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Apple and Google embody two alternative models of capitalism

theatlantic.com

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Re: Apple and Google embody two alternative models of capitalism

#11

Post by eldavido »

There is so much wrong with this article I hardly know where to begin.

First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even if they don't, their governments do. Huge pension funds like CalPERS are heavily invested in the stock market, which matters because (a) many state employees rely on them for income, and even if you don't work for the state, (b) your taxes are directly tied to the investment performance of these funds. Bottom line, it's complete folly to suggest the stock market is a "rich person's problem" even if you're poor. Anyone invested in the S&P 500 is going to have a large position (relatively) in Apple.

Second, this article makes no mention of Google's hiring of Ruth Porat or the recent moves to put better capital allocation processes in place. I, for one, wish Google would behave more like Apple. I think it shows admirable restraint that Apple can pay so much cash out without wasting it on dumb things.

Third, it's just a sloppy article in general. They make no mention of whether the "performance" of the two includes the cash thrown off by dividends, which in Apple's case, is significant. They also didn't mention the complex back-story of why the Irish subsidiary is used [1], nor any of the academic finance research suggesting that "Short-term" decision making actually benefits investors long-term.

[1] https://stratechery.com/2016/apples-eu-tax-problem-how-apple...

Re: Apple and Google embody two alternative models of capitalism

#12

Post by eldavido »

frgtpsswrdlame wrote: post #7

It's worth mentioning on a post like this that there is no legal (or historical) basis for the idea that maximizing shareholder value is the primary concern of a corporation. See these two sources: https://hbr.org/2010/04/the-myth-of-shareholder-capitalism [pdf] http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?artic...

This is a good point and I think it explains a sea change in US business. In the late 80s, business went from being pretty clubby and centrally planned (think big 4 auto companies, lots of union control, with big cross-industry labor bargains) to being a lot more competitive, with shareholders getting a lot more power.

Offhand I think it's a combination of globalization (requiring businesses to be "tougher") of both capital and customers, the increasing financialization of the US economy, and the birth of modern PE firms and other activists capable of putting more pressure on admittedly pretty lazy and nest-feathering managers. (Have you watched Mad Men? Two martini lunches? I wouldn't want employees at my company doing that!)

Re: Apple and Google embody two alternative models of capitalism

#13

Post by MR4D »

jtraffic wrote: post #2

> they embody two alternative models of capitalism, and the one that wins out will shape the future of the economy. Even in such a vague form, this is a touch sensationalist. The impact of 'the one that wins' may be negligible. There also may be no winner.

I originally thought that too, until I read through the entire article. Technically, the "one" that wins is not the company, but the style of how they treat shareholders.

Effectively, these two companies embody fairly different points on the spectrum of shareholder control: Google being effectively a public closely-held company; Apple being a public widely-held company. True, Google has millions of shareholders, but the _control_ is closely held, hence why I am using that term.

The control that shareholders (and activists and raiders) can have on Apple is significantly different than on Google. And that is what the article is about.

Over time, the market could adjust from the Apple model (which is the status quo in public companies) to the Google model. The implications are tremendous, as the idea of a public company that is closely-held over the long term hasn't really been done before.

Re: Apple and Google embody two alternative models of capitalism

#14

Post by williamstein »

jtraffic wrote: post #2

> they embody two alternative models of capitalism, and the one that wins out will shape the future of the economy. Even in such a vague form, this is a touch sensationalist. The impact of 'the one that wins' may be negligible. There also may be no winner.

Agreed. The article assumes that business/investment/etc. is a zero-sum game.

Re: Apple and Google embody two alternative models of capitalism

#15

Post by mfringel »

eldavido wrote: post #11

There is so much wrong with this article I hardly know where to begin. First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even i…

You seem to be asserting that anyone who owns any stock is completely aligned with the interests of the respective corporation, regardless of proportionality.

To wit, If I own (say) $5k of Amazon stock as the result of being invested in a mutual fund, that is not sufficient cause for me to take time out of my day to call my representatives and actively lobby for Amazon.

Re: Apple and Google embody two alternative models of capitalism

#16

Post by lostboys67 »

thedevil wrote: post #6

tldr: Google founders have more voting rights than Apple executives. In case you didn't know, this impacts corporate behavior, especially dividends. I thought this would be about the way each interacted with customers, which is far more interesting.

Which Wall Streat and the City don't like on UK media company that has this dual share class structure got kicked out of the FTSE index for this.

Re: Apple and Google embody two alternative models of capitalism

#17

Post by itcmcgrath »

MR4D wrote: post #13
jtraffic wrote: post #2

> they embody two alternative models of capitalism, and the one that wins out will shape the future of the economy. Even in such a vague form, this is a touch sensationalist. The impact of 'the one that wins' may be negligible. There also may be no winner.

I originally thought that too, until I read through the entire article. Technically, the "one" that wins is not the company, but the style of how they treat shareholders. Effectively, these two companies embody fairly different points on the spectrum of shareholder control: Google being effectively a public closely-held company; Apple being a public widely-held company. True, Google has millions of shareholders, but…

Except, given that both models ended up #1, and #2 respectively, doesn't it imply that both models can work and other factors are more important in success? Following that, doesn't it imply that shareholders should/will care more about those other factors?

Re: Apple and Google embody two alternative models of capitalism

#18

Post by BeenThere888 »

eldavido wrote: post #11

There is so much wrong with this article I hardly know where to begin. First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even i…

Why should the poor give a damn about the stock market, though?

Every time a bubble pops, they're the one's left holding the tab.

How many of those 401ks and IRAs were wiped out and the "owner" left with nothing after Madoff, housing bubble, etc.

IMO, it's a fools errand as a figurative little person on the totem pole to babysit the wealth of the rich who leave them dangling in front of the fan that just had shit splatter all over it.

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