The complete financialization of the US economy.
Nearly every single S&P500 company is majority owned by institutional investors, with 88% of them having one of the Big Three (Vanguard, Black Rock and State Street) as their top investor, and with the only exceptions being Tesla, Amazon, Alphabet, Berkshire Hathaway, Facebook, Oracle, Walmart, Comcast and Kraft-Heinz where insiders are still the top shareholders. The Big Three has 15-20% controlling stakes in nearly every large American corporation, and through the means of coordinated proxy voting, dictates the policies of the board of directors.
These institutional investors are financial capitalists who see the companies as investment vessels, not as industrial capitalists who want to grow their respective industries. They could not care less if the companies go bankrupt as long as they see a return in short term profit. Vanguard, for example, has a deep $7.7 TRILLION assets and do not care at all if some of their businesses go down.
Then you have private equity firms, also known as “corporate raiders”, who raise high stake loans to perform “leveraged buyouts” of established companies. They conduct “financial engineering” i.e. paying themselves dividends, lower wages and force overtime without pay, layoff employees, skirts labor laws, refuse to honor contracts, strip off assets and saddle the companies with debt until these are forced to declare bankruptcy. Then, like true parasites, they ditch the host and jump on to the next companies to suck off their wealth built up over the past century.
You also have venture capitalist (VC) firms that leveraged Obama’s Zero Interest Rate Policy (ZIRP) era after 2009 to raise capital to profit from tech/software companies. You can read this article about how Andreesen Horowitz perform their operations to destroy software startups:
The thing about these two strategies for VC is that they both can turn a profit. That second one, though, works a little differently than the first. Regardless of whether the company succeeds, pumping its valuation before selling your shares can mean you will make money, even if the business itself doesn’t survive in the long term. But hyping a startup isn’t something a VC can do alone. He needs help. He needs the media.
It happened to Groupon. It happened to Substack. It happened to Imgur. And many others, and it will happen to Reddit and all other software companies in America.
This is by no means only restricted to software companies though, for the rot of finance capitalism had already been sown since Reagan’s and Clinton’s deregulation era that massively expanded Wall Street’s influence, and subsequently fueled most prominently by Obama’s low interest rate monetary policy for them to encroach into every crevices of American industries.
Cisco, used to be the world’s leading telecommunications company, now a shadow of its former self after being financialized by Wall Street.
Boeing, used to be the world’s leading aviation engineering company, now churning out defective products that nearly never happened in its history, after being financialized by Wall Street.
Intel, used to be the world’s semiconductor pioneer, now struggling to keep up with Taiwan’s TSMC and South Korea’s Samsung, after being financialized by Wall Street.
And this is the fate of America - a financial oligarchy will continue to devour and strip off every remnant of the American industries built up since the past century, with nothing powerful enough that can stop it in its tracks.
BrikoX@lemmy.zip 1 year ago
Interest rates went up, shareholders asked for returns on their investment and companies are trying to get there in the least amount of time no matter the cost. Even if the cost is total destruction of the trust in their companies. CEOs are stupid like that.
luciferofastora@lemmy.zip 1 year ago
Is it really that they are stupid, if it works for them and boards keep hiring them after doing so?
Or is it that they and the boards turning a quick profit by bleeding the company dry and fucking over employees and customers alike for their own gain are simply the beneficiaries of an unfair system?
BrikoX@lemmy.zip 1 year ago
That’s a good question.
I don’t have statistics to analyze, but I think investors lose more in the long term with these rushed plans to turn up a profit. Basically it hurts the company long term, they suffer a hit when they have to buyout (golden parachute clause) the CEO to fire him/her and it limits the potencial new customers and growth. So these inverstors will stop any future contributions and turn their focus elsewhere which accelerates the companies issue with lack of cash and leads to people firing which leads to other issues until company is done.
The issue with decisions like this is loss of trust. Even if Unity won’t see big loss right now, the studios will look for alternatives from now on. Hiring of new people now focus on different engines experience instead of Unity and over time Unity will be out.
So while they don’t really lose they also don’t really win anything either. If they kept the status quo they would have keep getting income and ability to cash out in the future.
luciferofastora@lemmy.zip 1 year ago
I think the question is rather whether the investors expect / want the company to keep providing profit long term, or whether they just want to shake the price up enough that they can cash out on a high point and leave whatever new sucker is holding the shares now to deal with the fact that they’re turning to dust in his hands. Maybe they expected that the company wouldn’t be too profitable for much longer and figured any short term improvement was going to be as good as it gets.
The Investors are not one monolithic and everlasting hivemind that has to look towards its own future benefit. If they can pull their money out with as much profit as possible, it doesn’t matter if the company falls off a cliff the next day, so long as they got their sweet sweet Payday, which they can then invest into another company to eventually do the same to.
Or maybe they’re simply gambling on the fact that many large customers won’t be able to switch off of their platform so easily and will instead work out long-term arrangements, hoping that it will offset the loss from jettisoning the smaller ones. Industries tend to have a certain inertia, so they wouldn’t be too unreasonable with hoping the bigger ships would rather negotiate a better deal than attempt to shift their entire course.