Look at all the horror stories about businesses that were bought by PE firms; those are all privately held too.
In that regard "bought by PE firm" (or most any prospective buyer, really) is functionally equivalent to an IPO. Selling out is, in fact, selling out.
It's done some good stuff for the industry and even contributed to some bit FOSS projects. But business is still business.
But if you're just running the company 'badly' (in the shareholders eyes), probably no.
It's also worth reminding ourselves that Epic settled with the FTC for over half a billion dollars for tricking kids into making unwanted purchases in Fortnite.(1) Epic also stonewalled parents' attempts at obtaining refunds, going so far as to delete Fortnite accounts in retaliation for those who arranged charge backs.
Furthermore the FTC's evidence included internal communications showing that Epic deliberately schemed and implemented these dark patterns specifically to achieve the fraudulent result, even testing different approaches to optimise it.
https://www.ftc.gov/news-events/news/press-releases/2022/12/...
We currently have a handful of AI companies who make no profit, have revenue far below operating costs, their entire business runs on investment and they're posturing themselves for IPOs. Meaning that the reason they can keep the lights on solely comes from attracting investors (and will likely be that way for the foreseeable future).
People complain about the latter because they have higher expectations because the institution is supposed to serve them and often has all the diseases of true scale without being able to pick and choose customers. Private industry skates by because people assume it's out to screw them and they can cherry pick.
If they keep doing it, it must be because sometimes it works.
No, I don't think Gabe's averse to the nice checks, but he is in a business he deeply cares about on an emotional level. He doesn't just want to milk it to the last drop, he wants to leave his mark on gaming.
Passion matters.
When does this relationship with customers happen? Is it at the IPO? When they file the paperwork? When they contemplate going public for the first time? Or is it that any founder who might one day decide to contemplate going public was doomed to unhealthy customer relations from birth?
The obvious next thing we in society should do is abolish public equity as a concept as a customer protection mechanism?
It is genuinely hard to think of one. I treat all companies as adversarial relationships, where I fully expect them to treat me as disposable at least over any time horizon greater than 1-2y. There are certainly some companies that are more likely to find a mutually beneficial equilibrium. I think of Target, IKEA, sometimes Apple. But I don’t trust any of those companies to take care of me in the future. But I also wouldn’t be the least bit surprised if my next interaction with any of those companies was bad. I just typically expect it to be more mutually beneficial than Comcast, Hertz, or Verizon.
They have few employees and massive revenue.
But yew ,both private companies do their own forms of evil.
Valve can be Valve because HL + Steam, in the same way that Google ~2010 could not be evil because search + ad revenue.
The difference is that Google IPO'd and took market capital, and Valve didn't.
Once public investors are onboard, you maximize profits or face lawsuits.
The issue really lies in the fact that the (long-term, majority) shareholders aren't much, if at all, related to the customers or employees of the business, but first the founders, and then parties who are merely interested in rising stock prices and dividends. It feels like the solution here ought to somehow desegregate voting rights from how many shares are owned, instead of dismantling the concept of public ownership entirely. (Or, perhaps, allow the general public to proxy vote via their 401(k) index funds?)
(There's also strange situations like Google/Alphabet, which is publicly owned, but effectively does not allow shareholders to vote on anything.)
It's not just functionally equivalent to an IPO... it's an IPO if all the buying new shareholders were sociopaths.
(Yes, there are the PE companies who run businesses better like Berkshire, but that's far from the most common type of PE)
You mean the special class B shares that gives 10 votes per share, right? It isn't just Google though. Facebook and Snapchat also do the same thing, iirc?
Not that I condone capitalism, or socialism, or communism, or fascism, or any ism for that matter. Ism's in my opinion are not good. A person should not believe in an ism, he should believe in himself.
But a private company, at this point, can arguably affect the greater good just as much as a public company. The rich are getting richer, and the corporate model is just there to support that transfer of wealth.
Not really. Most people have terribly low time preference. Democracy for example is a very bad idea when you account for that (read Hoppe for a detailed explanation). Public company ownership is much better because it doesn't suffer from one vote per person, but still susceptible to much of the same management problems, specially in a society that already favors lower time preference by other means.
So "publicly" traded (the term public ownership can be confusing because it can also mean state control) just means it's open for the elite to invest in.
Just unsure about the timing
They seem to have a high ownership, consensus driven organizational structure. The only time I'm aware the consensus model was violated was when Gabe overruled a veto to ship Steam with half life 2.
It's very interesting to me because it seems to operate similarly to a lot of anarchist shit I've been involved in, but at a highly effective level. And they make oodles of money.
> The obvious next thing we in society should do is abolish public equity as a concept as a customer protection mechanism?
Abolishing public equity is quite drastic, but there are lots of other things we could (and IMO should) be doing to protect society from the negative externalities it causes. For example:
- Mandating worker representation on company boards. So shareholders still have some power, but less.
- Progressive corporation tax (larger companies pay more tax). This would bias the economy towards smaller companies which generally have less problematic externalities.
Ergo I propose grandparent commentator inject more humor in their clear understanding of leverage and debt to widen your, my, and their audiences' understanding regarding debt and leverage beyond your proposed metaphor of the toddler CFO failing the marshmallow challenge.
As the simplest example, they could have stamped HL3 on a third party game and made several millions of dollars with only a minor hit to their brand (in 5 years, "that bad HL").
In more realistic terms, they could have built proprietary, closed source emulation packages (they are funding a lot of development, apparently) to give themselves a unique advantage.
If they were a publicly traded company, they probably would be doing all these things.
This is unquestionably, undoubtedly incorrect. It is a really low information meme that's racing around the Internet right now. If you want a contemporary counterexample take a look at NASCAR. They're also not publicly traded, they're family owned, yet they are abusive toward drivers, teams and fans, and they're gradually ruining the sport that made them rich. We know all of this because it got so bad Michael Jordan decided to sue them and there's a ton of information coming out in discovery at the moment.
The real reason Valve are being the "good guys" at the moment (not really, but yes they're doing some amazing stuff for Linux) is because they feel threatened by Windows and Microsoft, they perceive a long term competitive threat to Steam. Competition makes businesses both private and public work for your dollar. The US economy has been characterized by a decrease in competition and an increase in monopolies for decades now which is the root of many price hikes and anti-consumer practices.
Employees of a company are the ones who are the most affected by the company's decisions, it's only fair that they have a say.
I think distributed public ownership placed in a corporation ruled as proposed here provides a chance to harvest residual good decisions from a citizen/shareholder who cares as opposed to having a single decision derived from some other issue a majority of citizens favor.
Unless you're talking about doing away with any kind of voting but Communism doesn't exactly have a stellar track record.
Well that's your problem there.
I do overall agree that Valve is only situationally the good guy here, but they do also have a sustainable approach to business and growth which I think helps this.
Yep. Valve is seen as virtuous because Microsoft is greedy and the default Windows 11 install is generally viewed as a tire-fire of an OS
Are they doing good things for Linux? Absolutely. As a long-time Linux user I am over the moon that we are where we are. But the general populaton only gives a shit because Microsoft is abusive.
“Open for the elite” how?
Ok, but this “at the moment” has lasted at least since 2011. Basically my whole adult life Valve gas been a pretty great company delivering value and not being annoying.
That's simply capitalism, money is spread unevenly across everyone, that does not make everyone an elite
So a link would be much appreciated, in order to judge the quality of the info. As it is, I'm skeptical that the info is accurate, precisely because mutual funds are so wildly popular among the middle-class people I know (none of whom are in the top 10%, though most of them would likely be in the top 50%).
As for the 2nd, that's sort of what Epic does, yet Valve's store revenue is 10x Epic. So if enacting these anti-consumer practices were actually more profitable, why is Epic doing so shit? Not even in terms of absolute numbers but in terms of growth, Epic store isn't growing at all. Epic can't hit even a fraction of Steam's numbers despite giving away hundreds of games.
Developing open source emulation is essential to their success - no developer would build and verify for Steam OS and Proton if it were closed source and only available on a single device (lol). Steam being very pro-consumer is what makes them successful.
LLM summary: "Steward-ownership is a model where a company’s control stays with long-term stewards (founders, employees, or a mission-aligned foundation) while profits are limited and the company cannot be sold for private gain. The goal is to protect the mission permanently."
The key, if I understand properly, is that these company cannot be sold (not even by the founders), so there is no "shareholder value" per se to maximize. It is also probably not a good way for founders to maximize their net worth, which is probably why it's not more popular...
If the company makes a profit and there aren't shareholders there to keep the stewards in check, excesses can and do develop.
So it's not perfect, but it sure as hell beats having shareholders.
This article explains roughly how Patagonia is structured: https://medium.com/@purpose_network/the-patagonia-structure-...
For Patagonia a trust owns 100% of the voting rights, while a charity collects 100% of the dividends. I don't doubt that there are ways the structure could be subverted, but it's a far cry from "money without oversight".
Do you have examples of Steward-owned companies that ended up with "well, we might as well spend the extra profits on executive benefits"-issues?
(I personally think Steam should go in that direction, otherwise I'm afraid enshittification is unavoidable once Gabe Newell is no longer at the helm)
Because it is "common wisdom" even if the wisdom is short sighted and doesn't always amount to increased profits.
See Netflix removing the ability to cast, because fuck you. How much of the current growth is borne out of that crackdown on people using all their profiles they pay for?
There currently isn't a "good guy" so they can keep turning those screws and force some extra growth. Being anti-consumer would be beneficial for Valve because they are currently the only good guys.
And IIRC Valve and EA had almost exactly the same revenue figures last year, yet EA had 10x more employees.
On paper it would seem extremely appealing to public investors.
I hear that for every major Windows release. And after 6 months everybody is fine with it.
Right after we get nuclear fusion and a million people on Mars.
I see it the other way round: they can do all that because they print money.
Not that it's necessarily a bad thing: maybe they stay relevant because they are doing that.
Is it good enough or should we be monitoring his health and hoard torrents of our steam collection just in case?
You still don’t have a say and the investor is also the customer. How is it democracy or keeping companies to being good for society.
What was your attempted point? Or did you not understand the issue that was brought up?
Precisely, in the form of the #1 trend of public companies, stock buybacks! I've seen aggressive buybacks take a company with a ton of money in the bank and a profitable business and drive it right to Chapter 7 bankruptcy in just a few short years.
It looks a lot closer to the economic policies of the most successful fascist regimes - the best term for modern American economics might be "democratic fascist." There is a facade of a market economy, but there's heavy intervention to privilege not just domestic businesses, but a specific set of big ones that have close ties to the ruling party. This is not much different from how Hitler and Mussolini approached economic policy. Basically have your system revolve around private ownership, pretend to have a market economy but actually make very centralized decisions and execute them through a small number of private oligarchs you're buddies with. The uniquely American flavor is that there are two parties which do this instead of one (but three would be unimaginable), and you can choose which pack of bandits you signal loyalty to without being executed.
This differs quite a bit from a typical venture-backed or boot-strapped entity, which has a realistic pathway to profitability.
https://www.analyticsinsight.net/news/hsbc-warns-openai-coul...
Open for the elite in the way that everyone else don't have enough money to matter.
The richest people are so much richer than everyone else that there's no comparison. You could grab a million average people off the street and all of you combined probably wouldn't be richer than Jeff Bezos. Think about that. This one guy is wealthier than a million other people combined, literally wealthier than an entire small country or large city, and he's not alone. There's more of them.
Those guys rule the world, everyone else are passengers.
The model has worked well for many decades for a 100 billion$ revenue company like Bosch, good to see others taking a cue from them.
(Also goes to show that even constructs like these are not safe from corporate fuckups - see the emissions scandal...)
I don't think he'll deliver and I think it's based on fantasy economics, he's been really losing it recently, but as a deal it's not entirely irrational if he could make it happen.
Dodge v. Ford is basically the source of all these headaches; the Dodge Brothers owned shares in Ford. Ford refused to pay the dividends he had to pay to the Dodge Brothers, suspecting that they'd use the dividends to start their own car company (he wasn't wrong about that part). The Dodge Brothers sued Ford, upon which Fords defense for not paying out dividends was "I'm investing it in my employees" (an obvious lie, it was very blatantly about not wanting to pay out). The judge sided with the Dodge Brothers and the legal opinion included a remark that the primary purpose of a director is to produce profit to the shareholders.
That's basically become US business doctrine ever since, being twisted into the job of the director being to maximize profits to the shareholders. It's slightly bunk doctrine as far as I know; the actual precedent would mostly translate to "the shareholders can fire the directors if they think they don't do a good job" (since it can be argued that as long as any solid justification exists, producing profit for the shareholders can be assumed[0]; Dodge v. Ford was largely Ford refusing to follow his contracts with money that Dodge knew Ford had in the bank), but nobody in the upper areas of management wants to risk facing lawsuits from shareholders arguing that they made decisions that go against shareholder supremacy[1]. And so, the threats of legal consequences morph into the worst form of corporate ghoulishness that's so pervasive across every publicly traded company in the US. It's why short-term decision making dominates long-term planning for pretty much every public company.
[0]: This is called the "business judgement rule", where courts will broadly defer the judgement on if a business is ran competently or not to the executives of that business.
[1]: Tragically, just because it's bunk legal theory, doesn't change that the potential and disastrous consequences of lawsuits in the US are a very real thing.
Because there's a huge network effect in play here and Valve was first in the market.
I find it interesting that this "feature" of the US (having those big monopolies) is often mentioned as a "weakness" of e.g. Europe, where companies cannot get as big (I guess partly due to regulations).
And in turn, when US companies "lose" against, say, Chinese companies, they will say it's because they get help from their authoritarian system (through the government). Which is a bit ironic given that the US monopolies do exactly that to the rest of the western world, right?
Also, I wouldn't necessarily make a distinction between the full-time employees vs the part-time ones.
By far, the largest shareholders in most publicly-traded firms are "institutional investors", but those are themselves in turn usually acting as middlemen managing mutual funds, most of which consist of ordinary folks' 401(k) plans and pensions.
If anything Milton Friedman is more responsible for this idea that shareholder maximizing is the corporate goal. That is an efficient market argument though not a legal one and he framed it long after the dodge suit. He needed to frame that argument because so many firms were _not_ doing that.
But just because a Chicago school economist says something about governance doesn’t mean it’s broadly applicable in the same way an Austrian economists opinions about inflation aren’t iron rules about monetary policy.
[0] https://finance.yahoo.com/news/wealthiest-10-americans-own-9...
There are old companies in either model.
This particular CEO is on the more influential end of the spectrum, but I think executives generally get too much credit for outcomes. If this does happen, it won’t just be because of the CEO, but also because of ~100,000 other employees. Their contribution might be smaller, but comparing compensation, I don’t think it’s proportionally smaller.
As far as "fixing" the problem, I think it would be important to expand voters' influence over the company in addition to voting changes like you described. I don't know how to make it feasible, but IMO voters should be able to influence or directly decide much lower level business decisions than they currently do
For example, a courier company like UPS employs all of its workers but the packages it delivers are for other companies who contract with UPS to do the work. If you force all businesses to employ their own couriers then UPS can’t even exist as a company and small businesses that depend on courier services would simply be unable to function at all.
Why would anyone believe that this means an organization is well run, or to everyone's benefit? Here in Germany we're notoriously unfriendly to public companies, most of the (well functioning) Mittelstand is private and family owned. And I pray to god it stays that way because I'd rather trust a company whose leaders have their family name and reputation staked on it for the next three generations than I do the amorphous blob called "the public". As Kierkegaard said, in the crowd nobody is responsible.
If you want to see what happens under public ownership visit a public bathroom. I don't want anything externally steered by nobody in particular, I want something steered by a handful of people with names and addresses.
Companies will do things that represent their interests, sometimes their goals align well with their customers, or the greater good, and sometimes they do unpopular things where they believe the profitability will outweigh the blowback.*
It's a lesson in not being too attached or needlessly loyal - our connection to a business is not a personal one.
*The Epic example is useful because their actions represent a steady pattern of deceptive conduct.
It's about leverage. It's all about where you stand and how long your lever is. Musk stands at the top and he has a very long set of levers. He's also much more closely personally involved in engineering aspects of a company that most CEOs know little to nothing about. Sometimes that's good, sometimes it's bad, because his decisions have massively outsized effects because of this. Leverage.
If Musk makes good or bad decisions over the next few years, that matters much, much more than the decisions of anyone else at Tesla, especially because he hires and fires everyone else at Tesla. They're all only there, as individuals in particular, because of him anyway.
As it happens I think his decision making has deteriorated significantly recently, in some respects but not all. Also Tesla just doesn't have the magic special sauce SpaceX has had since they developed reusability. There's no special engineering insight in the Tesla architecture. Other vehicle manufacturers already caught up. That catch up is happening in space tech as well with BO's recent booster recovery, but SpaceX still has a very significant lead there, based on a truly revolutionary concept (which Musk championed personally) that they had exclusively for 10 years. Starship still doesn't work though, so we'll see.
If they can just easily sell the shares they will do that instead.
I agree that the CEO is typically the most important in this respect, especially this particular CEO. I just think that giving him an additional 1/8th of the company's entire market cap growth, on top of the roughly 1/8th he already has, is highly disproportionate.
Clearly the shareholders disagree, and that's entirely their right. And I'm not surprised, CEOs are greatly overvalued in general.