Dear H,
A fine article from Henry Pierson at The American Thinker:
Today the United States government considers a stock a long-term investment, for purposes of lower taxation, if it's held a single year. I think it ought to be much longer. Business Insider Australia reports that in 1960, the average holding period for stocks was eight years. In 2010, the duration of a man's affection, attention, and overall concern for the company he "partners with" averaged only a few months.
Your father,
-J
PS: Elon Musk, inventor businessman extraordinaire, shocked all his shareholders this year by telling them, in no uncertain terms, that if they couldn't handle his genius and the decisions it entails he'd buy all the stocks from them and tell them to piss off*. That's how a business should be -- between a visionary and the people he works with and the people who pay for his products; not between him and a few thousand non-geniuses and non-businessmen who don't understand him, or his company, or his ethic, or even necessarily buy any of his stuff. A company sinks or swims on the ideas of visionaries. Many companies can do without genius, but they can't do without care -- and a lack of real we're-in-this-together care is the principal feature of a public corporation.
There's one thing Mr. Pierson has missed. We have to also consider that aside from these parasitical stock-jobbers, a company has a life-cycle like everything else. When a company is on the way up, that means the people in charge had a new product, brilliant ideas about how to make a product, or ways to deliver the product, or new ways to run an old business, or new way to market itself. Once competitors catch on to those new ways the profit margins start shrinking, and if a man doesn't keep having new and better ideas, he has to start cutting elsewhere to survive. If a business isn't growing it's in the process of dying.
*UPDATE: A hilarious turn of events. The above announcement by Mr. Musk, who was recently seen smoking grass and wielding a flamethrower on video, was deemed by the Securities and Exchange Commission to be illegal. He said he'd buy the stocks at $420 a share and that he'd secured funding to do it -- a price significantly higher than the stocks' own going rate, and with funding that wasn't actually secured. In fact he hadn't talked to anybody involved in the transaction. He pulled it, in a fit of megalomania, out of his own ass.
When Tesla's stocks jumped a whopping six percent as a result of this announcement, the government, citing an "inadequate basis in fact," considered it an act of securities fraud. They then fined both him and Tesla tens of millions of dollars each, and forced him to resign his position as chairman. They say pride goes before a fall -- but Solomon never guaranteed the sound of a slide whistle, or that the slipping would be done on a banana peel. I chose Musk as my example and I'm embarrassed and enjoying every second of it.
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A fine article from Henry Pierson at The American Thinker:
Jack Ma, chief executive of Alibaba, one of the world's largest companies and the global competitor of Amazon.com, says he has a plan to keep his company going for a hundred years. It sounds insane but that's what he wants. It's his baby. He has no idea what the next twenty years will be like, whether some new kind of warfare will rearrange society as we know it, or whether some unforeseen technology will make his style of business completely obsolete, or whether the people who succeed him are going to run it into the ground. But he has a plan, and God bless him, he's aiming for the stars.
This kind of dreaming happens when a man builds something from the ground into the heavens; not the man who comes after him, and least of all from a shareholder. A finance hotshot, hired out of Harvard, doesn't sit up all night wondering how to hand Pepsi to his grandchildren, or how to keep it viable until the Second Coming. He has a heart for it, but only until it quits giving him paychecks, at which point he's out. The shareholder is worse, in that he's in it only while his stocks are gaining -- or until someone says his stocks are going to take a dive, at which point he sells his share of the company to some other less-informed sucker. In truth he has no emotional attachment to the company. It isn't his baby, and absolutely nothing in the company bears any mark of his genius, or hard work. No -- he watches a number, and that number is the main reason he's in it, and the moment that number starts getting smaller he bails. Buy low, sell high is as good as the Gospel.
This profound disconnect between what's going on in a company and whether it's worthy of investment comprises my main objection to the corporate structure. I understand that going public means you can get more money faster, and that more money means you can do things you wouldn't have been able to do otherwise. And beyond this I know this means a lot of companies are here today that wouldn't be. It's a fast ticket to bliss, like cocaine, or prostitutes. What we don't hear about are the great companies that would have been around, or still remained great, but that the corporate structure has killed off.
My father works for what used to be the best company to work for in America, and now it's ranked one of the worst. At some point in their history the geniuses who ran it began to retire, and some new kids came in. They still had vision but they lacked heart. Someone found out that coming up with brilliant inventions wasn't the only way to make money. So the bean counters began cutting benefits for their workers. Little things here and there that didn't seem like much, but meant the world when added together. They began to cut back on payroll, which added stress on the employees. They got rid of little services they used to do in-house, and began to outsource wildly. All of which made getting things done difficult, impeded the efficiency of the company, and killed the magnet that brought the best employees in. All of which made the stockholders, who had no idea what was actually happening inside the company, turn a profit, and thus happy about their wallets.
Who were the prime owners of said company's stock during this period? We have no idea -- they came and they went. We can find the names of the original owners, but the investors are faceless and disappeared into the night. The company's declined and they all got rich. Another day another company to loot. [...]
I cheered the lowering of the corporate tax and now I'm booing it. Not because Americans don't deserve lower taxes, but because they deserve better than the corporate structure. Investment will be slower under another system, I guarantee it. It will be slower and harder like going to work will be slower than betting on a winning horse, and like managing employees is harder than managing slaves. But it's the difference between companies run by visionaries and companies run by schemers; or between getting a call-girl for a night and a wife to give you some children. The sad truth is that a public corporation is a business in the process of selling its soul. It might hold out for a while but the end result is clockwork. It's a jet that climbs the heavens faster -- and then, because people believed we could turn a profit by selling, mid-flight, the sensors, the flaps, the wheels and the gasoline, crashes right back into the ground, and never flies again.Mr. Pierson was called a communist by the readers at the AT for being against the free investment of capital; but yesterday, while reading Fehrenbach's masterpiece Lone Star: A History of Texas and the Texans, I found that the Texans, the most free-spirited frontier people possibly in the history of America, inserted a law against corporations into their original 1845 constitution. No (and I quote the planters of Texas here) "soulless corporation" was to be started in Texas without a two-thirds approval of their House; and no bank, under any circumstances, was to become a corporation at all. This coming from a state where slavery was legal.
Today the United States government considers a stock a long-term investment, for purposes of lower taxation, if it's held a single year. I think it ought to be much longer. Business Insider Australia reports that in 1960, the average holding period for stocks was eight years. In 2010, the duration of a man's affection, attention, and overall concern for the company he "partners with" averaged only a few months.
Your father,
-J
PS: Elon Musk, inventor businessman extraordinaire, shocked all his shareholders this year by telling them, in no uncertain terms, that if they couldn't handle his genius and the decisions it entails he'd buy all the stocks from them and tell them to piss off*. That's how a business should be -- between a visionary and the people he works with and the people who pay for his products; not between him and a few thousand non-geniuses and non-businessmen who don't understand him, or his company, or his ethic, or even necessarily buy any of his stuff. A company sinks or swims on the ideas of visionaries. Many companies can do without genius, but they can't do without care -- and a lack of real we're-in-this-together care is the principal feature of a public corporation.
There's one thing Mr. Pierson has missed. We have to also consider that aside from these parasitical stock-jobbers, a company has a life-cycle like everything else. When a company is on the way up, that means the people in charge had a new product, brilliant ideas about how to make a product, or ways to deliver the product, or new ways to run an old business, or new way to market itself. Once competitors catch on to those new ways the profit margins start shrinking, and if a man doesn't keep having new and better ideas, he has to start cutting elsewhere to survive. If a business isn't growing it's in the process of dying.
*UPDATE: A hilarious turn of events. The above announcement by Mr. Musk, who was recently seen smoking grass and wielding a flamethrower on video, was deemed by the Securities and Exchange Commission to be illegal. He said he'd buy the stocks at $420 a share and that he'd secured funding to do it -- a price significantly higher than the stocks' own going rate, and with funding that wasn't actually secured. In fact he hadn't talked to anybody involved in the transaction. He pulled it, in a fit of megalomania, out of his own ass.
When Tesla's stocks jumped a whopping six percent as a result of this announcement, the government, citing an "inadequate basis in fact," considered it an act of securities fraud. They then fined both him and Tesla tens of millions of dollars each, and forced him to resign his position as chairman. They say pride goes before a fall -- but Solomon never guaranteed the sound of a slide whistle, or that the slipping would be done on a banana peel. I chose Musk as my example and I'm embarrassed and enjoying every second of it.
Like these essays? Don't trust Zuckerberg? Email me at letterssubscription@gmail.com and start your subscription today.
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