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by GWBullshit
400 days ago
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OK, but consider the long-term: If (especially publicly-traded) companies are driven by the "You must increase profits indefinitely no matter what" ethos of "fiduciary responsibility to stockholders", when you've racked your brain and ran out of ways to increase new markets, by which point you're probably hyper efficient and figured out every cost-saving measure imaginable, then what? You then are, if you seek continuously-higher-and-higher profit margins, cornered in such a way that you have 1 of 3 options out (see my reply to the first poster above). The fact that more and more companies (1) are so myopic they can't see this coming and (2) openly embrace 1 of those 3 options when they're eventually forced to is how, for example, we've arrive at a world where formerly "Don't be evil" Google has morphed into "SOMEBODY is going to make some extra money becoming CyberDyne Industries, and so "Why not us?". Not saying what you said is not part of the consideration, but imagine the world your kids will grow up in if more and more companies behaved this way. |
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It should be clear to everyone that you can't forever grow profits, even if you assume that you're the only company in that segment. At some point you simply run out of uncaptured market to grow from. But you "have to grow" and you even have to grow the rate at which you grow.
Of course that leads to certain incentives. Especially if there actually are competitors in play. And then throw in inflation in general and some of your "growth" is actually eaten up by inflation too.
If there's a winner somewhere that means there's a looser somewhere else. It applies in business overall and in the stock market. If you make a profit from selling high after buying low, there's someone that sold to you at the lower price and they lost (either they lost out on more growth or even made an actual loss overall because they bought even higher).
The whole idea of "value add" is really just "exploitation" in various forms in many cases. You need a raw materials supplier to add your value. That raw materials supplier could've just taken the raw materials and "added value" themselves. But instead you got them to sell to you somehow and they lost (for whatever reason, such as missing knowledge, missing capital etc.). Over time that might change and they acquire those things and take over. Little by little. Bow you're the looser.