
Steve Jobs and the Purpose of the Corporation  - rfreytag
http://blogs.hbr.org/cs/2011/10/steve_jobs_and_the_purpose_of.html
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po
Although I agree with this article, I would take it one step further and say
that the reason for a corporation to exist should be to improve society as a
whole. Society grants corporations certain expanded rights and protections
(more now than ever) because we believe it is a net improvement to the world.
We should therefore expect certain behavior. If a corporation damages the
public at large for the benefit of a few shareholders what have we gained?

~~~
philwelch
The entire idea of the free market is that, once externalities are
internalized and the market is properly governed, the best way for a
corporation to improve society as a whole is to increase its own profits. It
turns out that improving society as a whole is a vaguely defined and difficult
goal, while increasing profits is directly measurable. The market works by
taking something vague and difficult for anyone to set out to do on their own
(improve the well-being of society) and turning it into a direct, self-
interested, measurable goal (increasing profit).

There are other systems that work a similar way. For instance, the adversarial
system in criminal justice works by throwing together two opposing lawyers,
each of whom wants only to win the case, and as a result does a pretty decent
job of both enforcing the law and protecting civil rights.

~~~
po
You're absolutely right about how that should work in theory.

 _once externalities are internalized and the market is properly governed_

If a company chasing down profits hurts the general public it is a failure of
the market, not the company. However, for this to work in practice, there
needs to be a strong firewall between the companies competing, the regulators
defining the market and even the media informing the public about what is
going on.

We're watching a rigged game where the coaches have paid off the referees and
the sports reporters have realized there's more money in becoming promoters.

~~~
philwelch
So the market only _partially_ works. Perfection is an unattainable goal.
Fine.

As you run a business, it should be pretty obvious to you whether you're
profiting by exploiting flaws in the system. If you're not exploiting flaws in
the system and you're still profiting, I don't think you need to worry a great
deal about whether you're actually benefiting society. Most businesses do a
small, dull, unexciting part of benefiting society, and that's fine.

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jayfuerstenberg
Publicly held corporations usually side with the shareholders' wants and needs
first. That's one of the reasons Apple was so remarkable.

Steve Jobs realized that if you give people stuff they'll love, they'll fork
over their hard earned money, and that is ultimately what shareholders want so
they let him do it over and over.

Have people at all levels with vision, commitment, and passion for the work
they do. They must be cross-disciplined and most importantly they must
understand that their actions and decisions connect directly to the success of
the company as a whole.

Then you will have some of the magic of Apple.

~~~
mwsherman
This seems like markets 101 (and I mean that as no dis to above commenter, but
as amazement that so few companies get this).

Apple worked like markets are supposed to work. That Apple was exceptional
means that there is still a lot of cruft to be cleared out.

~~~
redwood
The key is again the temporal timeframe: shareholder value NEXT QUARTER? or
shareholder value two decades from now? The American car companies, for
example, always look for the former (hence pushing trucks and whatever'll sell
this season through marketing expenditures rather than innovation)

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nostromo
> [Shareholder pressures] have led many business leaders to manage to the
> "expectations market" of the public stock exchanges. This in turn has led to
> narrow short-termism, accounting manipulation, cutting of ethical and legal
> corners, failures to invest in the long-term, and to the financial crisis.

I've actually heard from a salesperson at a big SaaS company that it's normal
to delay sales to the next quarter once your sales quota is fulfilled for this
quarter.

This surprised me because it's obviously worse for the company as a whole to
not capture that revenue as soon as possible (and to put it at risk entirely)
and potentially worse for the customer. However, it's better for the
salesperson to have an easy win next quarter, and easier for the management to
show nice quarter-over-quarter growth. I think this is a good example of
putting short-term gain before the interests of the company, and it seems to
be quite common.

~~~
joezydeco
Look at how Apple's stock price got a short pounding this week because they
"didn't meet analyst expectations", citing a fall in iPhone sales.

 _People were waiting for the new phone to launch_. Apple moved nearly USD
$3,000,000,000 in product _in a single weekend_ just after the quarter ended
and before the earnings report. And still, the stock got sold off.

I've heard that Apple tends to underestimate their earnings, and I'm starting
to wonder if Jobs played the 4S launch date just to screw with market analysts
even more.

~~~
yuhong
I wonder if it is by trading machines running algorithms.

~~~
veyron
too expensive for most HFTs to play with

~~~
mahyarm
If there was a stock trading tax of X cents per share, would it wipe out HFT?
What would X have to be?

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veyron
The reason why AAPL is so expensive is because of the TAF (a tax assessed by
the SEC). Currently its 19$ / million dollars sold. Note that this fee is
proportional to dollars sold, not per share (other transaction costs are per-
share).

Let's say you received $.0020/sh for adding liquidity and paid a commission of
$.0001/sh. The tax would be, assuming aapl is $400/sh, $.0076/sh. This is much
larger than the rebates, which means you need to buy at least one cent below
your sell price on every trade.

Now look at bank of america. It's been hovering around 6.50 for the past week.
The tax there is .000114, so in fact it's possible to buy and sell BAC at the
same price and make money!

But getting back to your question, blind market making loses money when the
tax exceeds the returns. For the larger players, they make .00295/sh before
commissions (and ostensibly they are free because larger shops have their own
clearing divisions), so X would have to be close to .29. For alpha-based
(generating a predictive signal) trading, most HF signals have an amortized
edge of .2 cents per share after fees, so I would say something like X=.2
would wipe out HFT

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ajtaylor
Perhaps it's only obvious to me, but unless a corporation has great products
that customers want to buy, the long-term shareholder value can only fall.
Customers buying a corporation's products is a prerequisite to profits at said
corporation. Isn't that what shareholders want?

If a company goes bankrupt, pays penalties, has bad press, etc because
executives can't take a long-term view, how is that good for shareholders?

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pedalpete
Nobody ever created a business with the goal of 'maximizing shareholder
value'. That is a mission of companies who have lost their purpose and
passion.

~~~
jasonshen
If you ever start your own company - trust me, you'll be extremely interested
in maximizing shareholder value. You may also want to satisfy customers and
build amazing experiences but as the owner of the company, you will also care
very much about the value of your shares.

~~~
pedalpete
I have started two companies. I'm not suggesting that the value of the company
isn't important, but I've seen many times where the quality of the product
drops due to a focus on shareholder value, resulting in a drop in that very
value they were trying to protect.

~~~
philwelch
There's definitely a cognitive indirectness here, in the same way that it's in
one's long term self interest to act unselfishly, but it's rather incoherent
to say that it's wrong to focus on shareholder value because it damages
shareholder value. If you want to maximize shareholder value and you're smart
enough to realize that focusing on product quality is the way to do that,
you'll focus on product quality.

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mwsherman
The purpose of a corporation is not to maximize shareholder value, per se.
It’s to allow a group of people to work together under a legal framework,
which includes things like public offerings of stock. Shareholders can buy
into that for whatever reason they want.

(Also, this article makes business theory sound frighteningly simplistic and
divorced from markets. I hope I am wrong.)

~~~
redwood
..a legal framework whereby the owners of the company have limited liability
for the company's financial obligations

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dr_
There's not much of a story here. If a corporation delivers great products -
profits and increased shareholder value will follow. If not, or if they stop
doing so, profits and shareholder value will drop. They can get gimmicky all
they want for a short while, but eventually they will drop.

The only exception to this would be the banking/finance industries - which
pretty much create nothing yet historically for the most part generate
enormous profits for themselves.

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alfbolide
I am wondering what good does Apple do to customers when it forbids users from
using software not paying to Apple or buying content that has nothing to do
with Apple without paying Apple.

~~~
seclorum
Good, quality, affordable software, of course. Have you seen how easy it is to
buy a high quality 79c game and play with it in a few minutes?

