January 3, 2012

Why do the hard stuff?

This seems to make sense to me...

The Dumbest Idea In The World: Maximizing Shareholder Value - Forbes:

There is only one valid definition of a business purpose: to create a customer.
    -- Peter Drucker, The Practice of Management
..."In today’s paradoxical world of maximizing shareholder value, which Jack Welch himself has called "the dumbest idea in the world", the situation is the reverse. CEOs and their top managers have massive incentives to focus most of their attentions on the expectations market, rather than the real job of running the company producing real products and services.

The "real market," Martin explains, is the world in which factories are built, products are designed and produced, real products and services are bought and sold, revenues are earned, expenses are paid, and real dollars of profit show up on the bottom line. That is the world that executives control—at least to some extent.

The expectations market is the world in which shares in companies are traded between investors—in other words, the stock market. In this market, investors assess the real market activities of a company today and, on the basis of that assessment, form expectations as to how the company is likely to perform in the future. The consensus view of all investors and potential investors as to expectations of future performance shapes the stock price of the company.

"What would lead [a CEO]," asks Martin, "to do the hard, long-term work of substantially improving real-market performance when she can choose to work on simply raising expectations instead? Even if she has a performance bonus tied to real-market metrics, the size of that bonus now typically pales in comparison with the size of her stock-based incentives. Expectations are where the money is. And of course, improving real-market performance is the hardest and slowest way to increase expectations from the existing level."...

If I own some shares in a company, technically I'm an owner. But in most cases that's just unrealistic. Shareholders mostly don't act like owners. Buying shares is kind of like loaning money with an element of making a bet. Imagine you loaning money to my company. But instead of a fixed 4% interest, we will make a bet. If my company is successful, you get 12% interest. If I flop, you get nothing. That's sort of what being a shareholder is like.

Treating the shareholder as an owner when he's really a lender doesn't make a lot of sense. Better to just build the business, and there will be more for everybody.

So who owns the publicly-held corporation? Who cares? It doesn't really matter. Businesses happen. They benefit us all. If they end up being like some sort of Quantum particles that are there but don't really exist, I'm not going to sweat it.

Posted by John Weidner at January 3, 2012 9:01 PM

I wonder if you ever read or heard of B Lewis at brucelewis.com. He writes:

A conservative believes in Tradition, not liberty; Family, not equality; and private Property, not socialist or capitalist communal ownership of property.

It is just amazing that both you and him have hit upon the key --"capitalist communal ownership".
To you it is irrelevant but just saying Businesses happen is very unsatisfactory and not a rational argument for anything.

The full quote from Lewis is (perhaps you would fisk it)(from pjmedia.com):

The problem with the conservative elite in this country is that, while they may be an elite, they are not in any sense conservative. It is, to a man, infected by the virus of individualist liberty-worship straight out of the Enlightenment test-tube, with all its symptoms: the rights of man, government by the people, the secular state, social equality, brotherhood of man. The average American “conservative”, elite or not, is, in short, just another liberal.

American “conservatives” are in fact nothing less than revolutionaries at heart. They support the revolutionary ideas of liberty, equality, and fraternity that lie behind the American idea. A real conservative stands in opposition to everything the American “conservative” elite supports: voting (especially the universal franchise) and representative government in general; the idea of equality; the desirability of racial/social/sex integration; large, centralized government; the idea of a “proposition nation”; secularism in government and in public life; usury as the basis for economics; and most of all the idea that “a person should be able to do whatever he wants as long as he’s not hurting anyone else”. Anyone who believes in such things has no right to call himself a conservative.

A conservative believes in Tradition, not liberty; Family, not equality; and private Property, not socialist or capitalist communal ownership of property. Above all, he believes in four things: Dios, Patria, Fueros, Rey. These might be defined for English-speakers as “God, the nation, regional/local traditions, and the monarch”. That is the baseline of the conservative mind. That is what conservatism is: the belief in a Divinely-ordained hierarchy consisting of an anointed king or queen, the nation (i.e. an organic culture/ethnos), and the various local ways and customs. It has nothing to do with “rights”, but everything to do with duties. It does not unite people at gunpoint based upon a paper ideology, but is organized integrally around organic hierarchies arising from shared blood, shared culture, shared custom. It does not pretend that men are either wise enough or capable of ruling themselves; it instead recognizes the fact that leadership emerges naturally from prowess in wartime and from justice in peacetime — that men want and need kings to rule over them under God. It regards as self-evident the inequalities of men; it recognizes no fraternity among them except as children of God. Above all, real conservatism has nothing to do with the damnable worship of individual liberty. It recognizes that a God exists, that He has instituted a natural law among men, and that it is the duty of the King to wield the sword to enforce that law.

A true conservative movement cannot arise in the United States because, like any revolutionary republic, it is an artificial construct — a “nation” based upon the liberal idea and united by nothing more than a scrap of parchment and naked force. To be truly conservative, the American must go back — back bast Buckley, past Russell Kirk, past the Southern Agrarians, the States’ Rights movement, past the Founding Fathers, past Locke, past Burke, back to the mindset of Christendom — the political and social order centered upon God and man’s relationship to Him. We have to step outside the context of politics, of America itself, and grasp the true root of truth.

This obviously isn’t going to happen within the current political and social situation. As the Revolution enters its death throes, its coils will clench every more tightly around our lives, making any significant movement impossible or meaningless. Politically, then, true conservatives have little choice but to protect their families, hone their skills, and safeguard the Old Ways as they wait for the inevitable collapse of mankind’s latest attempt to become as gods. Only when the Revolution has fallen in ruins will the natural — traditional — order of the world reassert itself.

Posted by: Gian at January 3, 2012 11:37 PM
to do the hard, long-term work of substantially improving real-market performance when she can choose to work on simply raising expectations instead?

Because you can control your own production and company far more reliably than other people's expectations? Because not every is a moron and you can't create expectations based on pure marketing?* Because expectations are the cocaine of business - they make you go really well for a short while and then you crash and burn?

* Yes, I realize "President" Obama makes a hash of this, but in general...

Posted by: Annoying Old Guy at January 4, 2012 8:11 AM

"the cocaine of business." I like that.

Posted by: John Weidner at January 5, 2012 6:25 PM


Your eloquence is much appreciated.

But there seems to me to be a logical flaw in your argument. It's the same flaw seen in Protestantism. The Protestant says, "We must return to the pure early Church, and not invent new doctrines." But that in itself is a radical new doctrine. (No one in the early Church talked that way.) And a radical kind of power-grab, since the Protestant gets to define what the "early Church" was, almost without limitations.

What you are suggesting is more a nostalgic modern fantasy of a "conservative" past, than any kind of understanding or love of what the past was really like. Iike something out of a novel by William Morris. You are just as much a modern revolutionary as Marx, or Mao, or the philosophes who led to the French Revolution. Why? Because the idea or picture in your mind is what is real to you, while the real messy stuff of life you ignore.

Posted by: John Weidner at January 5, 2012 7:16 PM

PS: Gian, your comment was held up by my software for some unknown reason (maybe length) until I noticed and liberated it. Sorry.

Posted by: John Weidner at January 5, 2012 7:20 PM
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