Hacker News Reader

Comment by carrozo | Hacker News Reader

Everybody’s got a plan until they’re punched in the face (with hundreds of billions of dollars).

Or, maybe, "Everybody is altruistic until they have shareholders."

The idea that companies should only be beholden to shareholders that has taken firm hold over the past 50(+/-) years doesn't look to be a good one, in hindsight.

Past 50 years, really?

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." - Adam Smith, 1776

> The idea that companies should only be beholden to shareholders

This concept was popularized by Milton Friedman with his Shareholder Theory. OP is not wrong.

https://en.wikipedia.org/wiki/Friedman_doctrine

Maybe, but it’s repackaging a point Smith made 194 years earlier.

I think Friedman's ideas are substantially different.

The quote from Smith is discussing tradesmen running a business in their own self interest.

In some ways, Friedman's point is the opposite. That the laborers perform in the self interest of the owner.

I don't know the full context of the Smith quote. I did a bit of digging for Smith's views on publicly traded companies, and came across this quote[0]:

>The directors of such [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.

[0] https://en.wikipedia.org/wiki/Criticisms_of_corporations

Surely that’s exactly the same thing Friedmam was saying. According to Friedman managers spending company money on social causes are spending other people’s money, the same phrase Smith used, when they had no business doing so. In saying that the firms responsibility is to its owners, Friedman was addressing precisely the concern that Smith was worried about.

Of course in Smith’s time joint stock companies were a relative novelty. We have a lot more experience of them now and have developed standards, checks and balances to try to maintain discipline in managers in the intervening centuries. Friedman was simply attempting to bolster that effort, but Smith was writing about exactly the same concern.

As it happens while I’m a big fan of both men, on this issue I think Friedman is too much of a purist. Some social spending can just be good business. It promotes the brand, buys political friends and can even reap commercial benefits down the line. Donating or subsidising computers in schools for a company like Apple for example.

A shareholder is more like the butcher or baker's brother than the butcher or baker. The incentives are different.

How so?

The butcher and baker a) have to understand what it takes to produce quality meats and breads and b) stand face to face with the customer, so they have both professional and reputational stakes in the game. Their stakeholder brothers and sisters may or may not have the same knowledge or reputational risk, and so their self-interested measures may correlate more with what puts money in their pockets in the short term than what makes the business viable over the long term.

Shareholders don’t care about the reputation or quality of service of the company? That seems a stretch.

As I’ve commented elsewhere I don’t entirely agree with Friedman because I think some social spending can make commercial sense for a company, but I think what he’s saying is just a pretty direct refinement of the exact same points Smith made.

> Shareholders don’t care about the reputation or quality of service of the company? That seems a stretch.

Not a stretch at all. Proven time and time again that shareholders focus on short term gains over long term.

When hired CEOs pay is tied to equity (i.e. shareholder) they make decisions based on how it affects the share price during their tenure, not after. GM after Jack Welch left is a good example.

Shareholders can sell their shares anytime. They care about the horse winning current race more than the next because they can bet on another horse next time. So they only care about the horse as long as they are betting for it.

Given the hundreds of thousands of listed companies you can find examples of anything, but there's nothing inevitable about companies being run purely for short term concerns. Not every company is run that way, shareholder theory or no. Plenty of listed companies are capable of extremely long term investments.

The drive for the short term is one possible strategy and outcome, that's all. In a competitive environment sometimes it even makes sense. Even when it doesn't the existence of failure modes in a system doesn't invalidate the entire system. All systems have failure modes, they need to be evaluated as a whole.

> Shareholders don’t care about the reputation or quality of service of the company? That seems a stretch.

It is a stretch beyond what I am arguing. On the other hand, I don't think it is a stretch to say that you are arguing that every shareholder has quality and reputation concerns indistinguishable from that of the direct proprietor. I claim that that is what would be necessary for Friedman and Smith to be saying the same thing.

Smith had very few good things to say of joint-stock (shareholder-owned) corporations. They were comparatively scarce at the time. Most businesses of his time, including the "baker and butcher" line you quite, were sole proprietorships or family-owned and operated.

The interests he writes of are those of the butcher and baker to themselves. Not to their shareholders.

"Shareholder value" is a recent error attributed to Milton Friedman.

Psychology studies in the past showed people were altruistic. Then psychologist accounted for social capital/good will and worked to remove it from their altruism tests. People stopped being overly altruistic when it stopped benefitting them, likely meaning that what we see as altruism is really a failure to account for all the benefits a person expects to gain and all the negatives they expect to avoid when choosing to perform a certain action.

As for shareholders, I think that comes down to the incentive to avoid the negative outcome of being replaced. Those at the top optimize their actions to avoid being replaced which filters down through each level until it effects every level of a company. There is some variety that results from how a company chooses who to promote, but that is still an outcome of not wanting to be replaced. Promote people who you think will strengthen your own position and not those who will weaken it. This ends up being the primordial pool that spawns corporate culture.

The concept of altruism does not require it to be "pure" or entirely selfless. Altruism can have benefits but those benefits can exist outside of economy and into the realm of the personal, spiritual, social, etc.

In other words, that doesn't disprove altruism so much as it proves that economic self-interest is not our only motivator.

They don't have to be. Everyone just chooses to do it that way because its easier to make loads of money.

It's not some idea that came about from a vacuum. Put yourself in an investors shoes: you may have some investments that you do for the sake of charity or philanthropy, however, the majority of your investments are to increase your investment. It isn't surprising then, following this basic premise, that we have arrived at the current situation. Capitalism factors in greed for the general welfare of the most people. It just seems that we underestimated the upper bound of human greed.

It's not so much an underestimation as it is a systematic breakdown of constraints and personal responsibility for owners/directors of large corporations.

Yep. Money is the one unpatchable zero-day for every platform and service on earth.

There is a patch thanks to contributor Marx but everyone keeps pressing "remind me later".

Does bribing not exist in that system?

Sure there is. I don't know which motivation you'd have to bribe someone to promite your product, though. Would also be hard to sustain if intellectual property was decommodified.

Other, more pressing concerns have to be addressed, though.

>your product

In a hypothetical world where I don't benefit from a competitive advantage, in what sense do I own the product / company?

Consider firms which are wholly owned by either 1) every single employee (worker-owned firm), 2) every employee and every customer who opts in (consumer co-op), or 3) literally every citizen of a government (publicly owned).

You own it in partnership with the other people who own it.

This is, in the strictest definition, the socialism that people are so scared of.

How much control do you have over the military of your government? Or even the DMV? Are these organizations behaving directly as a response to the majority will of the people? If not, how do you solve that problem before you add more organizations?

The best answer we have today, IMO, in terms of ethics of freedom and agency, is "representative democracy," which may be extended to "liquid democracy" to bridge the gap between small, direct-democracy-capable organizations and large, unwieldy ones.

Unfortunately, no solution will be perfect, but that doesn't mean some aren't better than others. The problem is in essence unsolvable. Politics and civilization is an exercise in minimizing harm rather than eliminating it, maximizing utility rather than spiking it.

I don't know how but I do know it is much harder to make something everyone involved thinks impossible than to make something everyone thought they already had.

Perhaps the problem is as simple as setting up a forum with sub forums for every government official - then throw money at it until it works.

In the sense first and foremost that you may produce and design it, especially if production is structured in a co-op way, in the sense that you use it, especially if it's a consumer/worker co-op but also in a worker co-op, and to a lesser extent in that you are part of the society which produces it.

because there aren't luxuries in that system. that creates a need, and from it a secondary market, which without titles[1], sees the exchange of power either via favors exchange or plain tribalism. bribery then becomes the norm for the influential, even if actual money doesn't change hand, favors and contraband do.

1: a catch all to include both money, 'quota cards' and the likes

Working example needed.

Socialism, like capitalism, also has a zero day vulnerability by the name of mundane old “human corruption” that undermines its goals. Capitalism just works better because it pits people against each other, keeping the focus off authority and top level control.

Let me know when we reach post scarcity and no longer need a rationing device such as money.

People thought of this issue since 1870 and the solution they came up with is simply non-transferable rationing devices. In traditional Marxist terms this was labour vouchers but nowadays there are much better solutions. Marx himself wrote about this, in terms of primitive accumulation in socialism.

For sure there are a lot of issues, but this isn't one of them.

You could in theory have bribery in material terms, but this is much easier to trace than in money terms.

My argument was with the idea that money will be gone as a rationing device. You can come up with alternatives but it’s the human nature that is the problem not the technology we use to ration resources. Let me know when this bug is fixed.

Well, that's not the problem we were talking about, is it? We were talking about the issue of bribery, which is made possible by the fungible nature of money.

Yes it is, namely this is the GP

> Money is the one unpatchable zero-day for every platform and service on earth.

To which the response was that Karl Marx had submitted a fix

Yes, and? I think you missed a few steps. Someone then answered that bribery is still possible, and I answered again.

I didn’t respond to the bribery comment I responded to the patch comment saying to let me know when scarcity is solved. I think it may be you who has added a step there, friend.

Money is not the only device that can translate relative preferences.

Just because things are scarce does not mean that non-scarce tools such as software must be bent to monetary incentives that reduce their value.

Any device that is used to ration is money though, there are other means to ration (the three we learn in Econ are beauty, brute force and first come first serve) but any device is by definition money since money is just a rationing device.

No, money has many more attributes than just being used to ration. Importantly money must be fungible divisible and durable.

I don't really get it. How does this prevent people from holding onto foreign currency or gold?

Who is going to sell you forex or gold for non-transferable tokens?

Non-transferable tokens aren’t going to be a successful replacement for money

In a capitalist economy certainly not.

In any economy that isn’t post-scarcity dude, money wasn’t invented by capitalists nor was the idea of an exchange.

No, modes of rationing and discovering preferential subjective values are necessary. That does not imply what is meant with money, which is infinitely durable, portable, fungible and uniform.

Already rationing systems which do not fit the definition of money are being employed. For example in the post-pandemic period the PBoC has issued consumption tokens with an expiration date.

You are simply confusing the idea of a scarce token with money. Money is in the former category but the former category is not money. The necessary function is to translate consumer preferences into numeric terms. For this fungibility and durability is not necessary.

Probbably due to the memory of the deaths of millions of people: https://en.wikipedia.org/wiki/Mass_killings_under_communist_...

You get bit by a viper in the bathroom and your going to avoid that bathroom for a while.

> This article has multiple issues

I assume that this criticism is offered in good faith, and that you're in need of good, solid Wiki articles about the tens of millions of victims of Communist regimes--well, I'm happy to get you started!

Here's an article about the Soviet terror-famine (known as the Holodomor) which killed 4 million Ukranians. No worrisome notifications on this article, so I assume it meets your rigorous standards:

https://en.wikipedia.org/wiki/Holodomor

And here's one about the so-called 'Great Leap Forward', when the Chinese Communist Party's top-down modernization plans resulted in the accidental deaths of ~50 million human beings.

https://en.wikipedia.org/wiki/Great_Leap_Forward

I don't know if you want to open the can of worms that is "accidental deaths from mismanaged resource distribution" under capitalism.

Global deaths from hunger result in one great leap forward every 5 years.

The fact that Capitalism has not (yet) solved the global issue of extreme poverty is hardly an argument against it. Particularly when it is the transition to capitalism which has done the most to solve the problem!

After all, it's a simple matter of fact that the accelerating decline of global poverty since 1990 was the result of the transition to capitalism in formerly Communist/Socialist countries in Asia, including the CCP's own particular flavor of state capitalism.[0]

[0]https://ourworldindata.org/uploads/2019/04/Extreme-Poverty-p... [1]https://en.wikipedia.org/wiki/Extreme_poverty

I think comparing Capitalism and Socialism is a red herring. There is no "pure" Capitalism nor pure Socialism.

There are only countries with specific sets of laws governing them. The question is which system of laws is better and why and when and most importantly: Better for WHO?

Arguing that capitalism is the solution is like saying: Don't look here, we are better than socialist countries and therefore there is no need to improve anything in our country. Same for the other side too.

I'm not denying or excusing that historical atrocities occurred under socialist governments, but for perspective one should also look at the myriad atrocities that were and continue to be committed under capitalist governments. That doesn't excuse such actions, but neither side is innocent. I suggest reading The Wretched of the Earth* Chapter 1, "On Violence".

Here are a few examples off the top of my head:

https://en.wikipedia.org/wiki/Atlantic_slave_trade

https://en.wikipedia.org/wiki/Slavery_in_the_United_States

https://en.wikipedia.org/wiki/The_Holocaust

https://en.wikipedia.org/wiki/Battle_of_Blair_Mountain

https://en.wikipedia.org/wiki/Tulsa_race_massacre

https://en.wikipedia.org/wiki/1985_MOVE_bombing

https://en.wikipedia.org/wiki/Bengal_famine_of_1943

https://en.wikipedia.org/wiki/United_States_war_crimes

https://en.wikipedia.org/wiki/United_States_involvement_in_r...

https://en.wikipedia.org/wiki/Police_brutality_in_the_United...

https://en.wikipedia.org/wiki/Incarceration_in_the_United_St...

* Though I will object that it is unfair to attribute the actions of the Khmer Rouge to socialism. Like the Nazis they were socialist in name only, and in fact were supported by the United States in their war against the Socialist Republic of Vietnam.

The issue is that these atrocities were committed more specifically as a result of communism, whereas other attrocities are less closely attributable to capitalism since it has been the majority default throughout history.

EDIT:. I'm not saying what's normal is ok, I'm saying what's common is more likely to falsely correlate with anything. Whereas as the common factor for communism across the board has been a high statistical propensity for mass murder and genocide. This includes the nazi regime I might add (look it up)

I'm not really interested in having this argument anymore, but I'll leave you with this:

Just because something is the "default" option doesn't mean it is non-ideological. Ideology is a powerful tool for shaping people's actions. People will go along with insane and sometimes horrifying things just because they perceive them as "normal". Maybe expose yourself to some alternative ideology. You don't have to agree with it to learn something.

That's ahistorical considering almost all deaths attributed to communism were a result of industrialization, a process which was just as deadly under capitalism.

The only difference as a result of ideology was the timeframe. The USSR was forced to rapidly industrialize due to global pressure from foreign militaries and famines in China were exceedingly common long before communism.

History is not as simple as you're making it out to be.

The famine under Mao was because of his failed policies, though.

Aside from the fact that mismanagement is not unique to communism, there have been many famines under capitalism.

I'm not a maoist, so I'm not about to defend his ineptitude, but it seems intellectually lazy to point to these problems as unique. In the 18th, 19th and 20th century, depending on what level of development a country was in, these problems were widespread across all ideologies.

Not unique, but some truly terrible leaders were inspired by Marxism in the 20th century. I'm not sure what the selling point is supposed to be if the rebuttal is that bad things happen under capitalism too.

I'm not selling revolutionary marxism here, but an informed view of history that doesn't fall into such ideological chasms.

Think about why Stalin is presented as a terrible leader and Churchill as a great one.

Holocaust is not due to capitalism. It's actually due to socialism. "The National Socialists German Workers Party"

That is the same thing as saying North Korea's failures are actually due to democracy. "The Democratic People's Republic of Korea"

Obviously the name of an organization doesn't mean jack compared to their actually implemented and enforced policies. The first things the Nazi's did when they gained power was kill all the socialists, communists, and unionists. They are anything but socialist.

This is a common rewriting of history in the last few years. Hitlers speeches are rife with rants against capitalism:

"We are socialists. We are the enemies of today’s capitalist system of exploitation … and we are determined to destroy this system under all conditions.” ~ Hitler

Literally the point you are replying to is that you can't take fascists at their word. You have to use their actions.

Communists were among the first inhabitants of Hitler's concentration camps. The Communist Part of Germany started the organization Antifaschistische Aktion, the direct precursor of what we now know as Antifa.

And please stop equating "anti-capitalist" and "communist". The two are not the same or even close.

That doesn’t really explain anything, given there are millions of deaths under capitalism too.

Big difference.

Not to the bodies in the graves there isn't.

Tell that to the people who were enslaved and to the people who starved to death.

Slavery is not a function of capitalism, though. Capitalism is being able to 1) firstly, own yourself and your body 2) thus sell your labour however you wish. It's the alternatives economic systems that prevent you from being free.

And yet capitalists imposed slavery upon multiple places around the world, often for decades or centuries.

Putting emotions aside for a second, slavery is very inefficient in a free market. It is not a coincidence free countries are all capitalist (and vice versa).

So are famines, but that didn't stop the market from starving millions of people, either.

When did markets cause famine? We are living in an age of wasted food because we have so much cheap crap (as well as high-quality) available. People are too fat because there's no barrier to over-consumption.

Whereas a socialist system causes famines due to central planning leads to poor decision making.

The causes of the Great Irish famine were those imposed by capitalism: https://en.wikipedia.org/wiki/Great_Famine_(Ireland)#Causes_...

The market decided that the starving people who harvested crops didn't need to eat them, because people would pay more for those crops elsewhere: https://en.wikipedia.org/wiki/Great_Famine_(Ireland)#Food_ex...

10 million people starved in the Bengal famine: https://www.mensxp.com/special-features/today/27992-the-forg...

How would socialism have dealt with the first scenario? My understanding is there simply wasn't enough food to go around, and no economic system can fix that. Capitalism at least provides a profit motive to solve the problem (eventually).

The Bengal famine was a top down project specifically designed to profit. There is no "free market capitalism" in that scenario.

That's because the United States invades free countries that aren't capitalist.

Oh yeah. The US is guilty as charged, but there's no such thing as a free country that's not capitalist, until we live in a post-scarcity society. Technologically we are many centuries away from that.

Bitcoin at least rations out the zero-days. You don't just have one authority that can create them as needed.

Reply on news.ycombinator.com