I mean the things that are useful to society as a whole. Things we seem not helpful/useful/conducive to people leading best lives can be curtailed. Not everyone shares the view that “economic freedoms” are inalienable when they entail externalities.
Hence why every business owner boasts about being a job creator. This despite these jobs being an unwanted side effect of the actual goals of the business. Cost centres.
'Look at all these employees I resent having to spend money on and actively try to make redundant and underpay. Aren't I just great?'
Says who? I think the idea of "purpose" of a company is very nebulous and interacts opaquely with: the "incentives" of a company, the societal purpose for having companies, the mission statement of a particular company, etc. I would say the purpose of a company is mostly to make money for the owners of the company, which is not the exact same as what you said.
Practically, we haven't yet developed anti-fragile socio-ideological technologies which can out compete shareholder-maximization ideologies(SMIs). Instead SMIs are adept at castrating anti-SMIs and rendering them inert before they can establish a foothold. The world we enter into today is the product of this anti-SMI castration. You can even see echos of the great SMI war play out whenever SMI granades are casually lobbed in the bushwar of this discussion.
Not in the US, but Germany and Scandinavian countries show this very much is a possibility. Medium sized firms in Germany just don’t behave the same way they do in the US and large enterprises are subject to far more state intervention. And it still works fine.
Yes. My comment was very US-centric. You're right; the outcomes are demonstrably true. Board-level representation is a good example of this. Maybe asking rhetorically in a different way - what is the series of chess moves where that goal is achieved?
This is why whenever a company claims to be "creating jobs" they're talking about a byproduct they're often trying to reduce/stop not a goal of their business. IMHO "job creation" rhetoric can be dismissed out of hand when discussing taxation and regulation.
It's to take raw inputs and turn it into money. No one really wants telemarketing calls, or patent lawsuits but companies "produce" those things regardless to make money.
Attorney General of NY looked at their books and found most of the collateral was there, although in the form of commercial paper. The risk is really in which companies debt they hold. If we see a perfect storm of something like 2008 where correlations go to 1 resulting in massive defaults AND a significant number of redemptions then I'd be worried.
The car is unbelievably good coming from someone who used to drive entry-level luxury sedans. It's light years beyond anything BMW, Infiniti and Lexus have to offer.
Yes, it works very well but not for the 'wisdom of the crowds' effect. It works because the people with the most information and best models sharpen up the price. Over time, the sharpest bettors grow their bankrolls or capital exponentially and place larger bets and have a disproportionate weight on the markets and their opinions matter more, making markets more efficient.
In theory you're right - but this isn't how it works in practice. The people who earn the most money are the best traders, not necessarily the people with the "most information and best models." The overall forecasts tend to be accurate, but you cannot look to individual participants, see who has the most money, and assume they know the most about the subject at hand.
Both right: on an individual level the people with the most money might or might not be the smartest, but in aggregate the money moves towards the smarter bettors, weighting their votes higher in future rounds, improving the aggregate intelligence of the market.
Ironically, one of the core reasons for less IPOs is Sarbanes-Oxley, which was meant to protect retail investors but instead has had the second order effect of reducing the number of IPOs and limiting the available higher growth / higher risk opportunities these same investors.
This is very accurate. It is extremely costly for companies to have an IPO. The regulatory burden is very high for publicly traded companies.
A history of financial laws designed to protect consumers has actually reduced the number of investment opportunities except for ultra-rich people.
Look up the definition of 'qualified investor' from the Securities Act of 1933. It prevents people below a threshold of wealth from being able to invest in certain things.
Similarly, based on my own experience having worked with proprietary trading outfits in the past, the FATCA laws just caused European banks to no longer want to do business with Americans which reduced the number of available investment opportunities again.
For young people especially, the investment opportunities are an absolute bore. It makes a lot more sense to take big risks when you are young, and by implementing the 'qualified investor' requirements, many young people will never have a chance to invest in the exact companies which interest them the most.
A 25 year old who loses a $10K investment in Myspace, or Digg can easily bounce back. It's well worth the chance of investing early in a company like Snapchat or Facebook which could give them a shot at a 10-100X return.
There's a reason so many people poured money into Bitcoin and crypto. Most of the projects are pointless, but young people have very little interest in earning 5-10% in stocks, since they don't have a ton of capital to invest.
