@DavidMc0 Thank you. Its a mechanism that can work and it has its place. I think the reason that we allow it, because remember half the world had made it a crime for a good number of years, is the hope that those who behave responsibly and insight-fully will do it, that their profit signals a track record of societal return on equity. Which is of course different than people who simply leverage the coercive power of money to get more of it to useless or destructive ends. I think this is where people get confused about the nature of progressive taxation. Its meant to curb the destructive use of money much more than its meant to confiscatory. Neal Gabler’s article “Disincentivising Greed,” seems to explain this well. Those in the highest brackets keep their associated money if they do reasonable things with the power of that money, they pay the brackets tax if they do unreasonable things as a disincentive. Historically in the US when those brackets came about it was either that or wealth ceilings.
But as to your actual question. Its been an intuition I’ve had for a long time. My sense is that most blue chips could be converted to no profits without much problem and the management and executive compensation could be cut way way down to Japanese levels without any problem. This means divesting the private ownership. To me in large so called public firms the people who do the firms actual work and the customers are the actual stake holders. As soon as its possible to automate away the managers and executives of large firms I think that should be done as well. Its a step toward democracy in the dictatorship work place.
Daniel Pink cited some research showing that people really aren’t that motivated by money that it doesn’t translate into performance etc. That was used as another excuse to try to cut worker pay and bonuses and benefits and be harder on wage negotiations. In the US they paid more for so-called leaders. In MIT Presses the 2nd Machine Age the worst part of the book talks about how revolutionary
MIS allows even small differences in manager/executive ability (whatever that is) to translate into huge gains in the firm and justifies the superstar pay of US managers. Certainly these execs and higher level managers aren’t employees and if you look at the US economy all its done is hollow it out and make it weaker, more brittle and more extractive. Also more likely to collapse. The US has gone back to paying dividends- which are an incredible waste.
The places where profit makes the most sense are in small innovative firms (which can be crowd sourced for start-up) and with visionaries. But again visionaries are not money motivated. Look at Irvine, and Musk and Jobs. Jobs started taking $1 a year and kept it that way. He didn’t give a damn about the stock holders, they never would have got the useless payouts that Cook has given. That could have been ploughed back into R&D. If someone wants a slice of the returns of an innovative firm they need to do more than throw money at it. Gambling isn’t enough, they need to take an active role. We have an inflation biased system, that means there are other means for capital preservation than stock investing and profit to keep money from eroding against inflation. They can go overheat the bond market.
But just to really focus this. What does a visionary do with their money? They focus into their vision an attempt to realize it. That is the maximum return on equity for society and that is the only place that return on equity is really meaningful. Nothing will ever beat that. Even Jack Welch recognized this stuff when he criticized the standing of stakeholders. Incredibly ironically given his matchless record in doing it the wrong way, he recognized they are last place. To me they aren’t even that, after employees society is the stake holder in large organizations.
As for return on equity for people who put their money in a group like SAFE, an open group no less. Well these people are my ideal entrepreneurs. They are visionaries who are actually down in it trying to make the world a better place. That also is maximum societal return on equity and high profit efficiency. But once again the point for these people is not so much profit, they aren’t shallow. If they get profit where is it going? Right back into the next life changing innovative idea. They are activists for everyone’s better future not destructive, extractive rent seekers. There is always this concern in capitalist society that the coercive power of capital will rot, it will degrade and go to waste and we won’t be able to build a bridge when we need to. I don’t have any fear about with the folks associated with Maidsafe at any level. I think Irvine in one post said he would do it or die trying. That’s perfect!
@Traktion , I hear you about land and forced association but after having gone through Capital in the 21st Century I just don’t think that’s supported by the long historical record. My opinion based on the quality of the writing is that the detractors of his data likely have their heads up their asses, I came away with the impression that the man would be constitutionally incapable of lying or skewing or fudging.
So really our capital is rotting and our money isn’t serving us when we have low profit efficiency and that’s in addition to all the added externality costs and risk with money. 1970s Social Democracy Sweden was highly profit efficient and per Wikipedia “The increasingly profit inefficient US economy is the primary reason for its rapid decline as an economic superpower.”