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The Toyota Way

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Re: The Toyota Way

#31

Post by tim333 »

TeMPOraL wrote: post #19
Someone1234 wrote: post #2

How do you maintain "Principle 1" while being a publicly traded company? The way the stock market is designed (and the fact that stockholders often get to appoint the board who gets to appoint the CEO) means they're going to put short term profits over long term viability. Many companies have been ruined and continue to be ruined by this short-term-ism chase for quarterly and yearly profits. For example look at the f…

After reading countless stories about companies big and small, I came to conclusion that if you want to build a company that has a mission and/or a moral compass, under no circumstances you should ever give any degree of control to people who are not in on the mission or do not share the same moral direction. From this follow at least two rules: 1) Never ever go public. 2) Never ever accept VC money. Problem is, you'…

There are public companies that are run for the long term. Berkshire Hathaway springs to mind and I'm sure there are many others. It's down to the CEO whether they do that or try to game the quarterly earnings.

Re: The Toyota Way

#32

Post by bumby »

supergauntlet wrote: post #10
zebrafish wrote: post #7

Earlier quoted context omitted.

All publicly trade companies have a fiduciary responsibility to shareholders. That means different things to different companies and is not a hard and fast rule. Amazon did not prioritize short term profits for a long long time and Bezos famously told investors they were too shortsighted. Many large manufacturing companies adopt the Toyota principles here in the US as well. Principle 1 is up to interpretation about w…

Sure, I just meant the fiduciary responsibility doesn't necessarily always mean "short term profits at all costs." Why does it seem to always be that way, though? Most every company I see appears very shortsighted with no thought to the long game.

My current personal theory is that it's related to a cognitive bias. People tend to be biased towards the short-term. I.e. the short-term pain on my doorstep seems much worse than the (potentially larger) pain on the horizon.

Re: The Toyota Way

#33

Post by rmah »

supergauntlet wrote: post #10
zebrafish wrote: post #7

Earlier quoted context omitted.

All publicly trade companies have a fiduciary responsibility to shareholders. That means different things to different companies and is not a hard and fast rule. Amazon did not prioritize short term profits for a long long time and Bezos famously told investors they were too shortsighted. Many large manufacturing companies adopt the Toyota principles here in the US as well. Principle 1 is up to interpretation about w…

Sure, I just meant the fiduciary responsibility doesn't necessarily always mean "short term profits at all costs." Why does it seem to always be that way, though? Most every company I see appears very shortsighted with no thought to the long game.

It doesn't always appear that way -- it's really a glass half full/half empty thing. If I may be so bold, you are see what you want to see. Generally speaking, public companies do not prioritize the next quarter above all else. Why not? Because they are, generally speaking, not run by idiots. Of course, some do in certain situations. Because it makes sense in those situations.

Owners (shareholders) and boards are not full of idiots either. They realize the temptation of short term pumps. Thus, executive compensation is typically shaped to encourage longer-term thinking (e.g. stock that does not fully vest for years, bonuses based on future company performance years out, etc). And if they do reward short-term metrics, it's for a specific reason.

That said, japanese companies tend to have longer time horizons than american companies (decades vs years) and perhaps that's better. But then again, the further out you go, the less your planning will work out. So who knows for sure?

Re: The Toyota Way

#34

Post by rectang »

tim333 wrote: post #21
rectang wrote: post #11

Earlier quoted context omitted.

> Many companies have been ruined and continue to be ruined You say "ruined", I say "fulfilled their ultimate purpose as disposable wealth-extraction machines enriching executives". I totally agree that the stock market's design encourages short-termism. But this is entirely appropriate in service of the idea that heroic individuals are chiefly responsible for company outcomes.

Though of course in traditional theory the company should be run for the shareholders rather than the executives. It's a bit of a flaw in the system if they can extract large bonuses while tanking the stock. Maybe the government could write some laws that bonuses have to be held in escrow for a while to check the company survives. (And in more modern views maybe you should worry about the other stakeholders too.)

I disagree that it's a "flaw". It is the natural consequence of an ideology, where we ascribe proportionate value to the contributions of executives and marginal value to the contributions of everyone else.

Since we believe that executives are the ones creating the wealth, it is just that the wealth flows out of the company and towards them. Executives giveth and executives taketh away.

Re: The Toyota Way

#35

Post by TeMPOraL »

icxa wrote: post #28
TeMPOraL wrote: post #27

Earlier quoted context omitted.

> Most stock holders have figured out that long term profits are important as well. Companies that only focus short term go out of business quickly and so are worth less than companies who will be around longer. Doesn't matter if the stock holders who pushed for the decisions managed to flip their stocks when they were still rising in value. Aren't most stock holders playing this game to flip stocks, without caring m…

Aren't most stocks are held in index funds and ETFs?

I don't know. Could someone who knows this for sure chime in here?

Re: The Toyota Way

#36

Post by gnode »

Someone1234 wrote: post #2

How do you maintain "Principle 1" while being a publicly traded company? The way the stock market is designed (and the fact that stockholders often get to appoint the board who gets to appoint the CEO) means they're going to put short term profits over long term viability. Many companies have been ruined and continue to be ruined by this short-term-ism chase for quarterly and yearly profits. For example look at the f…

I don't think the fundamental problem is being publicly traded, it's a question of how distributed the control of a company is. Some publicly traded companies are controlled by few people.

When ownership is concentrated, decisions can be made based on long-term ideology. When ownership is highly distributed, and especially when indirect via indices, decisions are made in favour of widely accepted and broadly applicable metrics of performance, which tend to have only short term confidence.

Re: The Toyota Way

#37

Post by eries »

Someone1234 wrote: post #2

How do you maintain "Principle 1" while being a publicly traded company? The way the stock market is designed (and the fact that stockholders often get to appoint the board who gets to appoint the CEO) means they're going to put short term profits over long term viability. Many companies have been ruined and continue to be ruined by this short-term-ism chase for quarterly and yearly profits. For example look at the f…

This is literally the thought process that led to the creation of the LTSE. I was actually reading The Toyota Way while writing the draft manuscript for The Lean Startup

Re: The Toyota Way

#38

Post by nradov »

tim333 wrote: post #21
rectang wrote: post #11

Earlier quoted context omitted.

> Many companies have been ruined and continue to be ruined You say "ruined", I say "fulfilled their ultimate purpose as disposable wealth-extraction machines enriching executives". I totally agree that the stock market's design encourages short-termism. But this is entirely appropriate in service of the idea that heroic individuals are chiefly responsible for company outcomes.

Though of course in traditional theory the company should be run for the shareholders rather than the executives. It's a bit of a flaw in the system if they can extract large bonuses while tanking the stock. Maybe the government could write some laws that bonuses have to be held in escrow for a while to check the company survives. (And in more modern views maybe you should worry about the other stakeholders too.)

Shareholders are free to impose deferred compensation schemes on executives. In fact many companies have done so. No new laws are needed.

Re: The Toyota Way

#39

Post by [deleted] »

magduf wrote: post #18
martin_a wrote: post #13

Earlier quoted context omitted.

Nah. I see some of those points could very well be adapted to German companies. And focussing on long-term growth and stability is probably one of the main aspects of the German "Mittelstand" (medium companies, often led by families over generations) which usually has a strong focus on providing a sustainable place to work and therefore not optimizes its business for shareholder value.

His post would have been correct if he had omitted the word "only". As you've pointed out, it isn't only Japanese culture that values long-term stability and value to the society. The problem is that American culture absolutely does not value this stuff, and that's why our companies work the way they do.

[deleted]

Re: The Toyota Way

#40

Post by nradov »

TeMPOraL wrote: post #35
icxa wrote: post #28

Earlier quoted context omitted.

Aren't most stocks are held in index funds and ETFs?

I don't know. Could someone who knows this for sure chime in here?

Yahoo Finance will show you the top holders for any publicly traded company.

https://finance.yahoo.com/quote/TM/holders?p=TM

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