[eestrada]

> Epic is privately held, Valve is too, Unity is not and we ended up here. I think that says a lot.

I've been thinking a lot about private versus public companies. Most of my favorite products come out of privately held companies. There is something about the incentives for publicly traded companies that encourages them to make poor choices. I think it is because there are effectively two forms of revenue: selling products/services and selling stock. And those two things often conflict with eachother to the detriment of the customer. However, with a privately held company, the loyalty is primarily to the customer. Thus the products are better because they need to be to keep the company afloat.

I don't think that means that public companies shouldn't exist, but I wonder how an individual can structure their publicly traded company to avoid having the company misalign its incentives with those of the actual paying customer.

My current theory is to focus more on revenue sharing instead of stock price. For example, dividend stocks. I don't think it completely solves the problem, but it at least moves things in the right direction.

[corethree]

>My current theory is to focus more on revenue sharing instead of stock price. For example, dividend stocks. I don't think it completely solves the problem, but it at least moves things in the right direction.

This can't be directly enforced. You can't make laws for what people to "focus" on.

Though there is a way to indirectly push this notion: Restrict all stock ownership to be a minimum of 10 years. This indirectly puts more focus on dividends.

It also puts more focus on the core misalignment you're alluding at but failed to see explicitly: The misalignment between short term gains and long term gains.

In the end whether private or public they care about profit over customer. But private owners tend to care about customers because customers represent an overall bigger gain in the longer term and private owners are playing the long game.

If all stocks had a minimum 10 year ownership requirement it will change all corporations to focus on long term gains. I believe this one change can fundamentally fix the problem we have with corporations.

Maybe we can test this.

The other thing that needs to be changed is public responsibility. If a company dumps illegal nuclear waste in some river, directly ask for minimum fines from all shared holders. First divide the fine by the shareholder amount, charge each shareholder. Then if it's below a 500 dollar minimum add the remaining amount to get it up to 500.

Pissed off share holders paying 500 will definitely get corporations to stop doing random crap. Maybe even funnel jail time to board members or C-level execs. If a corporation is responsible for deaths it's justice to place actual people responsible rather then giving "jail time" to a corporate entity that doesn't actually exist.

[brightlancer]

> If all stocks had a minimum 10 year ownership requirement

Then nobody would ever buy that stock, because they have no exit if things go south.

And then that's combined with

> If a company dumps illegal nuclear waste in some river, directly ask for minimum fines from all shared holders. First divide the fine by the shareholder amount, charge each shareholder. Then if it's below a 500 dollar minimum add the remaining amount to get it up to 500.

Again, who would buy that stock? What reward is worth that risk, especially when you've banned them from selling stock even if they see the company is doing shady stuff?

[corethree]

You wouldn't buy that stock because you represent people with short term interests. And that's the point.

You're a gambler, you dive in and immediately exit. Nobody buys assets this way in reality... when you buy a car or toothbrush you don't dip in and dip out like a mad man. Paper stocks removes reality away from assets and lets you buy 0.000001% of a shoe and immediately sell it in 1 second. The economy isn't improved, and instead you create a market of buying and selling paper. It's too abstracted. We need to lower the abstraction.

People buy assets for utility and long term investments. When people do HFS it's basically a gambling ring, you're making money off one idiot trying to sell paper to the next idiot. This influences the board which influences corporate behavior to cater to your gambling tendencies.

10 year terms makes it so you make money by putting your money in an ACTUAL investment to create something better. The company caters to your long term interests. You invest in Tesla because you expect the company to change the entire automobile industry and you expect that business endeavor to succeed in 10 years. Hype, bullshit and just trying shit out because gamestop seems fun will no longer be part of the equation.

Maybe 10 years is too long. Make it 5 years.

>Again, who would buy that stock? What reward is worth that risk, especially when you've banned them from selling stock even if they see the company is doing shady stuff?

Right so if the company knows this, then they wouldn't do shady stuff because they need to establish a reputation such that a person is willing to entrust a 5-10 year investment with them. The point of this restriction is to create incentive for companies to be good.

Corporate psychology is psychopathic due to the disconnect between action and responsibility. Criminal action is abstracted, long term gain is abstracted, the point is to remove these abstractions.

Who would buy the stock you ask? People who think the company is good. People who believe in the company. Not people who want to gamble on the company.

Thus if those are the ONLY people buying stocks. Then you tell me. What does a company HAVE to DO to cater to those PEOPLE? They have to be better. Truly better.

If you remove all abstraction away from the financial system you get rid of the dollar and suddenly you have the bartering system which is way to inefficient. But you make the abstraction to high and suddenly you have bitcoin and a bunch of other cryptos representing worthless shit. And you get corporations who have the mass psychology equivalent to a psychopath. It's a gradient of abstraction and I think we're too far on the abstraction side of things. We need to lower it a bit and that's what my proposal is doing. Unlikely to ever happen though.

[eestrada]

I apologize for not being clear in my comment. None of my musing was meant to allude to public policy or law. It was about what an individual (or group of individuals) could choose to do with a corporation to avoid perverse incentives in the future. I'm not really interested in directly enforcing anything.

To make a play on an old programming joke:

Once there was an individual who noticed there was a problem with society. He said to himself "I'll use the State to change things!" Now there were two problems.

[corethree]

True. Two things.

The first part of my comment doesn't require a state change. I'm sure you can issue securities with a 10 year clause.

The second part of my statement is that while I largely agree with you we Still have state controlling things in the world and it's largely a good thing. You don't want a world without the State controlling an aspect of the free market.

It's not that you don't like the State, it's just that adding additional controls can lead to large unanticipated side effects. Especially sweeping changes like some of the ones I proposed. Totally get this.

That doesn't mean it won't work. Like UBI, these ideas need to experimented on and data needs to be gathered to verify whether it will work. You can't dismiss the fact that that changing public policy Won't work because it currently DOES work.

[robertlagrant]

It just depends on the business in question, and the external pressures on the business. Jeff Bezos managed to not pay dividends for years by focusing on value, but also by zooming ahead of the pack in a greenfield environment that was ludicrously profitable. Low margin businesses, private or public, will struggle and have to do something to offer value for money; e.g. make a smaller chocolate bar that's the same price, and a larger chocolate bar that costs more.

On selling stock: I think this is a bit silly. A company can't just sell its stock as a viable strategy. What happens when it runs out? And who would buy it anyway?

[eestrada]

In the USA, corporations just do stock splits or run a corporate vote to issue more shares. Also many large tech companies use stock as total compensation for employees, so the "selling" of stock can be indirect as a form of revenue. Instead of paying employees cash, they pay in stock, which frees up more cash for other things. Thus they don't need to have as high of true revenue margins to pay employees well. Big corporations understand that a lot of paper value is fungible one way or another.

[robertlagrant]

A stock split doesn't increase anything. E.g. they might double the number of shares, but each share becomes worth half as much.

Issuing more shares only works if there's a reason to believe the underlying value has increased. No one will buy shares in a company that keeps on devaluing its shareholders' existing holdings.

Compensation via share options isn't revenue, and I can't see how it's anything like revenue. They've just set aside a percentage of the business to be issued to employees. They haven't gained money. Yes that might mean they can save a little on junior salaries for employees who don't know that options don't mean much, but that's not revenue either.