r/Damnthatsinteresting • u/hroaks • 4d ago

Grab your iced tea and Raise a toast! Video

Enable HLS to view with audio, or disable this notification

58.9k Upvotes

95% Upvoted

1.3k comments sorted by

View all comments

5.2k

u/[deleted] 4d ago

[deleted]

1.8k

u/UofMtigers2014 3d ago

Exactly. The problem in the US is that every public company has to show growth for shareholders. That's why companies always suffer in quality when they go public.

A public company can have their best year and net $2.6 billion. Well if the next year, they only make $2.2 billion, the public chatter on CNBC, etc is "what's wrong with them?". Nothing is wrong. We shouldn't be holding companies to their best year.

A salesman after having his best year wouldn't want his commission the following year based on the best year's numbers. It's stupid.

672

u/namecard12345 3d ago

"That's why companies always suffers in quality when they go public"

Side eye at Reddit

378

u/pyrowipe 3d ago

stares directly and unabashedly into Reddit's eyes

98

u/rimjob_steve 3d ago

Which eye?

25

u/JustYourNeighbor 3d ago

The stinky one.

15

u/Mage-of-communism 3d ago

The legend in the flesh, or data rather.

9

u/PimpPopples 3d ago

Brown eye

4

u/didgeridoo-it 3d ago

Back and forth so my eyes sparkle!

6

u/fardough 3d ago

A feeling flashes over you, should I try to kiss Reddit? No, that would be crazy… or would it?

3

u/Lore_ofthe_Horizon 3d ago

Reddit stairs back, but its a vacuous stair that clearly doesn't see anything.

5

u/DoctorDilettante 3d ago

Damnit man, it’s stare.

1

u/Lore_ofthe_Horizon 3d ago

Well shit, sorry for the totally unparsable sentence, hope you were not too traumatized. I'll let the shame stand, bring the downvotes, I deserve them.

3

u/SlurmmsMckenzie 3d ago

Just edit the post, stop acting like a victim. 

 You fucked up the homonym.  It happens.  Deal with it.

153

u/Standardweasel 3d ago

This, except a little worse. Because even if they did make the same $2.6 billion next year, it's still not enough, because some shareholders got in when profits were at $2.6 billion, so for them to be happy they now need the shares to go up from what they got in at, so now $2.6 billion isn't enough profits anymore. And the cycle continues..

67

u/ChatterManChat 3d ago

It actually gets even a little worse, if a company predicts they are going to make 3.2 billion and instead make 2.6 billion they are in even more shit. Number must go up, and it must go up as much as you think it will

22

u/SavvyGent 3d ago

Yeah, I work in a very profitable billion dollar company, and when we failed to hit the expected quarterly profits in a single quarter last year, it was unbelievable the things that started happening.

The staff Christmas gifts got taken away. (Had been there for decades) - and other benefits that left a lot of unhappy employees. The things we now have to spend time/money on to fiddle numbers, rather then create value has gone to insane heights. The increased focus on short term results, instead of growing the company long term.

The funny part is, that was our most profitable quarter ever, and it launched the erosion of our company. Ask higher ups about it, and the answer is "of course we have to do these things. We are a publicly traded company, and are doing these things for our shareholders"...

5

u/BoomerSoonerFUT 3d ago

Hell you’ll see stock drop if they project $2.5 Billion and get $2.6 Billion, because they didn’t exceed projections by enough.

4

u/HelloYesThisIsFemale 3d ago

Not every company is expected to grow. Dividend companies are expected to just maintain their levels of dividends. Look at coca cola for example. On an inflation adjusted basis it's just about okay and it's one of the most successful companies in the world.

Let's also not forget that owning a stock is owning risk. Risk should be compensated, that's the law of finance.

Yes of course a company like Google or Amazon something with a PE of 30 is expected to grow but they're not all like that. Towards the end of your life you move on to safer investments where you just want to earn a reasonable risk adjusted return. Let the kids have their growth.

1

u/a_a_ronc 3d ago

There’s a joke that every American’s retirement is based on Apple stock going up at a regular rate.

52

u/Perfect_Ad4026 3d ago

The problem imo is business majors and professors all jerk each other off that growth is king. It isn't always the best thing for a company, and I honestly think they are breaching the very responsibility they love to hide behind to make these horrible decisions.

16

u/xantub 3d ago edited 2d ago

And some companies do just that, I remember one external salesman I worked with, loved the guy, he knew the stuff and just offered what we really needed, we worked with him for like 5 years, until one day he came to say he no longer worked with his previous company and he went independent as consultant (so he could offer products from different companies now). I asked why the change and he said basically what you said, that the company was basing bonuses on his previous performances, so he had to sell more than others to get the same money, which he felt was an insult and left.

16

u/Madmartigan56 3d ago

I agree that is stupid. It's also what Frito Lay did to their salesman. Got rid of commission and called the new system, "Pay For Performance." Essentially having to outperform yourself year over year for the same money.

31

u/chelseablue2004 3d ago

"The problem in the US is that every public company has to show growth for shareholders. That's why companies always suffer in quality when they go public."

Perpetual growth is impossible, there is no way a company can achieve it's why you see CEOs gut and sell assets when they can't achieve it thru sales. Its why layoffs are always the 1st option so that can immediate capture the savings yet still keep paying severance and benefits for 2-6 months buts its fine cause it can't effect your bottom line thru accounting rules. Its also illegal per the courts to not actively seek profit if you are a publicly traded company, share holders have the right to sue and then call to remove you if you do.

This is why the form of capitalism in this country is pretty fucked. Especially when the government will also give them free money to survive then turn it around and harm the same people that money was supposed to protect and keep employed.

0

u/beams_FAW 3d ago

"But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”" https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits#:~:text=But%20this%20belief%20is%20utterly,%2C%20and%20many%20do%20not.%E2%80%9D

9

u/lostcauz707 3d ago

It's not so much we shouldn't be holding companies to their best year, executives usually get massive bonuses for growth, and coincidentally call the shots. So we don't grow, daddy didn't get his next yacht, mass layoffs, stagnant wages, etc. Daddy needs that yacht.

The US economy works mostly in short term because of this trend, and this trend is greed. In contrast, companies like Nintendo, and in Japan in general, are long term and believe the workers that got them to success in the first place should be kept and maintained. When the 3DS and the Wii U both had their failings, executives at Nintendo took pay cuts to keep their long term employees on board instead of doing layoffs. The Wii was a success, the Switch was a success, both with heavy limitations but there was care in their craft. Boeing would gladly see 1000 planes land without doors than keep on whistle blowing long term employees that made them great in the first place. Blizzard would rather just keep directors than keep the developers that made games like Warcraft and StarCraft satisfied in their positions. This is why we see record layoffs more and more tied to record profits or record stock buybacks. We just had the railway union fight. They claimed they couldn't afford an extra week of vacation, then when the union calmed, you guessed it, billions spent in stock buybacks.

3

u/Strict_Tie_52 3d ago

Eventually they will just become an acquisition company to make bigger profits.

3

u/Alienhaslanded 3d ago

The second a company goes public it becomes a cash farm with an expected infinite growth.

You could get the entire population of Earth use a service and the shareholders will still expect double the numbers in the next annual report. Going public is like getting cancer that keeps spreading until you die.

2

u/EvilWaterman 3d ago

It’s greed

2

u/moogpaul 3d ago

It's still wild to me that the market is based on growth and not just profit. Year 1: 80 mil in profit. Year 2: 100 mil in profit. Year 3: 100 mil in profit and stock price goes down. Bizarre.

2

u/Wotmate01 3d ago

It's not exclusive to the US. It's a worldwide problem with both corporations and governments.

And it's the reason why we're in an inflation crisis right now.

1

u/FuckwitAgitator 3d ago

There isn't a video on the internet that shareholders find more disgusting than this one.

1

u/Fuckface_Whisperer 3d ago

That's why companies always suffer in quality when they go public.

I sort of understand what you're getting at, and there are obviously negatives that come with public ownership, but this is an absurd position to take. Many giant corporations would never be able to even exist if not for the public capital markets. Even with private funding there is always an eye to selling the corporation to the public.

Microsoft wouldn't exist, Google wouldn't exist, Amazon wouldn't exist. Most of the things you enjoy are fueled by capital markets.

3

u/FetishisticLemon 3d ago

Microsoft wouldn't exist, Google wouldn't exist, Amazon wouldn't exist

Sorry, I thought you were trying to make an argument for why public companies are good, or did I misunderstand?

1

u/Fuckface_Whisperer 3d ago

How edgy.

If you don't want to live with modern convenience you don't have to. Nobody is stopping you from going out into the woods and building a shack. Hell, you could convince 100 other people to go with you and make a commune. Or just nut up and join an Amish community.

But no, you're on the internet on your iphone posting on reddit. A space that would not exist but for public capital markets.

4

u/FetishisticLemon 3d ago

The internet was a government project, I do not own an iphone and reddit started off private. Your implication that if not for the the cancerous wall street model of economics we'd still be living in the stone age is straight up dishonest snark.

0

u/Fuckface_Whisperer 3d ago edited 3d ago

The internet was a government project

Cool? None of the enterprises would've emerged from it without public capital markets. It would've stayed what it was. A small government experiment.

reddit started off private.

No shit. Re-read my original comment. Venture capital wouldn't exist without an eye to public capital markets. You understand that right?

Your implication that if not for the the cancerous wall street model of economics we'd still be living in the stone age is straight up dishonest snark.

Give me your alternative.

And no, it wasn't dishonest, since you claimed that huge corps that you benefit from suddenly not existing would be a fabulous thing.

2

u/BrittyPie 3d ago

Ugh, I am so sick of hearing this soft fucking argument. The idea that you cannot criticize a system if you're a participant in that system is insane. By that logic, any functioning member of modern day society has no right to an opinion on any societal systems, lest they come across someone like you who tells them to to "live in the woods". Do you seriously, honestly not see the critical flaw in that mentality?

2

u/Fuckface_Whisperer 3d ago

The idea that you cannot criticize a system if you're a participant in that system is insane.

You absolutely can. I was just responding to the flippant remark that life would be so great without the corporations I listed.

You understand that right? Go back and see my original post. I acknowledged that there are flaws with capital markets. However, products do not always suffer from corporations going public. Most of the time it is the opposite.