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NancyLebovitz comments on A Challenge for LessWrong - Less Wrong
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Part of my problem with making money today is that most of the methods of making money are benefiting from status games that do not help society.
Pretend for a moment I am a cool shades seller. I sell someone some cool shades. They are happy, they get more status girls etc. Everyone else wants some cool shades, so I sell them some. Now we are back to the status quo, everyone has some bits of plastic that are no better for keeping the sunshine off than some uncool shades and I have some money. The dangerously hip sunglasses took some energy to produce and oil to create that could have been used for producing something of lasting value or preserving some life. Also I needed to have been advertising my sub zero shades with images of women clinging to suave men, in order to compete with other makers of eye wear.
So not only am I exploiting the fact that the world is mad, I am excaserbating it as well. As most consumption is about status or other signalling, it is hard to get away from it when entering the world of business. Even if you aren't a customer facing company, you will supporting and enabling other companys that do play off the biases of the individual. Not to mention things like cigarettes.
Edit: Now if we were perfect rationalists we would swallow our distaste for creating more madness if we thought that we could do more good with the money from the sunglasses, than the waste of resources and increased irrationality engendered by the advertisement.
Still, there are probably useful things to be made and done which have little or no fashion component.
For example, there don't seem to be any child and pet-proof roach traps on the market.
How plausible is it to believe that the businesses which feed into counterproductive activities are likely to be much more profitable?
If we go with the very pretty Austrian theory that profits tend to be equal across all parts of the economy (unusually high profits draw capital in, unusually low profits drive it out), then the conspicuous profits in fashion-driven industry are counterbalanced by lower odds of making those profits.
I don't know how good the empirical evidence for the Austrian theory is.
True. If you can keep independent you would be okay. If you have share holders you would be bound to maximise shareholder value.
If you build keeping independent into your plans, you're more likely to succeed at it.
I've become somewhat dubious about the whole system of maximizing shareholder value. Anecdotally, companies become worse places to work (including less focus on quality) when they go public.
And I don't believe maximizing shareholder value is a real human motivation (not compared to wanting to make good things or please people you know or be in charge of stuff), and I suspect that a system built on it leads to fraud.
There's a fair amount of evidence that suggests that greater management ownership of a firm correlates with better performance. In other words maximizing shareholder value appears to work better as a motivation when the management are significant shareholders.
I didn't mean that you would intrinsically want to maximise shareholder value. Simply that if you passed up business opportunities due to your ethics and you didn't have a controlling share you might be out of a job.
This is a pretty inaccurate interpretation of what maximizing shareholder value actually means in practice. Generally corporate management are only considered to have breached their fiduciary duty to shareholders if they take actions that are clearly enriching themselves at the expense of shareholders, making an acquisition that is dilutive to shareholders for example.
It is highly unusual for corporate management to be accused of breaching their fiduciary duty by making business decisions that fail to maximize profit due to other considerations. For one thing this would generally be impossible to prove since management could argue (for example) that maintaining a reputation for ethical conduct is the best way to maximize shareholder value long term and this is not something that could easily be disproved in a court.
Activist shareholders may sometimes try and force management out due to disagreements over business strategy but this is a separate issue from any legal responsibility to maximize shareholder value. In the US this is also quite difficult (which is a situation that I think should be improved) and so is fairly rare.
Thanks. I was pretty sure that management wasn't getting sued for failing to maximize shareholder value through ordinary business decisions-- if that were possible it would be really common.
Agreed. I was explaining why I'm dubious about publicly owned companies in general.