> Private companies generally need to be efficient and make money or go out of business.
Half of this statement is true. A private company definitely can’t run at a loss forever. Although in the era of ZIRP a few definitely made a solid go of it.
However nothing requires an any company, and especially a private one, to be efficient. If an otherwise profitable and privately-held company wants to swell its middle management ranks or spend lots of cash employing the owners’ dubiously capable relatives, there’s nothing to stop it.
Incidentally that’s mostly true of public companies with diverse shareholders, too.
The idea that private enterprise is always efficient is a myth, as is evident to anyone who’s worked for a large enough corporation, or even a small one where management weirdly shields some obviously incompetent people for internal political reasons.
The only correcting factor is that companies can fail, and smaller competitors can sometimes find ways to undercut large, inefficient firms. But often the small company gets acquired or out-marketed. So there’s nothing inevitable about any of this.
Half of this statement is true. A private company definitely can’t run at a loss forever. Although in the era of ZIRP a few definitely made a solid go of it.
However nothing requires an any company, and especially a private one, to be efficient. If an otherwise profitable and privately-held company wants to swell its middle management ranks or spend lots of cash employing the owners’ dubiously capable relatives, there’s nothing to stop it.
Incidentally that’s mostly true of public companies with diverse shareholders, too.
The idea that private enterprise is always efficient is a myth, as is evident to anyone who’s worked for a large enough corporation, or even a small one where management weirdly shields some obviously incompetent people for internal political reasons.
The only correcting factor is that companies can fail, and smaller competitors can sometimes find ways to undercut large, inefficient firms. But often the small company gets acquired or out-marketed. So there’s nothing inevitable about any of this.