Large publicly traded tech companies seem to no longer consider their
customers – that is, people and organizations who actually buy their
products or pay for access to their services – their core foc
Yes, Welch popularized the model of shareholder primacy, I should perhaps link to that in the text.
But the point I am making goes further: it’s not just shareholder primacy, because that could still be compatible with just making a good product and service and focusing on that.
What I am saying is: shareholder primacy has now lead to another, kinda new thing, which is basically making the hype the actual main product the company sells. And tech companies diving into that bubble in lockstep. Every large tech company today is selling AI to shareholders, regardless of what a regular person can buy from that company – graphics cards, office productivity suite, operating systems, or smartphones. The “regular” product or service is just a vehicle for AI hype, an empty vessel to be filled with whatever grabs investor attention.
In other words: yes, shareholder primacy is a key underlying thing for it, but there was shareholder primacy without treating the hype itself as the product.
I understand the argument you’re making and I can see that way to look at it. It’s a useful framing and interpretion. I however see it as the same trend of seeking ever higher profits by shareholders. I don’t think shareholder primacy is conpatible with making good product. As a good product is made and sold, profits eventually stagnate as it saturates a market, sharholders demand profit growth, firms often respond by reducing product cost, which typically makes it a worse product. Lots of examples for this process. In effect, for many decades now one could consider profit growth being the primary product of corporations. When I look at the current developments you highlight, I can see manufacturing hype as the next version of this product. It’s novel, but I see it as an evolution along the product line that is maximizing shareholder value. I’m not saying this is a better interpretation or anything. To me it makes sense but I’d be perfectly happy with yours if I didn’t already have an opinion on this and I would have been well informed by yours. 😊
I wonder how much this is short-term investors being very dominant in the market, and executive compensation being tied to short-term performance, colliding?
If minimum holding times for a stock position were implemented (e.g. can’t sell for 2 years), or if executives were compensated based on e.g. 10 year performance of the company, I feel like this cycle of acquisitions and layoffs and trend/hype-humping would die quickly.
Hi, author here. Thanks for the good word.
Yes, Welch popularized the model of shareholder primacy, I should perhaps link to that in the text.
But the point I am making goes further: it’s not just shareholder primacy, because that could still be compatible with just making a good product and service and focusing on that.
What I am saying is: shareholder primacy has now lead to another, kinda new thing, which is basically making the hype the actual main product the company sells. And tech companies diving into that bubble in lockstep. Every large tech company today is selling AI to shareholders, regardless of what a regular person can buy from that company – graphics cards, office productivity suite, operating systems, or smartphones. The “regular” product or service is just a vehicle for AI hype, an empty vessel to be filled with whatever grabs investor attention.
In other words: yes, shareholder primacy is a key underlying thing for it, but there was shareholder primacy without treating the hype itself as the product.
I understand the argument you’re making and I can see that way to look at it. It’s a useful framing and interpretion. I however see it as the same trend of seeking ever higher profits by shareholders. I don’t think shareholder primacy is conpatible with making good product. As a good product is made and sold, profits eventually stagnate as it saturates a market, sharholders demand profit growth, firms often respond by reducing product cost, which typically makes it a worse product. Lots of examples for this process. In effect, for many decades now one could consider profit growth being the primary product of corporations. When I look at the current developments you highlight, I can see manufacturing hype as the next version of this product. It’s novel, but I see it as an evolution along the product line that is maximizing shareholder value. I’m not saying this is a better interpretation or anything. To me it makes sense but I’d be perfectly happy with yours if I didn’t already have an opinion on this and I would have been well informed by yours. 😊
Thanks for the work!
Sure, makes sense! Thank you for the feedback. 😀
I wonder how much this is short-term investors being very dominant in the market, and executive compensation being tied to short-term performance, colliding?
If minimum holding times for a stock position were implemented (e.g. can’t sell for 2 years), or if executives were compensated based on e.g. 10 year performance of the company, I feel like this cycle of acquisitions and layoffs and trend/hype-humping would die quickly.