It seems to me that whpearson’s reasoning is an instance of the “ends don’t justify means” heuristic, which is especially reasonable in this case since the ends are fuzzy and the means are clear.
If we grant that businesses that feed into status games (and other counterproductive activities) are likely to be much more profitable than businesses more aligned with rationalist/altruistic/”nerd” values, then arguing that one should go into the latter kind of business undermines the argument that ends do justify means here. And if the ends don’t justify going into business despite a lack of intrinsic motivation, what does?
How plausible is it to believe that the businesses which feed into counterproductive activities are likely to be much more profitable?
If we go with the very pretty Austrian theory that profits tend to be equal across all parts of the economy (unusually high profits draw capital in, unusually low profits drive it out), then the conspicuous profits in fashion-driven industry are counterbalanced by lower odds of making those profits.
I don’t know how good the empirical evidence for the Austrian theory is.
If you build keeping independent into your plans, you’re more likely to succeed at it.
I’ve become somewhat dubious about the whole system of maximizing shareholder value. Anecdotally, companies become worse places to work (including less focus on quality) when they go public.
And I don’t believe maximizing shareholder value is a real human motivation (not compared to wanting to make good things or please people you know or be in charge of stuff), and I suspect that a system built on it leads to fraud.
There’s a fair amount of evidence that suggests that greater management ownership of a firm correlates with better performance. In other words maximizing shareholder value appears to work better as a motivation when the management are significant shareholders.
I didn’t mean that you would intrinsically want to maximise shareholder value. Simply that if you passed up business opportunities due to your ethics and you didn’t have a controlling share you might be out of a job.
This is a pretty inaccurate interpretation of what maximizing shareholder value actually means in practice. Generally corporate management are only considered to have breached their fiduciary duty to shareholders if they take actions that are clearly enriching themselves at the expense of shareholders, making an acquisition that is dilutive to shareholders for example.
It is highly unusual for corporate management to be accused of breaching their fiduciary duty by making business decisions that fail to maximize profit due to other considerations. For one thing this would generally be impossible to prove since management could argue (for example) that maintaining a reputation for ethical conduct is the best way to maximize shareholder value long term and this is not something that could easily be disproved in a court.
Activist shareholders may sometimes try and force management out due to disagreements over business strategy but this is a separate issue from any legal responsibility to maximize shareholder value. In the US this is also quite difficult (which is a situation that I think should be improved) and so is fairly rare.
Thanks. I was pretty sure that management wasn’t getting sued for failing to maximize shareholder value through ordinary business decisions—if that were possible it would be really common.
Still, there are probably useful things to be made and done which have little or no fashion component.
For example, there don’t seem to be any child and pet-proof roach traps on the market.
It seems to me that whpearson’s reasoning is an instance of the “ends don’t justify means” heuristic, which is especially reasonable in this case since the ends are fuzzy and the means are clear.
If we grant that businesses that feed into status games (and other counterproductive activities) are likely to be much more profitable than businesses more aligned with rationalist/altruistic/”nerd” values, then arguing that one should go into the latter kind of business undermines the argument that ends do justify means here. And if the ends don’t justify going into business despite a lack of intrinsic motivation, what does?
How plausible is it to believe that the businesses which feed into counterproductive activities are likely to be much more profitable?
If we go with the very pretty Austrian theory that profits tend to be equal across all parts of the economy (unusually high profits draw capital in, unusually low profits drive it out), then the conspicuous profits in fashion-driven industry are counterbalanced by lower odds of making those profits.
I don’t know how good the empirical evidence for the Austrian theory is.
True. If you can keep independent you would be okay. If you have share holders you would be bound to maximise shareholder value.
If you build keeping independent into your plans, you’re more likely to succeed at it.
I’ve become somewhat dubious about the whole system of maximizing shareholder value. Anecdotally, companies become worse places to work (including less focus on quality) when they go public.
And I don’t believe maximizing shareholder value is a real human motivation (not compared to wanting to make good things or please people you know or be in charge of stuff), and I suspect that a system built on it leads to fraud.
There’s a fair amount of evidence that suggests that greater management ownership of a firm correlates with better performance. In other words maximizing shareholder value appears to work better as a motivation when the management are significant shareholders.
I didn’t mean that you would intrinsically want to maximise shareholder value. Simply that if you passed up business opportunities due to your ethics and you didn’t have a controlling share you might be out of a job.
This is a pretty inaccurate interpretation of what maximizing shareholder value actually means in practice. Generally corporate management are only considered to have breached their fiduciary duty to shareholders if they take actions that are clearly enriching themselves at the expense of shareholders, making an acquisition that is dilutive to shareholders for example.
It is highly unusual for corporate management to be accused of breaching their fiduciary duty by making business decisions that fail to maximize profit due to other considerations. For one thing this would generally be impossible to prove since management could argue (for example) that maintaining a reputation for ethical conduct is the best way to maximize shareholder value long term and this is not something that could easily be disproved in a court.
Activist shareholders may sometimes try and force management out due to disagreements over business strategy but this is a separate issue from any legal responsibility to maximize shareholder value. In the US this is also quite difficult (which is a situation that I think should be improved) and so is fairly rare.
Thanks. I was pretty sure that management wasn’t getting sued for failing to maximize shareholder value through ordinary business decisions—if that were possible it would be really common.
Agreed. I was explaining why I’m dubious about publicly owned companies in general.