[kelseyfrog]

> instead they got greedier and greedier and made their product worse once they captured most of the market

I wouldn't necessarily put it that way because not Google, nor any company, has moral capacity. They don't have souls. What they do have are incentive structures, and those flip when the stock goes public.

Pre-IPO: the board is mostly founders and VCs holding paper wealth. Their shares aren't liquid, so the only way they get paid is by making the pie way bigger for some future exit. That means "grow, grow, grow." and that means playing nice with customers.

Post-IPO: the board is legally stuffed with "independent" directors, whose pay comes in RSUs tied to the stock price. Now the shares are instantly tradable, and shareholders who can bail in a quarter want to see results in a quarter. Directors translate that into exec comp, and suddenly management's job is "make the stock go up right now."

Some theorists point out the obvious hack: take away the hot potato. Slow the game down. Make shares harder to flip, make earnings less frequent. If you could only trade stock once a year, you'd actually care what the company looks like in a year. If they only reported results annually, you'd be forced to think in years, not quarters.

Upside: management can focus on products and customers instead of quarterly guidance theater. Downside: investors hate being locked up, and capital gets more expensive because people price in that illiquidity. Transparency drops, execs get more room to bullshit.

It's a tradeoff: you can have maximum liquidity and hyper-efficient capital markets, but then you get short-term brain damage. Or you can slow the game down, but then you're basically asking people to trust managers more and accept worse capital efficiency.

Nobody;s found the perfect middle yet. LTSE[1] tried, dual-class shares are a kludge, and otherwise we just live with the cycle: grow like crazy private, IPO, then spend the rest of your corporate life addicted to quarterly earnings.

1. https://ltse.com/

[marcus_holmes]

In the old days, companies were valued on their expected dividend. Share prices didn't move that much, and trading shares took time and had fees attached. You could speculate on share price moves, and people did, but the primary source of income from holding shares was dividends.

Now it's the other way around. The primary source of gains from owing shares is speculation on the share price. Dividends are mostly ignored.

The result of this is that share prices move not on "how well is the company likely to do?" but on "what do we think the share price will do in the next couple of months (at most) [0]?". It all becomes hype and rumour and speculation. Shareholders only care about the price, so boards are incentivised to only care about the price. And so on down. Generating hype about what the company is going to do becomes more important than actually doing it (I exaggerate, but not by much). This then leads to the short-term-ism that we see, and the hot potato effect.

I think the answer would be to tax speculative profits. If you sell something for more than you bought it for, the government takes a cut. Specifically remove this from income tax calculations, because they have way too many loopholes, and make it more like VAT/GST; a tax payable at the point of the transaction. This would reduce the profits from speculation, and hopefully move the emphasis back onto dividends and longer-term thinking.

[0] and obviously, for some privileged traders, the next couple of milliseconds

[kelseyfrog]

While the importance of dividends has waned, we should still mention buybacks and liquidation. They still exist and buybacks especially are an important part of delivering shareholder value. Apple is a great example of returning about 4 times more in buybacks than dividends.

How would you feel about tax-disadvantaging buybacks?

[marcus_holmes]

Good point, and good question.

I like Cory Doctorow's take on this [0], that this is basically defrauding the shareholders. It used to be illegal, it probably should be illegal again.

It's also unsustainable, in that you can only do this for so long before you've bought up all the open shares and there's so few remaining that your company is no longer effectively tradeable.

I don't know where this practice leads, but I don't think it's a place we want to go to. I suspect it'll be further concentration of capital into fewer hands. To the extreme, we end up with all the large companies doing this becoming effectively private, owned by a small group of folks rich enough to keep their holdings while everyone else sells out during the buybacks. That's not good.

[0] https://pluralistic.net/2025/09/06/computer-says-huh/

[eru]

How are buybacks defrauding anyone?

They just return money to shareholders. The only material difference with dividends is the tax treatment. Even all the incentives are the same.

> It's also unsustainable, in that you can only do this for so long before you've bought up all the open shares and there's so few remaining that your company is no longer effectively tradeable.

What makes you think so?

https://en.wikipedia.org/wiki/Stock_split might blow your mind.

> To the extreme, we end up with all the large companies doing this becoming effectively private, owned by a small group of folks rich enough to keep their holdings while everyone else sells out during the buybacks. That's not good.

You can tell your broker to automatically re-invest dividends for you.

Similarly, if you just don't sell when there's a buyback, you own more of the company afterwards. No one is forced to sell.

Btw, most companies (including Apple and Google) keep issuing shares to employees. Buying back some of them in the open market is just an indirect roundabout way of essentially handing employees cash.

[marcus_holmes]

> How are buybacks defrauding anyone?

Mr Doctorow's point is that the company is taking money from its operations, which it should be spending on expanding those operations and increasing its value, and spending that money on artificially inflating its share price, by effectively wash trading the shares, creating artificial demand, and artificially reducing supply.

If you bought shares in the company as a long-term position in order to receive dividends then you do not benefit from buybacks, and arguably lose out (because the money used on the buyback could have been distributed as a dividend). It only benefits short-term speculator shareholders. And, of course, the executives who are incentivised on share price, for whom a buyback is a much, much, easier way to get those incentives than actually doing their jobs and using the money to grow the company.

[eru]

Thanks for the explanation.

How is any of that fraud? Fraud doesn't just mean you have to disagree with something someone does, but you have to have been lied to.

> And, of course, the executives who are incentivised on share price, for whom a buyback is a much, much, easier way to get those incentives than actually doing their jobs and using the money to grow the company.

Companies can and should adjust the incentives so that the effect of dividends and buybacks are the same for the executive. (They already adjust for share splits for example.)

> If you bought shares in the company as a long-term position in order to receive dividends then you do not benefit from buybacks, and arguably lose out (because the money used on the buyback could have been distributed as a dividend).

Before you buy any shares, you should check what management says about their plans. At least, if you have specific expectations.

Even if buybacks were outlawed, companies aren't guaranteed to pay dividends. It's perfectly legal to never make a profit, or to give all your excess money to charity. You just have to tell your shareholders.

> Mr Doctorow's point is that the company is taking money from its operations, which it should be spending on expanding those operations and increasing its value, and spending that money on artificially inflating its share price, by effectively wash trading the shares, creating artificial demand, and artificially reducing supply.

Yeah, that's a stupid objection.

The substantial first half of it would equally well apply to dividends. (And the whole point of giving money to companies as an investor is that eventually you are getting more back.)

The second half is just not how any of this works. Does he even know what a wash trade is? And what's 'artificial' about this?

[Workaccount2]

I can tell why Mr. Docotorow is a sci-fi author and not a finance guy.

This is like listening to RFK talk about medicine.

[eru]

Buybacks and dividends are financially equivalent. They give money from the company to shareholders. The incentives are exactly the same for all parties involved, too.

Their only material difference is in taxes. Yes, I am in favour of putting dividends and buy backs on the same tax footing, just in the name of simplicity. And while you are at it, also put dividends and interest payments on the same tax footing.

At the moment, many jurisdictions advantage interest payments, thus encourage financing companies with debt instead of equity. And then they awkwardly pair it with other rules that try to tell companies (especially financial companies like banks) not to use so much debt, not to be so levered.

[eru]

> Some theorists point out the obvious hack: take away the hot potato. Slow the game down. Make shares harder to flip, make earnings less frequent. If you could only trade stock once a year, you'd actually care what the company looks like in a year. If they only reported results annually, you'd be forced to think in years, not quarters.

Google's original founders still hold the majority of voting rights.

Making trading less efficient wouldn't change anything here.

> It's a tradeoff: you can have maximum liquidity and hyper-efficient capital markets, but then you get short-term brain damage. Or you can slow the game down, but then you're basically asking people to trust managers more and accept worse capital efficiency.

No, your proposal wouldn't work at all.

A big problem is actually that most managers in most companies mostly work for themselves. It's called a 'principal/agent problem'.

Exactly as you say 'execs get more room to bullshit.'

Btw, there's private equity funds with very long capital lock-ups. Their effects on companies typically aren't loved by the people who voice similar concerns to yours.