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Biff McFly's avatar

Couple other related things:

Dividend income doesn't have the tax advantages of capital gains tax. Many companies don't pay dividends as a result, so shareholders only make money by selling their assets. Therefore, the goal is doing whatever you can in a short amount of time to increase the value of the stock because you DONT want to own it. That's a very different set of incentives from, say, a family business that views their company as a generational annuity.

As a result, companies operate in a very similar manner to real estate agents. The goal is to juice up a purchase price while making very scant investment. You don't want to do to make real improvements. You want to rearrange furniture, but pictures over the holes in the wall, paint over the mold, etc. In a word, you want bullshit.

For the same reason, companies invest in bullshit jobs. Long term investments don't actually help you that much. But glossy PowerPoints, Excel files that are overcomplicated that confuse auditors and make them want to get on with their lives, lots of smooth talkers and story tellers to speak with consultants, and so forth grease the wheels of a sale, or an earnings report.

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Karma's avatar

It's good that you're putting this out there on the right. Far too many people believe in the fractional reserve theory that Richard debunked a decade ago.

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