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Comment by marcus_holmes | Hacker News Reader

Say you're a decision-maker at Google (or Any Large Corp). You have a KPI to increase revenue by 5% this year. If you hit this KPI, then you get a bonus. If you get the bonus, then you can afford the thing that your partner has been wanting forever (or that will make your neighbours jealous, or whatever), and you get a happy life.

You know that doing X will harm the company in the long term (defined as anything past your likely tenure in this role, so usually 2 years max). But doing X will bump revenue in the short term, and get you your bonus and your happy life.

WDYD? Given that to get to a level where you have the power to make this decision, you had to have a particular personality type and set of priorities, it's extremely likely that you decide to do the thing that helps you and hurts everyone else.

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I know people that do this very thing but none of them admit to themselves that they "know that doing X will harm the company in the long term". Instead they create a narrative that says "This time it will be different" so they don't have to be bothered by any kind of pesky conscience. I don't even know if they do this consciously, it just seems to happen.

How do we fix this loop in companies? It is a very serious problem for humanity’s future. It exists in government too. How do we reward long-term thinking and decisions?

A lot of the most egregious, society-warping behavior by monstrous-sized companies is due to paying execs with stock. It was a salary tax avoidance maneuver that started in the 80's, and has led to 1) absolute fixation on short-term stock price, and 2) (also to that end) stock buybacks. Many of our largest corporations have used recent stimulus moneys to fund buybacks like it was sex or something. All it has been is a transfer of tax dollars to the oligarchy, and has "stimulated" nothing. We need some laws that do away with the loophole somehow, either by not allowing companies to pay people in stock, or by taxing the stock on its nominal value when given, making it much less attractive as a shell game.

This has also completely messed with startup stock options. Because large companies used options to award execs with tax-free incentives, and the tax authorities didn't like that, we now have to pay tax on the options when we get them rather than on the capital gains we actually make. And it doesn't solve the problem - execs get paid some other way and options are still fubar'd

Or we need money they can’t be created via debt.

Issuing debt to buy back shares is a strategy that works great when interest rates are very very low.

But when the money supply is scarce, only so much leverage can exist, so issuing debt to buy shares would be far far riskier.

RSUs are taxed as income according to their value on the day they vest. Companies can offer employees below-market grants, but the difference is recognized as a cost and (eventually) has to be approved by shareholders.

Stock options with a strike price below market also have tax implications for both the company and the employee.

Equity based compensation essentially comes out of the hides of shareholders: As long as they are happy (and people aren’t playing Thiel-type games), it’s not as terrible as you make it out to be. There’s a limit to what buybacks can do to juice prices and equity generally puts people into a long term mindset.

Nature solved it for us: obsolete things die and are replaced by better, new things. Google dying is not a bad thing, it's how it's supposed to work. Same for countries, religions, and so on. On a different scale.

That's the neat part, you don't.

The problem, ultimately, cannot be solved without disassembling neoliberal capitalism. It is more or less endemic to the system. To a large extent that short termist, get returns and move on before the cost is due, mode of being is how we managed to run an economy that requires constant growth (rather than stability) to function. It's also why we won't solve any of our climate or many social issues.

There's no way to change this without drastically restructuring the utility function people apply to decisions, and that just won't happen until the aftermath of whatever collapse is inevitably going to happen when the planet floods.

Yeah. It's wild to see sibling comments thinking that it's an exec incentive "problem." No, exec incentives align to GOOGL shareholder incentives and GOOGL shareholders are pursuing returns at your expense, as is their right under capitalism. In theory, competition keeps this in check, but we either need to get much more serious about encouraging competition or we need to figure out a different way to organize control.

Personally I'm a bigger fan of "encourage competition" than "reorganize control," at least in the search engine market, but I fully agree with you that what we see here is the system working exactly as designed.

Private ownership of businesses, so long term consequences fall on someone with the authority to steer them right.

Short term rewards would need to be less enticing than the long term ones. Doing so would involve restricting many rights and privileges and people would hate that.

We are restricting our long term rights and privileges though...I know it is hard to get people to see that, but that is what is happening.

We know the problems, would like to see workable solutions.

That only works if leadership can spot the difference between long term and short term, and more importantly that they even cares about it.

"Reward long term" is easier to say than to do.

This is essentially what corruption is. Fixing corruption is extremely hard, especially when it is less overt like this. The main thing you can do is to teach people how to spot bad apples and push them out, fire them or in other ways punish them and reduce the damage they can do. It shouldn't be culturally acceptable to be a bad apple, but that requires a cultural change and those are really hard to do.

You have to align the long term growth and wellbeing of the company with the long term prosperity of the employee. This is why stock options with a long term vesting period have become an attractive choice.

build better systems.

Easier said than done, but the basic idea would be something like what the Founding Fathers of the US did with the Constitution - make a system where incentives are set up in such a way as to align success for the individual and the group.

If you start a company, you can experiment with alternatives to the current "increase da KPI" style of organization that is so prevalent nowadays.

I think Steve Jobs was a good example of someone who governed by pointing people to a beautiful vision, rather than mindless "ya, numbers go up" type thinking prevalent amongst investors nowadays.

Family owned/controlled businesses think in terms of "what will the next generation inherit?"

It's the alignment problem, but for people.

And it's turtles all the way down. Every single incentive and system is optimized for some goal like periodic revenue increase. It's not one personality type and the desire to buy a new car, it's the intentional structure of a public corporation. We have high minded ideas about sustainability and corporate citizenship, but those views don't drive decisions in the bear market.

or in the bull market. techies are greedy

Yes that's true. I just think it's particularly easy to forget how your company actually works--e.g. what puts the bread on the table--when the markets are high. Therefore we see more monetization strategy in this type of financial cycle.

Why do you care if you harm the company long term? It’s not like you are tied to it’s performance forever. When equity and labor markets are liquid, why wouldn’t you make decisions that help you now, and cause long term hurt something you have no long term stake in? If you don’t, your peers will.

Corporations are meant to improve our lives sustainably. If all these people can do is extract short term value for themselves instead of providing long term value to the world, then there's no reason to allow this corrupt system to continue. It's pretty screwed up that executives can go around chasing infinite short term growth and awarding themselves golden parachutes so they can jump ship when the problems inevitably start to surface. How much destruction can they cause before society stops them?

Because as an executive officer of a company, I am supposed to have the shareholder's interests as my main priority.

I totally get your point, and I understand the "me first!" attitude that it comes from. But we can't have nice things if everyone does this.

you kinda described sociopathy

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