Having a monopoly like this is like having a goose that that lays golden eggs. The right thing to do is nothing except to guard the goose and keep it happy and well fed.
But what Adobe has done is a series of aggressive egg laying hormonal supplements and force feeding. Yes, it might get them even more eggs for a bit, but it's also a big risk for killing the goose for not a whole lot more eggs, with the side effect of definitely making everyone angry with you.
But I think Adobe, and most companies, would inevitably make this decision. If you give a medium-sized public corporation a faucet that spews money at a constant rate forever and a button that has a 60% chance to double the money and a 40% chance to destroy the faucet, I suspect that most corporations would push that button at least once every few years.
> If you give a medium-sized public corporation a faucet that spews money at a constant rate forever and a button that has a 60% chance to double the money and a 40% chance to destroy the faucet, I suspect that most corporations would push that button at least once every few years.
That pretty much sums up all of what business and investment is. Play with money to get more money to play with.
Its more like a 90% chance to double the money and a 60% chance to utterly destroy the faucet. Definite short term gain at only a moderate chance of future failure.
> If you give a medium-sized public corporation a faucet that spews money at a constant rate forever and a button that has a 60% chance to double the money and a 40% chance to destroy the faucet, I suspect that most corporations would push that button at least once every few years.
If the shareholders, who management has a fiduciary duty to, are well-diversified, this might even be the right decision.
Basically, if it's mostly index funds and mutual funds holding your stock, you probably should push that button every so often.
That assumes that once a golden goose dies, there’s an infinite supply of replacements. There’s a reason we’re comparing these companies to a mythical creature after all: if sustainable businesses producing valuable things were easy to create, this website wouldn’t exist.
The thing is, the people who own these companies also happen to live in a word powered by the products they produce. If you kill a bunch of golden geese in pursuit of profits, they will see bigger numbers in their broker accounts, but it’ll be because everything we all use has become scarcer and more expensive.
Sure, the owners will look richer - at least in comparison to everyone else. But would you rather be rich in a world of scarcity? Or middle class in a world of abundance?
You seem to be making a bunch of somewhat odd assumptions? Eg that investors are idiots, and that it's easy to beat the market?
I was answering the hypothetical example of one company having this magic button. With the rest of the world operating as normal.
If you want to figure out the optimal approach to many companies having such magic buttons, that's a slightly different question.
You are right that creating companies isn't easy nor trivial. That's why the market so richly rewards creating successful companies from scratch. But that's nothing that a well-diversified investor needs to worry about for this particular decision. You just look at market prices.
> The thing is, the people who own these companies also happen to live in a word powered by the products they produce. If you kill a bunch of golden geese in pursuit of profits, they will see bigger numbers in their broker accounts, but it’ll be because everything we all use has become scarcer and more expensive.
> Sure, the owners will look richer - at least in comparison to everyone else. But would you rather be rich in a world of scarcity? Or middle class in a world of abundance?
You seem to assume zero competition? And also that the stock market is really bad at evaluating business decisions (at least worse than you)? If the latter is the case, you should become an investor and make a killing!
Especially if you are living in a world where everyone else is stupidly slaughtering their golden geese, you should be able to pick up some disgruntled ex-employees for cheap and just run a steady ship!
Another important consideration: at some level of abstraction a company is just a legal shell. 'Killing' a company might just mean that the old equity (another legal abstraction) is deleted, and the former creditors turn into equity holders. The operations don't even need to be affected by this at all. Of course, you can also 'kill' a company by shutting it down. But again, that doesn't necessarily remove any of the demand for its (type of) products, nor does it remove the experience of the people working there, nor does it break any of the machinery and hardware.
So if Adobe goes belly up, there are already plenty of other companies willing to fill their former niche.
That's what the post-WW2 world looked like: the developed countries had booming economies, but the poor countries fell further and further behind. Some even in absolute terms.
Yet, that time is frequently cited as the golden age that people harken back to.
But what Adobe has done is a series of aggressive egg laying hormonal supplements and force feeding. Yes, it might get them even more eggs for a bit, but it's also a big risk for killing the goose for not a whole lot more eggs, with the side effect of definitely making everyone angry with you.
But I think Adobe, and most companies, would inevitably make this decision. If you give a medium-sized public corporation a faucet that spews money at a constant rate forever and a button that has a 60% chance to double the money and a 40% chance to destroy the faucet, I suspect that most corporations would push that button at least once every few years.