tags: #capitalism #line-goes-up #economics #power

idea

Market capitalism dictates that companies will always look for ways to grow their revenue, at the expense of long term consequences. (line goes up)

Executives in public companies are voted in by shareholders (even if so indirectly by the board). Investors seek return on their investment by an increase in the value of their shares and dividends, which is directly linked to the potential that said investors see in future growth. This in turn is linked directly to the profitability of the company. When revenue and profit meet or exceed expectations, it sends a signal that the company is doing well, drives confidences, drives investment, ergo price goes up. However, if investors don't anticipate that the value of their shares will grow, they will divest, which will in turn reduce the value of the company's share. Short of adapting strategy for the company to correct the potential, share-holders will vote for a new board and new executives.

As a CEO of a public company, you must do what it takes to increases profit^[1], event if it's detrimental to your company, customers, or society at large for the long term^[3]. If you don't, you will get replaced by someone who will. The main reason why it won't be profit "above everything else" is when there is a risk that the "above everything else" reduce either of profit or market cap: potential legal ramifications, bad press, etc.

Capitalism dictates that revenue must go up. If CEO weren’t using the main leverage they have to make the line go up, they’d be replaced. Short of changing the rules of capitalism, there’s no other end than enshittification for such large enterprises^[2].

links

references

[1]: BBC / Critics say new Google rules put profits over privacy

[2]: Price Hikes, Enshittification Trigger 700K Customer Losses At Disney+, ESPN+

[3]: NPR / Short-term profits and long-term consequences — did Jack Welch break capitalism?