[dcolkitt]

I'm gonna disagree with you. Very few companies manage to successfully pivot to a line of business that's substantially outside their original area of core competence.

The reality is that different organizations have ingrained cultural DNAs that's usually both optimized for their specific niche and painfully difficult to change. When an industry reaches its inextricable decline, most companies would do better to gracefully return money to shareholders (either in the form of dividends or buybacks).

9 times out of 10, that produces a better outcome for investors than a desperate attempt to reinvent themselves. We tend not to realize this because of survivor bias. But for every Apple, Western Union or AT&T, there's a dozen companies like Polaroid, Sears and DEC littered across history's dustbin.

[blackflame7000]

It could be argued that every time a company comes out with a new product they are adding alternative revenue streams. By this definition it happens all the time.

[eru]

Funny enough, companies that follow this sensible advice often get a lot of flak. Matt Levine had some examples.

[rocqua]

Thing is. Whilst doing stock buybacks and dividends is best for the stockholders, it isn't best for the employees. Nor is it good for other stakeholders in the company.

In our modern state of stockholder supremacy, that doesn't tend to matter much. But I think it should matter more.

[dcolkitt]

Well, one thing to note is that money returned in buybacks doesn't just get thrown in a big pit. It has to be reinvested somewhere else. So, while it may not help the employees of the company paying the dividends, it certainly helps the employees of the company receiving new investment.

I think you did adroitly mention down thread that there are labor market frictions to consider. And I definitely agree with that. Obviously stable employment is definitely one social consideration. And certainly long-lived companies make for more stable labor markets.

But all in all, I still think that overall most people would prefer faster rather than slower turnover among large firms. Younger companies (as in those founded more recently) tend to be more innovative, deliver better customer service, have more satisfied employees, engage in less lobbying, and have fewer environmental and safety issues.

[sukilot]

Obviously it's better for you to take money from shareholders if you don't ever give it back. That's not a foundation for a long term stable ecosystem.

[rocqua]

What about, if you keep the money from shareholders. And instead of burning the money, or letting the shareholders 'efficiently reallocate capital'. You try and redirect the company to stay relevant.

It might be a less efficient allocation of capital. But it could reduce a lot of friction in the labor economy, and incurs less overhead from building an organization from scratch.

[eru]

The whole point of investing in a company is that eventually you get more money out than you put in.

And, for example, I don't want coal companies try to stay relevant. They have coal managers and coal workers who know how to run coal mining.

I'd rather they give the money to shareholders, so that the shareholders can invest it in a different venture, or consume it.

[eru]

Shareholder capitalism is an aspiration. We have never really tried it.

In practice, companies are run for the benefit of management and other insiders.

> Whilst doing stock buybacks and dividends is best for the stockholders, it isn't best for the employees. Nor is it good for other stakeholders in the company.

Stockholders can invest the money returned to them again in more profitable ventures.

[blahbhthrow3748]

Financial capitalism where everything needs to be consolidated, bundled and sold as an investment vehicle seems like a pretty modern invention.

To go to an extreme, look at It's a Wonderful Life. Something like a community bank in the early 20th century was not run aggressively for the sole benefit of shareholders, there was a notion of community involvement. If anything financialization since the 70s has created the fiction that corporations are soulless machines designed to optimize profits at the expense of all others.

[eru]

I would be careful about citing a fictional example of an American bank.

I'm not even objecting to the fiction. But more that American unit banking was extremely weird. Basically, many states banned banks from having more than one branch. The result was the world's most fragile financial system.

See https://www.alt-m.org/2015/07/29/there-was-no-place-like-can... for a comparison of 19th / early 20th century Canadian and American practices.