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Comment by p1necone | Hacker News Reader

Part of the cause is that the people doing this still benefited - if you can cut a bunch of costs and bump profits for the next few years it doesn't matter to you as an executive whether those changes ultimately lead to significantly worse outcomes for the company in the longer term.

Brand loyalty takes a while to fade, there seems to be a cycle with a large number of successful companies that goes

work honestly to build a good product

-> generate brand loyalty

-> people with integrity get replaced by people who would have had no chance of building that successful product/company in the first place

-> cut as many corners as possible while riding the brand loyalty to more short term profits

-> eventually, on the scale of decades sometimes (because people take a /long/ time to realize that 'well known brand' !== quality), get out-competed by a small company building the same thing as you with integrity

-> return to step one with new company.

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This is why I think we need to figure out executive compensation. Boards just rubber stamp whatever the CEO wants.

Tie their compensation to real goals and require them to hold for the next 10 years.

What do you mean "we"? Like government intervention? These are private companies, if they don't want to change this aspect, there's not a lot you can do aside from getting on the board...

> What do you mean "we"?

Perhaps people who are interested in building great companies, like the regulars of a tech startup-centric forum

I think it's great that companies particularly large incumbents tend to decay and fall after a time. It promotes renewal and evolution, like the cycle of life and death. It's a bit sentimental to want a company to survive decades.

It would be much worse if the big incumbents all remained at the top and dug themselves into the regulators and politicians and crowded out others (they already do to a great extent but it could be a lot worse).

On the other hand, as a consumer, I'd like the services that I'm using now to remain useable for the rest of my life.

People in 1900, as consumers, thought they'd need a reliable supply of horse feed for the rest of their lives too.

Uncertainty and risk are big reasons why people fear change, I completely understand. I'm not saying the feeling or desire for stable incumbents is invalid, although maybe my comment could have been worded a bit better.

They are publicly traded companies, mostly.

Governments place a lot of rules on corporate governance already. Maybe a new one is called for. Maybe a social movement that pushes index funds to exercise the voting shares they hold. I'm open to ideas.

The real defense against this dynamic is the takeover bid. If you think the existing board and CEO are doing a poor job of running the company by neglecting growth opportunities, you can literally buy out the existing shareholders' position and be in charge. If you're right, you'll reap the gain in the form of increased valuation for the shares you bought.

That only works if the market recognizes the long-term impact of financialization and prices the company accordingly. Otherwise you'll be paying more than the company is actually worth. By the time it becomes obvious that the company was overpriced it's too late. Whatever actual value might have been there back in the day has already been destroyed.

I've been successful enough, but glancing at my bank account it doesn't look like i can literally buy 51% of any company I've heard of. Have you done it? Or can you help point me to someone like myself who has? If 'you' meant "Private Equity Firms that specialize in hostile leveraged buyouts", are they numerous enough to squeeze inefficiency out of the Fortune 500?

Activist investing is a thing if that's what you're asking. This link includes a short list of such famous individuals: https://www.investopedia.com/terms/a/activist-investor.asp

Forgive me if this sounds foolish, I don't know how this stuff works. Could it be possible to somehow write something like this as a requirement into the corporate charter or articles of incorporation such that if these terms were violated the company would have to be dissolved (or some other equivalent nuclear option)? Has there ever been anything like this e.g. 'if company ever stop selling x, it has to close down'?

Not foolish at all.

That's the sort of bespoke governance that Eric Ries' Long Term Stock Exchange is meant to enable and support.

https://wikipedia.org/wiki/Long-Term_Stock_Exchange

This is excellent. Thank you!

There's reasons why that doesn't happen to this kind of company

- short term-ism leads to great financial results in the short term so the stock price goes up making a buy out expensive. Anyone that can see the internal issues will know it's not worth that price.

- very few groups can make an offer on companies as large as Intel and Boeing. Those groups are not known for deep engineering expertise.

- companies use poison pills and other measures to prevent take overs

But stock prices are ruled by long-term dynamics not short-term ones. That's how firms like Amazon can see their stock prices rise even well before posting any profit.

Stock compensated C-suite can get shares on start, juke the stats for four years to vest, stock is well-up, cash out for juicy comp, buy a new boat, stay a few years more if wanted, exercise more shares/options for cap-gains taxed new money, buy second home, quit and watch the company crumble over a few years from comfort.

> But stock prices are ruled by long-term dynamics not short-term ones.

You have more faith in public markets than I do.

Why would the board care about the 10 year health of a public traded company, If that same board could profit on the short term gains and get out before it tanks?

When the board members taking their gains and re-investing them in other companies to then repeat this strategy.

I think the solution is in reforming capital gains taxes. You should only get the discount on taxes if you hold for 5+ years. And even then, the brackets should be more progressive for extreme (e.g. hundreds of millions) in income.

Overall, these two changes would incentivize holding stocks <1 year more often than people do currently.

Perhaps you could get a longer-term effect if you had another, lower tax level at 5+ years, or raised moderately the 1+ year cap gains rate and moved the current one to 5 years.

That's fine with me -- they shouldn't get a discount if it isn't a long term investment.

There are severe market stability issues associated with people gravitating towards <1 year holdings. The cap gains rate exists partially to encourage long-ish holdings.

With that incentive severely reduced as your plan proposes, you’ll see much Miles’s incentive to hold and more volatile markets.

I doubt there is anything specific about an exact one year holding cutoff, but I'd love to see a source. If anything, the fact that we're having this conversation suggests the long term investment theory has been demonstrated to be either false or uncalibrated as it exists now. I'd also be open to a graduated rate (almost like a vesting schedule) of discounts starting at 1-2 years and ending at 5 years. But do we really need more complexity? Just have it be 5 years and public companies can be long-term focused once again. Markets will survive -- day traders tend to lose money and drop out.

This is what happens after you hold a stock for 12 months:

https://www.investopedia.com/articles/personal-finance/10151...

Why not just treat all stock investment like 401k’s: taxed as income when selling, tax deductible when buying? The deferred income tax still provides an incentive to invest, yet you don’t get a tax break when selling (unless you happen to be in a lower tax bracket between then and and when you sell).

One possible solution: weight shareholder votes by how long they're willing to lock up their shares.

There's still an agency problem between the shareholders and board members, but at least the shareholder votes will be weighted for the long haul. Locked shares would have to be held in a way that prevents wrapping them in a salable derivative.

This is a good idea along with progressively decreasing taxes based on how long you hold the shares. They could go down every year all the way to 5% at 10 years.

This would have a significant impact on encouraging long-term investing for investors and long-term planning for companies.

This should apply only to shares in individual companies and not index funds or mutual funds.

It would also encourage a shift away from short-term speculation and to long-term investing in great companies.

Hadn't heard that one before, that's fantastic.

> This is a good idea along with progressively decreasing taxes based on how long you hold the shares. They could go down every year all the way to 5% at 10 years.

Where I live stocks profits are taxed at 20% at first, then 5% less for each 5 years you hold them, down to 0 taxation after 20 years.

That sounds amazing! Where is this?

It would also mean that sufficiently rich people pay only 5% taxes on their income.

Could always tax other things, like consumption, inheritance, or carbon emissions.

Consumption taxes hit poor people harder than rich people. Inheritance might work, and carbon emissions might also work if you have a tax-and-rebate system so that poor people can still afford stuff.

Consumption taxes can give rebates just like carbon taxes. A somewhat popular national sales tax proposal a few years back would have done it that way.

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

The bigger problem with taxes is that companies are not paying their fair share of taxes in the countries where they generate revenue and profits.

Also, this kind of progressive tax reduction should only apply after the company is public. So the clock for VCs, founders, etc only starts at the time of the IPO.

This would ensure all the early stakeholders are also aligned in investing in the long-term success of the business.

Currently, these early stakeholders are more likely to be focused on cashing out and having a liquidity event.

How would investors tell the difference between executives that are actually optimizing for ten year health, vs. executives who are floundering and using fake long-termism as an excuse to delay accountability? Ten years is a long time to wait to find out if a strategy works or not.

I saw an interview with an old finance guy some years ago talking about this, he was saying in the past you'd work for a company and spend your career there, you'd get shares somehow (through partnerships or some other mechanism, but you can't sell them) and as the years go by the value of your shares increases and you get more and more, so its in your self interest to keep the company going.

Now it's in the interest of a CEO to take a performing company carve out the middle so profits go up in the short term, shareholders get more money, he gets fat bonuses and the company dies.

Though there were problems with the old style too - they became very conservative and couldn't adapt among other things.

+1 the way shareholders and managers have a shorter time horizon than their employees is a huge red flag

> Boards just rubber stamp whatever the CEO wants

Boards often want the same thing because members usually own stock in the company. Make a lot of money in the short term, pump that into stock buybacks, profit. Shareholders want the same thing - they often aren't looking past the next 1-4 quarters, they want fast returns.

> Shareholders want the same thing

Maybe that's the root of it and long-term capital gains should take longer than 1 year. The owners have a shorter horizon than employees!

It's not really a solvable problem IMO. Big corporations and humans have different lifespans, so trying to tie together their fates is kind of fools errand. Intel's success has a time horizon of decades. The only person willing to sacrifice that kind of time for a company to see things through is the founder, because it's more sentimentality than achievement or profit seeking.

If Intel's business requires a time horizon of decades and its owners time horizon is a couple years isn't that a problem? I'd propose some portion of a leader's comp should stay in company stock for 10 years even if they leave after 3. That will incentivize them to make good capital investments and train the next generation of leaders.

I'm not convinced this is even a problem that needs to be solved.

If companies inevitable self-destruct from short-term management, that creates space for new companies to emerge with new approaches. Sure, there will be some noise/churn but overall I think it makes the overall ecosystem stronger.

The 1,000-year monopoly is a terrifying idea.

Creative destruction is important, but some businesses are easier to replace than others. How do you create another Intel or Boeing? The start up costs are insane. Even beyond that, there's value in some institutions.

I mean if we really need leading-edge aerospace or semiconductors protected from the vicissitudes of the market, the government getting more directly involved seems like the obvious answer.

I agree for these two cases, but more generally the market has some inefficiencies when good companies self-immolate like this.

How many folks out there got burned by HP products when they were hip-deep in that step 3 step 4 zone of "strip-mine your own brand reputation selling cheap crap"?

Maybe I'm revealing my youth here, but... when was HP good?

Do you have any non HP printer from 20 years ago still working as expected?

Not 20, but my 10 year old HP color laser is working as well as new!

I have an opening price point Brother laser printer from about 2002 whose drum is on its last toner cartridge worth of wear. I’ve only used it lightly since I stopped contracting about fifteen years ago though.

I have a Fuji Xerox colour laser printer bought in 2005 still running the same as it ever has

My ImageWriter still works, although my ImageWriter II gave up the ghost a decade or two ago.

HP was legendary in electronic test equipment and early computers, calculators etc. Look on Ebay for HP branded power supplies or multimeters, for instance, and you'll see that they still command very high prices. And it's not collectors buying them AFAIK, it's mostly people using them-- even 30 or 40 year old gear. They spun off the test equipment division as Agilent (which still exists and is highly respected under then name Keysight) around the time their computing division started to go downhill.

LaserJet III.

This is all true. I always hated their deskjet printers, though. The First one I had was a Deskjet 500 and that thing was a massive turd with very expensive ink cartridges, and no matter how many times I cleaned the rollers, it'd still have issues not being able to feed paper. Shit design.

I had a 600 something C that was pretty decent, and my wife had a 720C that we abandoned because drivers got too fussy around Windows 8.1ish (the 64-bit driver in windows update didn't work, but if you got the driver from 64-bit xp, it would work). The color had stopped working, but not bad for 15+ years of service.

Has there ever been a good printer though? If there has I'm either out of the loop or sad that I'm not old enough to remember it.

I sympathize with this sentiment, I hate printers. Worked in a copy shop for a time. Hate em.

But there has been at least 1 good printer, and HP made it: - https://en.m.wikipedia.org/wiki/HP_LaserJet_5

Also, 9-pin dot matrix printers were workhorses.

I think it's more printer _software_ that sucks. But we have three LaserJet M553 printers that have functioned perfectly. I think that model only recently went out of production and can still be found on the shelf.

I have a sharp mx c301w color laser printer at the office and it's frankly just great. Scanning, printing and whatever just work.

At home I have an Epson ET-M3170, it's not a laser but one of those epson thing where you don't have cartride but just empty bottles of ink into a tank when it's empty, and it works great too (it's much slower, but then again it's a lot cheaper).

It's mostly inkjet printers that are always terrible.

Brother Laser MFCs have been good for me for 15+ years.

HP used to make amazing monochrome laser printers. I can't really speak to other brands, but I maintained dozens of LaserJet 4000, 4050, and 4100 printers. https://en.wikipedia.org/wiki/HP_LaserJet_4000_series

Those things are tanks. Perform a maintenance kit on one of those, and it's good for another 150k pages no problem. The main thing that needs attention is the rubber feet that pick up the paper get dry. Some rubber rejuvenator on a q-tip goes a long way.

I have a 4050 for home, and I have no reason to doubt its future longevity. :-)

The firmware, though, is ancient (telnet, and a web interface that requires IE 5 IIRC). Now if there was open source firmware for these things...

their business laserjets were amazing but they started adding shit to make them crappy like time limited catridges and what not.

Before the 2000s or the Agilent spin-off, HP was the undisputed king in electronics test equipments. Their flagship multimeter HP3458a, launched more than 30 years ago, is still the standard in metrology. And Keysight (spin-off from Agilent) is still making them with little to no significant modifications over the years.

They also made some great RPN calculators.

And used 3458As (in working condition) tend to go for between $5000-7000 these days. The HP ones, not the newer Agilent or Keysight ones.

Very entertaining video explaining a bit about the HP3548a: https://youtu.be/upTgM_S5rAQ

Before Carly Fiorina.

A repeat offender. She also had a stint at Lucent.

LaserJet 4 (20 years old?) still runs.

There are tons of great innovation coming out of HP pre 2000. Do you enjoy using optical mice? Thats HP.

Heh, back in the day they made the best calculators, test equipment, disk drives, workstations (early PA-risc snakes), etc. Even their printers were a unique technology using an HP print engine that was wonderfully durable.

Then they killed off the calc division, not because it wasn't profitable, but because it wasn't as profitable as ink. Years later they decided to upgrade the calculator (TI had won the market in the meantime), instead of doing something innovative they bought a new arm chip and ran an emulator of the old chip and used the old software stack with minimum polish under the emulator. Not surprisingly Texas Instruments laughed all the way to the bank.

Their laser printers were starved as well, again not as profitable as selling ink for ink jets. So the print engine was killed off and now uses the same print engine that you get in a Dell printer. Which was sad, they weren't nearly as durable.

It was sad to watch

I don’t feel burned honestly.. A HP printer that I have is probably 8 years old, another one is about 20 years old and they are both still working as expected. (The 20 years old now feels slower than my grandmother drawing, but it was expected at the time)

Correct, it’s effectively the moral hazard problem. Where executives capture the upside (of short term gains in stock) and pass on the risk to future execs/shareholders.

Very difficult to align long term incentives unfortunately, unless the company is founder led.

Yes. Some big old companies have been family-owned for generations. You may be much more intent on keeping brand quality if you envision your grand-children prospering off it.

You know, normally I agree with you. But I looked it up, and Intel has only barely tripled revenue in the last 20 years. Their stock price has followed almost exactly this increase in revenue.

These are not what I would call super gains, they are definitely good gains, but they are what anyone would expect from a blue chip company like Intel.

So the point is this isn't people looking at the short term, this is a company that used a strategy to optimize growth over a 20 year period. Yes they hampered future growth after those 20 years, but this is a technology company, most technology companies don't even exist after 20 years. I don't think there is really any policy or attitude or anything at all you can implement to get people to maximize revenue over a longer period than 20 years, especially in a technology company. No one would invest in such a company because, because such an investment would be extremely risky.

I mean it's not just that, right? Investors do not reward long-term, slow-growth policies as much as those which pay out in the next quarter.

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