We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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Why we need more Gordon Gekkos “The perceived ills of Anglo-American shareholder capitalism shown up in the bursting of the 1990 stock market bubble are not therefore a sign of some decrease in corporate morality – though there have been some clearly illegal practices which are rightly being dealt with by the courts – but due to the perverse incentives created for managerial `rent seeking’ by the regulations limiting hostile takeovers, and the unintended effects of fiscal policy through the double taxation of dividends. With the double taxation of dividends due to end, if all the regulations preventing hostile takeovers can also be repealed, the unregulated market for corporate governance would again provide checks on predatory managements. Executive compensation will begin to fall, accountants will have less pressure to cook the books, and the Anglo-American corporation would pursue the innovation, efficiency, and profitability that has till now been its hallmark.”
– Deepak Lal, from Reviving the Invisible Hand, page 202. (The book was first published in 2006.)
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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There’s no such thing as an unregulated market. People who wish to “regulate” markets with regulations and restrictions don’t understand how supply and demand work.
Yes – sadly “shareholder capitalism” has been in decline for many decades. It was as long ago as 1965 (when Capital Gains Tax came in) that the majority of shares were owned by individuals – rather than by pension funds and other such that are controlled by hired managers. Hired managers in charge of other hired managers with no OWNERS in sight does not work – and it is government tax (for example in inheritance tax and capital gains tax) and regulation policy (for example the Dodd Act in the 1960s United States) that has castrated shareholder (owner) power.
The left (as is their habit) blame things on something that does exist (shareholder campitalism) indeed something they have helped destroy.
In Germany families still own many manufacturing enterprises – the international establishment elite (who falsely call themselves “liberals”) hate this, and seek to destroy it via such things as imposing inheritance tax.
“In Germany families still own many manufacturing enterprises”
Lamentably, people die, and second or third generation scions rarely posses the talents of the founders that founded great enterprises.
So, corporations are mostly managed by hired managers, and that’s not something that can be avoided.
Jacob is correct: hired managers isn’t something which can be avoided, or for that matter, should be avoided. Truly large commercial enterprises are rarely held by private families, and even when they are closely held professional management is generally far more competent than individuals who simply inherited the company. But that said, the problem of “rent-seeking” management remains, especially when equity ownership is widely dispersed. That is why a robust market in corporate governance is greatly to be desired, and is also why it is strongly opposed by entrenched managements (who adopt various “poison pill” strategies, pay “greenmail” with the shareholders’ money, and generally resist any attempts at takeovers even when they would clearly benefit the shareholders).
But it’s not more Gordon Gekkos that we need. As I recall, in that movie Gekko made his money through insider trading and other illegal activities. Beneficial corporate raiders identify hidden value and expose weak management, and thus provide a useful service. Their takeovers benefit both themselves and the shareholders, the value of whose stock increases as a result. What we really need are more Larry the Liquidators, who explains the value he provides so eloquently here. (I never tire of hearing that speech!)
I agree with Laird that it is Larry the Liquidator who is actually the one to emulate. And unlike Gekko, Larry does not push the fixed quantity of wealth fallacy as it was not written by that economically illiterate Putin-licking jackass conspiracy theorist Oliver Stone.
Laird, in re Larry: Let me just join you in that (yet again). Also about Gekko (I gather, though I never was interested to see the movie 😳 ), and Gekko’s vs. Larry’s outlook and methods.
Especially like Para. 2. :>)))
O/T: Unfortunately, I understand that Mr. DeVito is yet another loony librul (not sure if he goes along with the Asner/Glover/Harris crew or not). Went for The Bern, thinks Corbyn would be a great P.M. :>(
I have wprked for and with companies that grew by success, and also others that grew by takeover, amalgamation and/or merger. In IT, I’ve observed the frequent consequences of the latter. Five managers from the various parts of the merged behemoth, each running a crap system for that bit, sit in the same room as a sixth manager, from yet another bit, whose lean system could effortlessly do all the work for the entire company. Their task: decide how to merge into a single system for the whole company. The effort invested by the five into not admitting into consciousness the fact that they and their teams can simply be discarded can rival some of what we’ve seen in left-wing politics.
Bottom line: if a company grows its markets, sales and production, its managers may know what works well within it, and probably something works if such growth occurs. If a company suddenly becomes much bigger by acquisition or merger, the majority of middle managers’ political incentives can positively work against that knowledge.
I once worked with a skilled computer group whose single-US-state company let them enter a US-wide industry competition. When it became clear they were about to win hands down, with much resultant publicity, the company pulled them out in terror that one of the big boys would notice and target the company for take-over. The team, when they understood, complied willingly – for fear of the outcome I describe above. Years later, when they had grown big enough to fear take-over less, they allowed the story to be told.
Just my 0.02p input to this discussion.
Laird, up to a point I agree. I was annoyed that the full, Ayn Rand-on-steroids magnificence of the “Greed is good speech” was undermined by Gekko’s later zero-sum game bullshit as penned by Oliver “Castro” Stone.
Julie, DeVito may indeed be a “loony librul” (I simply don’t know), but he is a good comedic actor and as a rule I try to separate artistic talent from political predilections. Barbra Streisand is a fool, but she’s a great singer and I love listening to her. (Sean Penn, on the other hand, is a crap actor as well as being a total idiot.)
Perry, Oliver Stone is economically illiterate, and certainly has some weird political ideas, but he has made some good movies (see my comment in the previous paragraph). You might disagree, but I thought his “Snowden” movie was very well done, turning a rather bland and essentially introspective story about losing faith in the government into something with actual cinematic quality. Not a great movie but a good one, given the dramatic shortcomings of the events he had to work with.
It is depressing that people still follow the mantra of the Economist magazine and the Financial Times newspaper – about how hired managers only responsible to other hired managers (pension funds and so on) is both inevitable and good.
In reality companies tend to need OWNERS – people with a long term interest in the business (long term, over GENERATIONS, – not just the end of year stock market price). They do NOT need to own all of the business (just have a real large scale stake in it) and they do not need to run the business themselves – as long as they can hire and FIRE those managers who do. But owners are needed.
Capitalism without capitalists (without real owners) does not work – and that is why tax law and regulations that undermine real owners (capitalists) is so harmful.
I am sorry if I did not make this clear to start with – but I did hope it was obvious. A 100 billion German trade surplus is not just caused by E.U. regulations being rigged in their favour (although yes they are) – it is because many German manufacturers still have CAPITALISTS involved, people who actually own a real part of the business and want to hand things on to their children – just as their parents handed the business to them, each generation improving it. Clearly it is not obvious.
The alternative is something like Lloyds Bank – which was deliberately bankrupted by the head manager buying HBOS (knowing that HBOS was bankrupt) because his friend Prime Minister Brown asked him to.
Why should the head of Lloyds care about the business? He does not own it – he did not inherit from his forefathers and he is not going to hand it on to his children. What the head of Lloyds cared about was his own pay and perks (pension and so on) – nothing else.
I have guarded (and worked in other “worm’s eye view” positions) in many companies for over 35 years – and overheard many conversations of top managers (people in my position are not human so top managers talk quite openly in front of us – as if we were chairs or tables). And I can tell you that this sort of person is typical in top management.
They know nothing about the business enterprises they control – and they do not care about them.
Why should they care? The business does not belong to them – they did not create it or inherit it, and they are not going to pass it on.
Sorry, Paul, but you’re pining for the 18th century. That business model can no longer work, at least not for large multinational companies. A company with $ billions of capital cannot be owned by one family, or any small group of persons. In fact, no one person can even own a significant portion of it. Professional management is a necessity, not a luxury. All you can do it try to find mechanisms to ensure that they keep the best interests of the business at heart, such as by requiring that they own enough shares that it’s significant to them, and having competent, independent directors watching over them. Even that doesn’t always work (obviously!), which is why we need a market in corporate governance (i.e, “raiders”). It’s the ultimate control.
No Laird I am pining for sanity – and if you think that companies can prosper in the long term without actual human beings having a long term stake in their success (by owning a substantial part of them) then you are mistaken.
A good “raider” (as in the James Garner played character in old film “Cash McCall”) is someone who buys an enterprise. What is someone who buys a enterprise? Someone who buys a enterprise (like someone who creates one or inherits one) is an OWNER. If not of all an enterprise, then of a real part of it.
“18th century” – as with the Ford Motor Company under the first Mr Ford, or Huntsman Chemicals under Jon Huntsman (senior), or Koch industries inherited by Charles and David Koch. So not just a German thing.
Having dealt with that I must deal with an error of my own.
It is not a 100 billion trade surplus in the case of Germany – according to the Economist magazine (not a totally a reliable source – but the only one to hand) it is a 300 billion German trade surplus.
Of course the German success is also a weakness – as almost 10% of their economy is this trade surplus when other nations go into decline (as they will over the next few years) so will Germany.
High energy costs (due to government regulations) will also play a role, as will the attack on the family owned manufacturers that Laird thinks make South Germany the “18th century”. Warren Buffet would agree with such a view – he would love the families who control the manufacturers to sell out to his organisation (and make their children “trust fund kids” rather than independent producers).
But certainly neither Britain or the United States, with our vast trade deficit and declining manufacturing output, have anything good to say.
Compared to somewhere like Bavaria (and it is NOT Protectionism that has created Bavarian industry – as it has grown up under Free Trade) I do not think that we really have an economy – we have a Credit Bubble instead.
Almost every town and even village (yes village) in Britain has places where X,Y,Z USED to be made. And not in the “18th century” – into my own life time (and I am not that ancient).
USED to be made.
If this is our new economic model – then damn it. God Damn it to Hell.