[GolfPopper]

>pursuing quarterly profits and forgetting to look up

"Forgetting to look up" implies a desire or intent to do so. The United States - former leader of the collective West - made the choice decades ago to sacrifice everything on the altar of quarterly profits. All that remains are the consequences of that decision.

[pogue]

When did this whole quarterly profits thing start and what lead to it?

[jaggederest]

You can round it down to Milton Friedman as the ideology and Jack Welch at GE in the 80s as the implementation and figurehead, but the original seeds were in the SEC mandating quarterly reporting as part of regulation after the great depression.

We can all agree to blame Jack Welch as shorthand though, I think.

[irishcoffee]

I think it changed before that.

https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

[terminalshort]

It's not real. Companies routinely lose money for years in pursuit of long term growth. But for some reason people love to use this as an explanation of everything wrong in our country.

[jaggederest]

I'd cite as a counterexample in recent memory Sears, GE, Boeing, and Intel. I think collectively they've destroyed close to a trillion dollars by focus on quarterly results over long term, and they're not alone.

[scrubs]

I sometimes wonder what a Drucker or ishikawa would say of today's "vaunted American management". Speed roughly short term thinking is too strong of a force in our American thinking. Heck I've counted three recent HN posts this month pushing for speedy software development too.

[tjwebbnorfolk]

Yes, and we all saw what happened. They've experienced serious financial consequences, some went out of business. This is exactly what is supposed to happen when you do dumb shortsighted things.

There's also risk in investing in very long-term things that may not pan out.

WAI, in other words

[mcny]

The exception proves the norm.

The only major example I can think of is Amazon dot com which famously reinvested all its profits into itself for well over a decade.

The fact that investors didn't punish Amazon dot com was seen as befuddling in the press.

> Companies routinely lose money for years in pursuit of long term growth.

No, I don't think this is true at all because you used the word "routinely". I would claim it is very rare.

[gorgoiler]

FAANG-like stock, in general, has paid little to zero dividends for long periods of time post IPO, their rational stock values being based on hypothetical future dividends only after the initial self-investment phase is over.

[terminalshort]

There's not much that doesn't befuddle the press

[neltnerb]

Don't most tech startups lose money for years before they maybe make a profit?

I mean, I agree that such companies are over-represented in thinking about small businesses if that's what you mean. Normal companies have to be profitable quickly for sure.

It feels like tons of companies get valued based on userbase or revenue or theoretical breakthrough rather than ever having to really think about breaking even, but I know that's just because those folks get all the press.

[Ekaros]

Growth in this case can also be growth of valuation. Or maybe that is in general the goal. Get the market cap or nominal valuation to go up.

Some money is lost to push up this valuation or valuation based on some future sales, or market share or anything...

[solid_fuel]

> Companies routinely lose money for years in pursuit of long term growth.

But much of that long term growth now is just the company growing to displace competitors in existing markets, often by subsidizing prices and dodging regulations - see: Uber, Lyft, Air BnB, etc.

We've all seen the playbook a dozen times now: move into a market, keep prices artificially low until the existing competitors are displaced, then the raise prices to return the initial investment and more. That kind of growth-by-displacement is genuinely necessary sometimes but in these cases it's more like a fungus than a plant, just metabolizing an existing system.

It's not the same thing as actually expanding a market or investing in concrete assets (steel mills, power plants, boats, railroads) or R&D that compounds future growth. When the actual investment is just spent artificially lowering prices there's no actual efficiency gains and the consumers ultimately pay the price and more when the company hits the peak of the existing market and shift to enshittification mode to really extract wealth.

[cjbgkagh]

Minority shareholder rights, you can be sued for not maximizing profits see Dodge v. Ford Motor Co. (1919).

[trillic]

1910s Dodge v. Ford Motor Co.

[everfrustrated]

This is slightly reductionist. If consumers _actually_ cared about quality or US-made over price this wouldn't have been possible.

[silver_silver]

My counterpoint is that it’s not possible to buy appliances which last for decades anymore, because the entire industry has changed. Consumers eventually don’t have a choice

[everfrustrated]

They have much less choice because all of those businesses that cared about quality have gone out of business!

100 years ago clothes were expensive items. Which is why they were class signals - less because of fashion and more because if you were poor you needed to buy long lasting fabrics. Clothes for the poor were expensive as well as the rich.

You can buy those same quality items today but nobody will because we expect clothes to be cheap and not have to repair them.

Take flights... For all the complaints about lack of legroom etc the price of a flight 50 years ago was the same as first/business class today. And yet how few people will pay for it. They'll grumble about small seats and bad snacks but hardly anybody will fork out for the upgrade. Not because they can't actually afford it but because they believe it should be cheaper.

[clayhacks]

I think some people can afford those quality goods, the same percentage roughly as could afford it before things got cheaper. The people complaining are people who couldn’t afford those quality goods earlier and now are buying the cheaper versions they can afford. But that has shaped broader consumer preferences for cheaper goods across the board

[mrguyorama]

When a manager at GE decided to turn into a bank and get rid of all the making stuff, how was the consumer supposed to continue buying quality things that didn't exist?

When Sears was looted by management, how were consumers supposed to continue purchasing quality stuff from a historic company?

You've got your cause and effect backwards. American companies fired everyone who was paid enough to afford good stuff, and replaced them with workers in other countries, and then those people didn't really have a choice but to buy the junk because it was the only option left on the market and they couldn't afford anything else

What happened was that American business theory abandoned the American worker.

[monero-xmr]

I would just be careful to discount the capitalist West. You’d have to be blind to ignore the massive overbuilding of property in China, which they are now demolishing. All of that wasted capital. Authoritarian regimes with controlled media always seem successful… until it doesn’t. Up until the USSR collapsed there were many prominent people in the West saying it was the superior system. The market test - meaning floating prices and the response to them - is a superior way of allocating capital. We need to see how all of this plays out

[literallywho]

I swear I've been reading about overbuilding in China since, like, 2012. And I've definitely used it in arguments myself. Not only China hasn't collapsed, but it has improved massively since then, as far as I can tell.

[kube-system]

The US also had a period of time in which their government directed large construction projects, and they too were particularly prosperous in the time afterwards.

[vkou]

> You’d have to be blind to ignore the massive overbuilding of property in China, which they are now demolishing.

Is it all being demolished, or is 95% of it being moved into?

Because all those ghost cities that China was building that the news kept bitching about... Are now all full.

Meanwhile, in the West, we have a housing shortage. Who looks the fool now...

[reeredfdfdf]

Yep, it's way better to overbuild than underbuild. Lack of houses for young people looking to start families / move in for better jobs has big negative societal impacts that we're only starting to see.

[expedition32]

In the 60s and 70s European countries were giant construction yards. It gave many people jobs and we still enjoy the infrastructure today!

[palmotea]

> I would just be careful to discount the capitalist West.

I would. It's showing the weaknesses and limitations of its ideology.

> You’d have to be blind to ignore the massive overbuilding of property in China, which they are now demolishing. All of that wasted capital.

So what?

> Authoritarian regimes with controlled media always seem successful… Up until the USSR collapsed there were many prominent people in the West saying it was the superior system.

The West is literally de-industrializing and can't seem to built shit except slowly and expensively. Industry after industry gets hollowed out as China takes the lead.

Do not make the mistake of reasoning about US vs China from the experience of US vs USSR. China doesn't have a command economy, outproduces the US, and controls many key industries. The US is resting on its laurels, and its people cope by thinking of the few industries where it's still ahead, but those are dwindling.

> The market test - meaning floating prices and the response to them - is a superior way of allocating capital.

That's not truth, it's a dogmatic assumption.

China has been able to exploit a dogmatic belief in the free market to siphon the real capital out of the West and into itself (industry and know-how) in order to achieve dominance. The US elite is content to have paper. We'll see how that works out.

> We need to see how all of this plays out

If you're rooting for China. If you're rooting for the US, by then it will be too late to course correct.

[csomar]

> You’d have to be blind to ignore the massive overbuilding of property in China

Isn't the same now happening with the US with the massive overbuilding of AI capacity? Seems like a tightly centralized capitalist system is not that different from a communist one.

[Betelgeux]

Or rather thinking one step forward the question arises, whether we use the right words for the right things? Does the capitalist West has any defining economics characteristics of a liberal free-market capitalism at all?

Private ownership of means of production: On an atomic, legal level of course. But if point at an NVIDIA based compute rack at a US based random datacenter, can someone tell me actually who owns it? I am interested in the actual natural person who has an ownership share of this capital asset, not the myriads of layers of corporate and financial networks of equity delegations through investment banks, but the actual owner?

Profit oriented: Of course, it is said so. But do really companies, entrepreneurs do things to maximize the profits of the actual owners, shareholders? Are the executives and boards really that keen on putting forward the interest - of the previously referenced unknown - actual owner of the capital assets?

Free market based: This has also multiple sub-characteristics, but most importantly something about competition, or rather the lack of collusion and that economic actors (including consumers, (natural person) investors) are all fully informed. How much is this true in the West?

I think we are very much lost in labels.