|
It's psychological, but it also goes from an understanding that profits, in the rigid economic sense, don't reliably exist. A profit is gain realized by buying things, recombining them using innovation, and selling at a favorable price. A true profit is something you make, again and again, and with diminishing returns because prices move and the gap closes, as with arbitrages. Rents, which are more reliable, are payments you collect because you own things. (You may use those things, or you may, using the more common sense of the word, rent those things out.) Most "profits" are actually just rents. Rents extracted because the company owns real estate, rents extracted because of brand presence, interest (which is a rent on money) through financing programs, rents extracted because workers' need for daily survival has them systematically underpricing their labor, and rents on political capital (favorable regulatory environment). Getting paid because you have a great idea is intermittent, and usually requires taking on a lot of risk, and risk is something established companies hate. Getting paid because you own something is easy-as-shit and forever reliable. Where does the car industry make the bulk of its gains? Not on selling the cars, but in financing. It's an evergreen business, so long as there is capitalism-- there will always be people who need money they don't have, and it will always be an easy business to collect the vig. Regular businesses eventually stop innovating-- they have plenty of smart people, but the bosses don't want to take risks because they're busy collecting personal rents by holding management positions, and obviously don't want to lose that-- and their "profits" converge to the rent roll on the resources they own. That's just how it works. Average equals mediocre, the latter used non-pejoratively. That said, it's not sexy to imagine that one is investing into companies that have become mere utilities, that will continue to collect rents on the resources they own (of which a person can buy a tiny fractional share of the ownership) but not really do anything interesting. These ultra-capitalist non-profits (non-profits-for-now) create the illusion that they're something different... that they're "rocket ship" companies run by people with supernatural talent and "vision", that they aren't rent-seekers using capital's native advantage over labor for reliable but unpulchritudinous gains... which is what all large companies are... but, instead, a kind of "new company" that is going to innovate moonshots and synergize us up a new century of prosperity, freedom, and magical puppies that never poop. Smart investors recognize that all of that is bullshit, and that these tech unicorns are just as exploitative as traditional companies (and, in fact, probably more so) but they also realize that dumber investors get the warm fuzzies and that there is therefore a premium. |