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The Oft-Repeated Pattern of Stakeholder Demotion and Entrepreneurial Opportunity

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amp0193

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When a company has an IPO, the consumers are not the only customers anymore. The shareholders are too.
This doesn't just happen at an IPO, it's anytime you take outside money. Every dollar you take a little bit less control that you have for yourself.

When I took my first dollar of outside money, my company goals effectively changed to "provide a return for the investors"... which for now looks like: operate the business as I see fit, as long as I meet expected timelines on objectives and an exit. I do not plan on taking institutional money, however, and want to maintain majority voting rights for myself on major decisions.

But long-term, I'm going to be selling the company, and I will be optimizing for profit (or growth) for the 12 months leading into that sale, and I will not be able to control 100% what happens to the company after that.

I'm open to staying on as CEO for a while post-acquisition, depending on how the deal is structured. But if it came down to a choice between maintaining ownership for myself, or taking my chips off the table and selling to XYZ Megacorp, who's values may not be 100% aligned with mine... I'm picking door #2.
 

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Kak

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This doesn't just happen at an IPO, it's anytime you take outside money. Every dollar you take a little bit less control that you have for yourself.
Agreed.

There is a difference in mentality of the investors for the sake of this argument though.

Generally, early, private investors are inspired by the vision and the disruption. They want to align themselves with the CEO and his/her vision for taking care of customers. It is when companies start electing board member delegates to represent totally passive investors that own mutual funds when this starts really getting sanded down to mediocre.

Being a good steward of investor money is a very very good thing.
 
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Tourmaline

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For me this is the difference between capitalism and corporatism. The first allows for the growth and betterment of the common man or woman. The second panders to the behemoth of the corporate entity, destroying and stifling competition, swaying government legislation in order to skew the marketplace.

Once stages 6-10 have happened, then comes the only way profits can increase is by paying less tax and eroding the rights of your workers. Think Apple Ireland and zero hour contracts.

This is the sad march to corporatism, and unfortunately - especially in, though not exclusive to the United States - the corporate-industrial-media complex have convinced a lot of people that they are one and the same, that anybody who decries Amazon paying 0.1% tax is anti-capitalist.

For me Sweden have got this right, they are a virulently capitalist country, with the highest percentage of billionaires in the world, yet they have one of the most advanced social systems in place.

They have pitted corporatism (in the guise of capitalism), against socialism, as if the two are diametrically opposed, when in fact the two can coexist quite happily. Sweden is living proof of that.

I wrote an article about this some time ago, postulating the question; is it inevitable that a company will become evil? In which I take a look at the story arc of a small company, right through to big corporation, and I came to the conclusion that; yes, it is indeed inevitable.

However since watching the brilliant breakdown of Sweden's economics by the amazing Economics Explained Youtube channel, I have changed my mind.

Corporatism denounces taxation because it cuts profits, as the corporation tries to cut corners. Whereas capitalism welcomes taxation, as it uses it to further the capitalistic cause, which inevitably leads to a fairer social structure.

I know this isn't directly what you spoke of, however I believe they are linked.
Have you looked at Sweden's corporate tax rate? 21.4%

We're now at 21%, thanks to Trump. Probably the single best thing Trump has done this entire time.

I don't actually understand the need for a corporate tax at all. All profits divested to shareholders will be taxed. It seems like double dipping to tax it before it's paid out then? And if it's not paid out, the corporation will likely reinvest in itself or other areas and grow right?

So then corporate tax simply slows down growth?

I want to say I'm missing something but it seems that straightforward.

I suppose perhaps we need some corporate tax so that corporations will then do things in order to get tax breaks.

To me corporatism is about corporations hijacking government. When this is established corporations are allowed to do things against the market and against the populace that it serves/employs that it should not be able to. I do not think we are there by any means. China is far more of a corporatocracy than America is, the government and business work very closely at the expense of their workers. Probably a byproduct of the individual not being valued. Unlike in the USA where the individual reigns supreme.

To go back to Sweden, Sweden is a capitalist country 100%. They just have extensive social programs. Which they mostly can only keep up as long as they have because of prior oil profits if I'm not mistaken.

The fundamental problem with heavy social programs is that it slows down economic growth. Money is redistributed from the most productive to the least productive. To be clear I am not saying we should not have any social programs in the USA. But that it should be minimal, because the more we have, the more our growth slows, which ultimately hurts everyone.

According to this you see the USA grew by 2.35%, UK by 1.235%, France by 1.249%, Germany by 0.544%, Sweden by 0.936%, Switzerland by 0.761%, Norway by 1.932%, Denmark by 1.698% in 2019.

The numbers ultimately don't lie. And in the USA we still have welfare, food stamps, medicare, housing vouchers while more than double the growth rate of Sweden and most european countries that have far more extensive social programs.

Completely agree, and in fact laid out why above, in my answer to MJ.

I took the liberty of correcting your quote by the way; I figured the word not was missing.

Also, on another note, could you please add your website into your signature. I was trying to show some friends your site the other day, and couldn't find it. Is it the same as your name?

Anyway, remember this thread when you become a huge behemoth of a company, stay gold man! :-D
I feel humbled! I've added it to my signature per your request :smile2:
 

Roli

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To go back to Sweden, Sweden is a capitalist country 100%. They just have extensive social programs. Which they mostly can only keep up as long as they have because of prior oil profits if I'm not mistaken.
You are mistaken, you're thinking of Norway, which has huge oil reserves and started a sovereign wealth fund, which every Norwegian is entitled to.

Watch the video on Sweden at the bottom of this post, you'll be amazed.

The fundamental problem with heavy social programs is that it slows down economic growth. Money is redistributed from the most productive to the least productive.
Nope. That's just the lie we're told. In truth, Sweden's social programs help the least productive to become more so.

I feel humbled! I've added it to my signature per your request :smile2:
Good stuff! You have a great site, with a cool product, shout it loud and proud!! :cool:

Watch this, and you'll realise that socialism and capitalism can live together quite happily. I hear what you're saying regarding economic growth, however this obsession with growth is more corporate than capitalist, because growth often comes at the cost of stability. Be that economic stability, or social stability.

It's just 15 minutes, enjoy!

View: https://www.youtube.com/watch?v=2E0dWHCnic8&t=1s
 

ShamanKing

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Ever notice how now when you upload a picture on your own f@cebook profile it hardly ever gets seen by your friends.

Nope no wonder, my own facebook feed is jusyt flooded with "sponsored" posts. Hardly any of it is of my friends pictures or status updates.

Instead of having an organic news feed you now have this giant shitstorm of random stupid videos and very little of your own social circle.

Im getting real tired of it.
Just like how YouTube ads are now full videos back to back LoL
 

Tourmaline

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You are mistaken, you're thinking of Norway, which has huge oil reserves and started a sovereign wealth fund, which every Norwegian is entitled to.

Watch the video on Sweden at the bottom of this post, you'll be amazed.



Nope. That's just the lie we're told. In truth, Sweden's social programs help the least productive to become more so.



Good stuff! You have a great site, with a cool product, shout it loud and proud!! :cool:

Watch this, and you'll realise that socialism and capitalism can live together quite happily. I hear what you're saying regarding economic growth, however this obsession with growth is more corporate than capitalist, because growth often comes at the cost of stability. Be that economic stability, or social stability.

It's just 15 minutes, enjoy!

View: https://www.youtube.com/watch?v=2E0dWHCnic8&t=1s
ah okay, yes I was confusing them with Norway!

The video was interesting, thank you.

Though fundamentally this isn't socialism. It's capitalism with social programs. Socialism does not allow for private property or privately owned businesses. Socialism is fundamentally state/group owned means of production.

At best one can call this capitalism with socialistic programs. Which the USA already has.

So what is interesting is that they have very high income tax, but low capital gains and corporate tax. Although actually their capital gains tax is 30%, which is higher than the USA's at 15%-20%.

Hence low income inequality, but high wealth inequality.

But the fact that their welfare seemingly keeps someone from being in poverty entirely, means that people can quit their job rather readily and start a business.

I wish they had given some hard stats on how much money Sweden gives for welfare, I'm having trouble finding this.

I found this: Sweden: average monthly social welfare payment 2007-2017 | Statista

Says average payment is 7703 kronor a month which is only $800 USD. But average may not be a good measure here.

USA is hard to judge as it varies by state: States Where Welfare Recipients Are Paid More Than Minimum Wage

But in general it doesn't seem like much at all, especially if you don't have kids.
 

Roli

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Socialism does not allow for private property or privately owned businesses. Socialism is fundamentally state/group owned means of production.
Nope, that's Communism. Essentially part of the lie we're told by the corporate-owned govermedia; previously exclusively in America, but now also in the UK and Europe, is that socialism is the same as Communism. Which is akin to saying capitalism is the same as Nazism.

What happened in Soviet Russia was not socialism, it was an imperialist dictatorship masked as a socialist initiative, fuelled by the lies of Maoist China.

In a true socialist country, people are allowed to come and go as they please, express political dissidence, and pursue capitalistic goals. Taxation is high, however it's the same for everyone, wages are evened out, a doctor will still take home more than a cleaner, however the tax that they both pay is used for social betterment, rather than to give people and companies that can already afford it, an even better run.

This isn't just philosophical masturbation, there are quite a few countries around the world that manage to strike this balance, with Norway and Sweden being the ones that most look to.

I wish they had given some hard stats on how much money Sweden gives for welfare, I'm having trouble finding this.
I'm not sure about that, however living in London as I do, I know and have met quite a few Swedish people, and I ask them about taxation and their system. In fact, I watched that video the other day and spoke to a couple of my friends about it.

They both agreed that the video portrayed an accurate depiction of Sweden, they told me that even though there is high taxation, people there accept that is what makes their country work. As opined in the video, there is less resentment from high earners about the tax, because they all benefited from free education and healthcare, and cheap housing.


You mentioned the roughly $800 per month. Recently a Swedish person made a post on TMFF, and they stated that the (major) city (not Stockholm) where they lived, they got an apartment in the smart part of town for about $350 per month. In London it would cost four times that.

The point is, that if you have your entire system set up with a strong social ethic, then things like property cease to become assets to profit from, and simply places to live. Of course people still own their own homes in Sweden, and some probably profit from those homes, however this isn't the status quo.

From budget to budget, their tax system remains fairly static, people do not expect to get bonuses from tax cuts, because they get societal kickbacks that far outweigh having a few thousand extra Kronas a year.

Plus of course, there is no resentment caused by the fact that a normal person has to pay tax, yet a huge corporation finds ways around it. So the poor, do not resent the rich, nor vice versa, they live side by side.

As the guy said in the video, you don't start a business because of a 5% cut in corporation tax, you start a business because you can afford the risk. In America and the UK, if you start a business and lose everything, the consequences are a lot higher than if you live in Sweden. I myself have come close to being kicked out of my home in the past, because of failed business ventures.

I think the fact that they have a low GDP coeeficient, yet high economic imbalance, shows that it works. If you want to sit around on your arse all day, then the government will allow you to do that, however you won't become rich from that.

At the same time, if you want to go all in on a business idea, they'll help you out with that as well. Does that stifle wealth? No. Does it stifle growth? Probably. However do they suffer from a boom & bust economy? Nope?

Here's a brief account of how Sweden solved their 1992 banking crisis Swedish banking rescue - Wikipedia

The TL:DR version, is that they bailed out the banks, however they nationalised them, or sold them to private equity firms. Then when they returned to profit, the state took those profits and put it back in the taxpayers' pockets who'd bailed them out in the first place.

Contrast with what happened in the US and UK, whereby banks were bailed out and literally nothing happened to them, they just carried on as usual, screwing us all over whilst getting bailed out to hundreds of billions of dollars.

In the UK Lloyds was nationalised, and now they are going to sell it back to the city at a loss....

Anyway, I'm ranting now!

In conclusion, I asked both of my Swedish friends, why the hell they would ever want to leave the place? They both said the same thing, boredom. They found the people pleasant but boring, they came to the UK for excitement. I found it very interesting that they both independently said the same thing.

 

Tourmaline

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Funny how so often things get entangled with semantics. And of course what socialism is does depend a lot on who you ask because of the forms in which it appears.

If we take the opening paragraph from wiki:
Socialism is a political, social and economic philosophy encompassing a range of economic and social systems characterised by social ownership[1][2][3] of the means of production[4][5][6][7] and workers' self-management of enterprise[8][9] as well as the political theories and movements associated with such systems.[10] Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity.[11] There are many varieties of socialism and there is no single definition encapsulating all of them,[12] with social ownership being the common element shared by its various forms.[1][13][14]
And yes communism is a form of socialism, by definition. Both derive from Marx.

Communism is a form of socialism. Nazism is actually also a form of socialism, Nazi is short for National Socialism after all, even though their form of it is mixed with fascism and rather different compared to Communism.

For reference it will help to see how wiki defines capitalism:
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[1][2][3][4] Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets.[5][6] In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[7][8]
The two are inherently opposing - You have group/public ownership of means of production compared to private ownership of means of production.

Capitalism is also greatly fueled by the profit motive which most socialists find evil. And I do not exaggerate by socialists see profit as evil.

Especially in today's postmodernist neo-marxist socialists that are running around the USA and much of europe, profit is tied to power structures that necessarily oppress the people at the bottom of the hierarchies. And thus it is evil. Anywhere there is profit there will be exploitation and evil being perpetrated.

In the USA the DSA is pretty powerful, Bernie Sanders who at this point may very well be the democratic candidate in the upcoming election, is a member of this group.


Democratic socialists do not want to create an all-powerful government bureaucracy. But we do not want big corporate bureaucracies to control our society either. Rather, we believe that social and economic decisions should be made by those whom they most affect.
...
Social ownership could take many forms, such as worker-owned cooperatives or publicly owned enterprises managed by workers and consumer representatives. Democratic socialists favor as much decentralization as possible. While the large concentrations of capital in industries such as energy and steel may necessitate some form of state ownership, many consumer-goods industries might be best run as cooperatives.
So what's my point here really?

Conflating Sweden's capitalist economic system with some strong social programs with general socialism creates a rather dangerous precedent. It then makes one think that the Democratic Socialists of America is also just another variant of this, which is extremely far from the case.

At the heart Sweden's capitalist system, it has strong economic freedom. It social programs and taxation scheme promotes economic freedom.

At the heart of any socialist system, there is no economic freedom. It seeks to control industries as it sees fit to provide people with goods and services that they deem important.

that if you have your entire system set up with a strong social ethic
This is extremely important. We, and well most analysis, seem to look at economic systems and social system in a sort of vacuum.

In the USA our culture does not have a strong social ethic. I find it unfortunately rather uncommon to come across people that actually want to work and help their community. Our focus, especially in high school and college and onwards too, is on having fun, partying, and making ourselves feel good. It is not on bettering the country, advancing humanity, serving life and others.

I do think however it's getting better over the last decade, but there is an extremely strong influence, especially from Hollywood, to promote self-centered selfishness.

A large part of the lack of strong social ethic is the difference in population. Sweden has 10 million people, Texas alone has nearly 30 million people. We also have much greater ethnic diversity.

Both these things I think contribute to people having 'group think' and not wanting to give their money to people that they feel too different or disconnected from.

I realize this is already getting really long, lol, but I appreciate this discussion we're having!

In America and the UK, if you start a business and lose everything, the consequences are a lot higher than if you live in Sweden. I myself have come close to being kicked out of my home in the past, because of failed business ventures.
Yes absolutely this is the case. That must have been pretty scary to have come close to being kicked out of your home!

I think it's probably one degree tougher in the USA because our health insurance is greatly tied to our employer. Typically the employer pays 90% of the costs, whereas your healthcare is baked into your taxes already. It is not uncommon for Americans that are self employed or have a business to keep a corporate job just for healthcare for their family.

In conclusion, I asked both of my Swedish friends, why the hell they would ever want to leave the place? They both said the same thing, boredom. They found the people pleasant but boring, they came to the UK for excitement. I found it very interesting that they both independently said the same thing.
haha! Well, perhaps the danger of losing everything and living on the streets adds to the excitement and passion!
 

Roli

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Funny how so often things get entangled with semantics. And of course what socialism is does depend a lot on who you ask because of the forms in which it appears.

If we take the opening paragraph from wiki:


And yes communism is a form of socialism, by definition. Both derive from Marx.

Communism is a form of socialism. Nazism is actually also a form of socialism, Nazi is short for National Socialism after all, even though their form of it is mixed with fascism and rather different compared to Communism.

For reference it will help to see how wiki defines capitalism:


The two are inherently opposing - You have group/public ownership of means of production compared to private ownership of means of production.

Capitalism is also greatly fueled by the profit motive which most socialists find evil. And I do not exaggerate by socialists see profit as evil.

Especially in today's postmodernist neo-marxist socialists that are running around the USA and much of europe, profit is tied to power structures that necessarily oppress the people at the bottom of the hierarchies. And thus it is evil. Anywhere there is profit there will be exploitation and evil being perpetrated.

In the USA the DSA is pretty powerful, Bernie Sanders who at this point may very well be the democratic candidate in the upcoming election, is a member of this group.




So what's my point here really?

Conflating Sweden's capitalist economic system with some strong social programs with general socialism creates a rather dangerous precedent. It then makes one think that the Democratic Socialists of America is also just another variant of this, which is extremely far from the case.

At the heart Sweden's capitalist system, it has strong economic freedom. It social programs and taxation scheme promotes economic freedom.

At the heart of any socialist system, there is no economic freedom. It seeks to control industries as it sees fit to provide people with goods and services that they deem important.



This is extremely important. We, and well most analysis, seem to look at economic systems and social system in a sort of vacuum.

In the USA our culture does not have a strong social ethic. I find it unfortunately rather uncommon to come across people that actually want to work and help their community. Our focus, especially in high school and college and onwards too, is on having fun, partying, and making ourselves feel good. It is not on bettering the country, advancing humanity, serving life and others.

I do think however it's getting better over the last decade, but there is an extremely strong influence, especially from Hollywood, to promote self-centered selfishness.

A large part of the lack of strong social ethic is the difference in population. Sweden has 10 million people, Texas alone has nearly 30 million people. We also have much greater ethnic diversity.

Both these things I think contribute to people having 'group think' and not wanting to give their money to people that they feel too different or disconnected from.

I realize this is already getting really long, lol, but I appreciate this discussion we're having!



Yes absolutely this is the case. That must have been pretty scary to have come close to being kicked out of your home!

I think it's probably one degree tougher in the USA because our health insurance is greatly tied to our employer. Typically the employer pays 90% of the costs, whereas your healthcare is baked into your taxes already. It is not uncommon for Americans that are self employed or have a business to keep a corporate job just for healthcare for their family.



haha! Well, perhaps the danger of losing everything and living on the streets adds to the excitement and passion!
I don't know why I missed this very thoughtful reply when you originally posted it, however I've just read it now and it has given me food for thought as I do agree with a lot of what you said.

Like you say this has been a most invigorating exchange between us, and a lot of the elements we've discussed, I'm using as a basis for my new Sci-fi novel...

Ultimately I'd love to live in a country like Sweden, I wish the UK was more like it. However due to circumstances mentioned before, I can't see that happening for the foreseeable future.

You mentioned ethnic diversity in America, clearly it's much higher than in Sweden, though it got me thinking so I checked. Sweden's immigrant population has risen dramatically since 2005 to around 20% of the population, yet it has not caused the same kind of unrest as it has here and in the US. I guess when people aren't primed in the whole protect what is ours philosophy, they are happy to accept fellow humans in need. Although I accept that geography and recent history will undoubtedly influence behaviour in our respective countries.

Anyway thanks again for this, I've really enjoyed our discourse here, though perhaps if we want to continue we should resort to DM, or we'll be in danger of changing the fastlane forum into the geopolitical theory forum! :)
 

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