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No science, no startups: The innovation engine we're switching off

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Re: No science, no startups: The innovation engine we're switching off

#201

Post by _DeadFred_ »

terminalshort wrote: post #129
intalentive wrote: post #94

Earlier quoted context omitted.

I read "stock buybacks in 1982" as shorthand for "financialization and short-term thinking at the expense of long-term gains", which certainly happened across corporate America and Britain starting with Reagan and Thatcher.

You state that as if it is a fact, but from what I see the tech industry has engaged in the longest term corporate strategies I have ever seen. Amazon took losses for the better part of two decades before it showed a profit, and public markets would never even fund a venture like SpaceX.

Amazon is a dystopian nightmare of a company. Amazon took losses in order to decimate their competition. Their business model you hype is evil af. They have to have people planning for when they run out of local workers their warehouses are so bad. They allow in fake fuses and tons of other fake products because they are cool with the risk to peoples lives. Instead of giving you decent search results they sell ad spots.

So yes, Amazon represents 'good management thinking' post 2010. But not corporate thinking pre 1980s that, you know, build the US/UK to the positions they were able to cost on up until now.

Re: No science, no startups: The innovation engine we're switching off

#202

Post by nyeah »

triceratops wrote: post #193
fn-mote wrote: post #98

Earlier quoted context omitted.

Can you make this argument more rigorous? I’m just not following the connections here. It seems like your assumption is that a stock buyback is a short term gain. One of your arguments is that the strike price for options is set based on a certain amount of stock in circulation, and decreasing that amount will “artificially” raise the stock price, making the options more valuable. I agree that higher stock price bene…

> It seems like your assumption is that a stock buyback is a short term gain. My argument is a stock buyback isn't a gain for a long-term, buy-and-hold investor. Unless a) they sell some of the stock or b) it pays dividends they don't see the benefit of a higher stock price or reduced share count. Qualified dividends and long term capital gains are taxed at the same rate. So anyone who says "buybacks are more tax-adv…

I think I'm mostly agreeing. Anyway here's my story.

Buybacks can be good or bad for shareholders, depending on the buyback price.

Example. I take $1000 and securitize it as 1000 shares. The company sells the shares for $1 each. This is a no-fee closed fund, whatever. I'm the "CEO". I personally buy 1 share.

Anyway, one day the stock trades at $0.90 and the company buys back 500 shares at that price. (How $0.90? Maybe the largest shareholder was distressed and needed cash, maybe somebody didn't read the SEC filings. Maybe "the ticker tells the whole story" and the ticker told $0.90 for a few days. It doesn't matter.) Now the company holds $550 and has 500 shares outstanding. Each share owns $1.10 of USD. Expenses are zero. I kindly volunteer my services as CEO and sole employee.

Pretty soon the stock might trade around $1.10. (Why $1.10? wHo knows?) The people who sold for $0.90 might regret that decision now. Continuing shareholders make money if they sell now. Was this "good for shareholders"? Depends on which shareholder.

Now I (the CEO) decide the company will do a buyback. The company offers $2 a share. I sell my own share for $2. To make it simple, say the company buys back 275 shares at $2. Now it's broke. The remaining shares trade for ... whatever. Somewhere between $3 and $0? ($3 because growth rate!)

I personally doubled my investment. Anybody who sold at $2 also did well.

Buybacks can be good or bad for shareholders.

Re: No science, no startups: The innovation engine we're switching off

#203

Post by badpun »

Tuna-Fish wrote: post #156
triceratops wrote: post #74

Earlier quoted context omitted.

> all shareholders That's the key phrase, they benefit all shareholders. Buybacks on the other hand only benefit the following shareholders: 1. those with regularly vesting stock options and stock grants - basically employees. For non-tech companies especially, this only means high-ranking employees 2. those who intend to sell - that is, soon-to-be-ex shareholders 3. those who borrow against their stock - typically h…

4. Those who intend to re-invest all returns in to the stock, who avoid a taxable event when their ownership of the company goes up without having to first pay tax for the dividend. A stock buyback rewards all stockholders equally . Those who sell, get their reward in cash. Those who do not sell, get their reward in the proportion of their ownership of the company going up.

> Those who do not sell, get their reward in the proportion of their ownership of the company going up.

This is incorrect. If the company buys back say $100m worth of its stock, it's true that the individual shares remaining represent a larger fraction of the company, BUT the company itself is worth $100m less after the transaction (because it has spent that $100m on purchase of something that can't be added to the balance sheet - basically incinerated that money from company's point of view, similarly to how paying out dividends is "destroying" money). These two factors cancel out perfectly, and the book value per share remains unchanged.

Re: No science, no startups: The innovation engine we're switching off

#204

Post by _DeadFred_ »

HardCodedBias wrote: post #60
terminalshort wrote: post #3

> In the 20th century, U.S. companies put their excess profits into corporate research labs. Basic research in the U.S. was done in at Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE, et al. This changed in 1982, when the Securities and Exchange Commission ruled that it was legal for companies to buy their own stock (reducing the number of shares available to the public and inflating their stock price.) Very quickly B…

Of course the relation is minimal if it exists at all. Stock buybacks are simply a more tax efficient dividend.

Of course, I forgot how management's compensation used to be 'dividend options'.

Re: No science, no startups: The innovation engine we're switching off

#205

Post by badpun »

xixixao wrote: post #59
twobitshifter wrote: post #48

Earlier quoted context omitted.

Not why it can’t be done so much as why it isn’t done. Share buybacks allow companies to reward executives directly as their compensation is tied to stock price. If we started not doing that, the priorities might shift, but those executives like things the way they are. Before Tim Cook Apple had never done a buyback - Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. W…

Dumb maybe question: Why couldn’t the companies with excess profits just pay they employees more in salaries?

For businesses, employees are a necessary evil and not company's beneficiaries.

Re: No science, no startups: The innovation engine we're switching off

#206

Post by _DeadFred_ »

constantcrying wrote: post #121
terminalshort wrote: post #3

> In the 20th century, U.S. companies put their excess profits into corporate research labs. Basic research in the U.S. was done in at Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE, et al. This changed in 1982, when the Securities and Exchange Commission ruled that it was legal for companies to buy their own stock (reducing the number of shares available to the public and inflating their stock price.) Very quickly B…

It is a totally delusional argument. Companies always could reward their shareholders, stock buybacks aren't fundamentally different from paying dividends to shareholders. The idea that stock buybacks are what caused a decrease in company funded basic science is ridiculous. Only in very rare cases is doing basic science anything but a total waste of money, viewed from a commercial perspective. Companies should seek t…

Yes yes, companies used to compensate management with 'dividend options' so switching to stock options totally didn't pervert management's incentives.

And management doesn't manipulate the stock using stock buybacks. Why would they? Their performance and compensation are only completely tied to stock price. But no, stock buybacks don't allow perverse incentives that lead to short term thinking different than dividends. Totally the same.

Re: No science, no startups: The innovation engine we're switching off

#207

Post by nradov »

nyeah wrote: post #183
nradov wrote: post #172

Earlier quoted context omitted.

Having an industrial policy has been disastrous for most countries that have tried it. Works fine for a few years and then everything falls apart as the grifting builds up and disruptive innovations destroy the underlying reasons for the original policy goals.

I don't doubt your sincerity. But there's a big difference between believing something very sincerely and actually knowing whether it's true or not.

I actually know it's true that having an industrial policy has been a net negative in the majority of countries where it was tried.

Re: No science, no startups: The innovation engine we're switching off

#208

Post by PhotonHunter »

terribleperson wrote: post #160
wbl wrote: post #37

Earlier quoted context omitted.

Repealing Bayh-Dole is a terrible idea. A lot of research produces enough to get a patent but still requires a lot more development to get a product. Drugs are probably the best example.

Wouldn't a company still be able to patent the additional development they did to turn the original research into a product? E.g. delivery method patents are very common. I don't see why they need to own the original research.

All else being equal, it's most straightforward to demonstrate infringement of a composition of matter claim (which tends to be the earliest for pharma) and so these are more valuable. Also, they tend to be the earliest to issue and possibly litigate over, which also increases value.

Re: No science, no startups: The innovation engine we're switching off

#209

Post by cjbgkagh »

fkyoureadthedoc wrote: post #196
cocoto wrote: post #143

Earlier quoted context omitted.

If for instance higher ups from all companies require you to hire only whites with straight blond hair, a certain weight/size and with green eyes, you will quickly need to hire the bottom of the barrel of this group to expand your teams.

[flagged]

Numbers were not invented, they were tied to management bonuses, numbers lower than that negatively impacted bonuses. Inhouse counsel were much more worried about disparate impact lawsuits than race quota lawsuits. There are many reasons why I, and others like me, can't post personal anecdotes publicly.

Not absolutely everything was great before DEI, and DEI is not the only problem. I gave a number of other problems that have diminished the efficacy of research orgs.

Corporate labs have now gotten so bad that I can outcompete them as an individual which would have been much more difficult in the past.

Re: No science, no startups: The innovation engine we're switching off

#210

Post by PhotonHunter »

photochemsyn wrote: post #20
terminalshort wrote: post #3

> In the 20th century, U.S. companies put their excess profits into corporate research labs. Basic research in the U.S. was done in at Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE, et al. This changed in 1982, when the Securities and Exchange Commission ruled that it was legal for companies to buy their own stock (reducing the number of shares available to the public and inflating their stock price.) Very quickly B…

The article doesn't mention that Bayh-Dole made it legal for a university to exclusively license a patent generated by a government-financed researcher to a corporation. Prior to this, if a corporation wanted to have exclusive rights to basic patents, they'd have to run their own private research labs to generate those patents. Prior to Bayh-Dole, university inventions were patented but there were no exclusive licens…

The obvious retort would be, if the situation were so favorable for corporations before Bayh-Dole, why were so few licensing deals in place before the passage of Bayh-Dole (fewer than 5% of technologies were licensed)?
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