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A boring question about economic stuff I don't understand...

posted 5 years ago by Jehosaphet (1055)
7 replies | jump to latest

Okay, say you're someone who pre-ordered the hottest new video game a few months in advance, only to eventually find out that its one of those loot-box, pay-to-win games.
"SUCH BULLCRAP!" You shout on various forums, "EA is the WORST company ever!"

Except we know that the only thing that REALLY matters to any given company is keeping their shareholders fat and happy, right? Yeah its probably best to strike a balance between them and the consumer, but boundaries are surely going to be tested when the revenue generated from loot-boxes can sometimes triple/quadruple a game's projected profit. We can't blame them for trying, they have to post those beefy quarterlies!

Once a company goes public, that's ALL its about, right? And my question is...okay, but...why the intensity about it? I understand how shareholders would like a return on their investment, but why does it have to be so much that companies will claw, scramble...seemingly do anything this side of legal to post as high of profits as possible?

This drive seems to be the cause of so much shady stuff...everything from false advertising to driving employees into the ground while paying them as little as possible.

Is there not a happy medium somewhere? Why does everything have to be grow grow grow?

[–] Frogarama (12942) 5 years ago

Once a company goes public, that's ALL its about, right? And my question is...why the intensity about it? I understand how shareholders would like a return on their investment, but why does it have to be so much that companies will claw, scramble...seemingly do anything this side of legal to post as high of profits as possible?

This is a fantastic question and it's something that's been on my mind recently -- This is a pure example of democracy functioning in capitalism. Wall Street, shareholder influence, etc.

The answer to your question is because big decisions require shareholder input/votes/etc based on all kinds of laws and regulations and contracts I'm sure.

It's not just a demand, they actually have their hands on the wheel, they help steer the ship itself.

They have partial ownership, that's what a public company means. Anyone who owns a majority share basically runs the place.

[–] GlenEllyn (21062) 5 years ago

One word: greed. No matter how much they make, it's never enough.

[–] [deleted] 5 years ago

what company are you talking about ??

[–] actionkamen (23176) 5 years ago

He mentioned EA (Electronic Arts Inc.)

[–] [deleted] 5 years ago

thanks I am not a video game guy.

[–] actionkamen (23176) 5 years ago

Yeah, me too. I used too when I was younger, not anymore. I still have my working PlayStation 1 under the tv. Sadly all the controllers are not in good condition anymore so it's not enjoyable to play.

[–] [deleted] 5 years ago

it's a pretty good question, and i don't think you're wrong to say there is a lot of pressure for immediate results which can be detrimental to long term stability. but where i would push back is in saying this is a problem specific to corporate culture or shareholder influence. i think this is mainly just a human failing, emotion holding sway over rationality, & all human endeavors face that failing, whether its business large or small, relationships, everything.

a rational shareholder would look at a business and, assuming they are holding the shares as a long term dividend paying investment, would want the company to do things that would please customers, make customers think they've gotten good value for their money. a spike in quarterly earnings from pushing a cheap product that disappoints a lot of people may work well for some people who hold that stock & think they're savvy enough to bolt at the right time - but that tends to be an incredibly risky & often ruinous strategy. most investors are people like you and me, people who hold mutual fund or other investment vehicles who want to hold stock in companies that do good in the long term.

so you have conflicting values and conflicting motivations, and it can produce bad results at times, no question. but it also produces brilliant results, and it's always worth taking a moment to step back and look at what the results have been of free markets & free trade, and i think it's fair and accurate to say that the results have in fact mostly been brilliant. the places in the world where people have escaped from the relentless grinding poverty that has dominated all of human history are those that have largely adopted free trade & free markets, and the places where people are the worst off today are the places where people have deviated the most from that.

so we certainly ought to look at any corporation as we should at any human creation: with skepticism. being in favour of free enterprise & free trade doesn't mean that your in favour of any specific business, or most businesses. we're all free to disregard or dislike or refuse to have anything to do with any business we don't like.