Until we, as a culture, stop requiring everything to always be going up and to the right, we will continue to see these trends.
Maybe shackling everyone's retirement outcomes, executive compensation, and economic policy to large private corporation's stock price isn't the best way to manifest the world we want...
> Maybe shackling everyone's retirement outcomes, executive compensation, and economic policy to large private corporation's stock price
The alternatives to investment-based pensions do have some trade-offs. Both the tax-based and "public insurance" (current payers finance current pensioners) model are vulnerable to demographic shifts and economic depressions. In many countries with bad demography, the payout you get per income-month has been reduced and the age of retirement increased, because the system threatened to collapse. Since most of the world is now aging rapidly and living longer, these systems are under severe strain.
A significant advantage of pension funds is that they can invest abroad to spread the risk, but in a public system this is impossible.
small nitpick: Pension funds invest only tiny percentages into actual private companies, like the PE firms TFA is referring to.
I was replying to a comment which lamented the fact that people's pensions depend on the stock market. I brought up that the alternative - financing current pensioners directly from taxes or an "insurance" fees - also has some large drawbacks.
You are probably talking about Norway's sovereign wealth fund[0] (funded by oil revenues); the actual pension fund is only for government employees and structured almost exactly like any non-government pension fund.
There are of course many financing models that are some combination of the two, but these models have the exact same problem to the degree that they invest in the stock market. Also, there are very few countries in the world that invest their oil surplus as wisely as Norway. Most democracies would just use the funds to hand out election presents to their voters.
Saw a discussion on threads recently about private equity buying things like Red Lobster and ruining it, and there was some general head scratching over the general theme of, why is "private equity took over XYZ and ruined it!" such a theme right now, whereas it was not a few decades ago? Less aware folks felt this was some new thing that could somehow be regulated. How do you regulate private ownership of things? Even this article talked about "regulation". Nobody is more pro-regulation than me but in this case what are we regulating exactly?
Well that's the question isn't it -- clearly, many people feel that the thing that private equity does is bad, but how do you quantify that thing well enough to ban it?
The most broad brush would be a complete and total ban on mergers and acquisitions, an idea that I find mildly interesting but I suspect would fail in practice. Perhaps M&A could be restricted somehow, with particular criteria disqualifying one from being able to accquire?
I tend to be anti-regulation unless the benefits of the regulation can be justified above and beyond laissez-faire, which in practice makes me quite anti-regulatory with some notable exceptions like the FAA.
I think the root of this problem is that private equity managers often have no skin in the game and tend to fail upward. It would be one thing if a private equity manager had a record of taking a company private, streamlining it and making it sustainable for decades to come. Even with the human cost of that, it's preferable to a company going prompt bankrupt. But too many managers seem to take these things private and then run them straight into the ground. Toys'R'Us, for instance, or Red Lobster as quoted in the article. In the latter's case, the management tried boneheaded promotions like "unlimited shrimp," which would be a bad idea even in a zero interest rate world.
I'd propose instead some sort of mandatory filing on the part of private equity managers that is publicly accessible and searchable and shows the track record of a private equity manager, with links to all of the other managers they've worked with. Then, when a PE investor proposes to take a company private, they're required by the SEC to demonstrate that their management isn't tainted by a chain of incompetence.
Who knows if that would work, but it might increase the skin in the game somewhat. The status quo seems to be HBS grads performing with mediocrity at best and having no real accountability.
A neutral transcription of the article's content could be "Streaming video content has similar underlying economics to TV. Now that money is no longer cheap, everyone is converging on the TV model of 90% standard-fare and 10% prestige projects."
The really sad thing is that public broadcasters operate in the same way with regard to content quality. Sure, they have (almost) no ads, a lot less complete garbage ("reality" TV, voyeuristic game shows), but on the whole they make the same clinic dramas, soap operas (and sometimes spend billions for the rights to sport).
For-profit media companies cut shows because they're unprofitable, public broadcasters cut them because of a "lack of demand by the public". Media companies make terrible programming choices because they think it will be profitable, public broadcasters make them for political reasons (no matter their structure, they cannot actually be independent of their funding source, the sovereign that organizes their funding).
It would have been nice to read an analysis like that in TFA, but alas it was published in jacobinmag.
They're a better Trotskyite paper than any of the ones written by members of the 4th international. Some of those papers couldn't write an article like this without dropping in some note to the effect that NATO provoked Russia into invading Ukraine or that Lenin had predicted it all 100 years ago, but Jacobin doesn't do that.
We dropped Amazon Prime earlier this year, in part because of the introduction of ads, and we haven't missed it. We're now talking about moving to the model where you stream one or two providers at a time, then switch. Between the ads and garbage content, it's just increasingly hard to justify subscribing to a half dozen services just to have options.
I should add we're not doing this because we need to cut costs.
I quit Prime when 2 day shipping turned to 5 day shipping. I was never that big of a fan of their subscription streaming programming although from time to time I would "rent" a movie I wanted to see.
The one streaming subscription I have now is Peacock because it is (1) well priced and (2) has some pretty remarkable sports content such as Premier League soccer (stupid of MLS to stay behind the Apple TV paywall because the one thing that will convince people American soccer is worth watching is... watching it) and events like the Rugby World Cup. That's despite my being entirely uninterested in network TV fare such as "Like Columbo but he never talks to anybody because he only uses forensic methods" and "Like Star Trek but set in a hospital" etc.
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[ 3.5 ms ] story [ 53.6 ms ] threadMaybe shackling everyone's retirement outcomes, executive compensation, and economic policy to large private corporation's stock price isn't the best way to manifest the world we want...
The alternatives to investment-based pensions do have some trade-offs. Both the tax-based and "public insurance" (current payers finance current pensioners) model are vulnerable to demographic shifts and economic depressions. In many countries with bad demography, the payout you get per income-month has been reduced and the age of retirement increased, because the system threatened to collapse. Since most of the world is now aging rapidly and living longer, these systems are under severe strain.
A significant advantage of pension funds is that they can invest abroad to spread the risk, but in a public system this is impossible.
small nitpick: Pension funds invest only tiny percentages into actual private companies, like the PE firms TFA is referring to.
https://www.calpers.ca.gov/docs/forms-publications/facts-inv...
You are probably talking about Norway's sovereign wealth fund[0] (funded by oil revenues); the actual pension fund is only for government employees and structured almost exactly like any non-government pension fund.
There are of course many financing models that are some combination of the two, but these models have the exact same problem to the degree that they invest in the stock market. Also, there are very few countries in the world that invest their oil surplus as wisely as Norway. Most democracies would just use the funds to hand out election presents to their voters.
[0]: https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
The most broad brush would be a complete and total ban on mergers and acquisitions, an idea that I find mildly interesting but I suspect would fail in practice. Perhaps M&A could be restricted somehow, with particular criteria disqualifying one from being able to accquire?
I think the root of this problem is that private equity managers often have no skin in the game and tend to fail upward. It would be one thing if a private equity manager had a record of taking a company private, streamlining it and making it sustainable for decades to come. Even with the human cost of that, it's preferable to a company going prompt bankrupt. But too many managers seem to take these things private and then run them straight into the ground. Toys'R'Us, for instance, or Red Lobster as quoted in the article. In the latter's case, the management tried boneheaded promotions like "unlimited shrimp," which would be a bad idea even in a zero interest rate world.
I'd propose instead some sort of mandatory filing on the part of private equity managers that is publicly accessible and searchable and shows the track record of a private equity manager, with links to all of the other managers they've worked with. Then, when a PE investor proposes to take a company private, they're required by the SEC to demonstrate that their management isn't tainted by a chain of incompetence.
Who knows if that would work, but it might increase the skin in the game somewhat. The status quo seems to be HBS grads performing with mediocrity at best and having no real accountability.
https://en.wikipedia.org/wiki/Private_equity_in_the_1980s
The really sad thing is that public broadcasters operate in the same way with regard to content quality. Sure, they have (almost) no ads, a lot less complete garbage ("reality" TV, voyeuristic game shows), but on the whole they make the same clinic dramas, soap operas (and sometimes spend billions for the rights to sport).
For-profit media companies cut shows because they're unprofitable, public broadcasters cut them because of a "lack of demand by the public". Media companies make terrible programming choices because they think it will be profitable, public broadcasters make them for political reasons (no matter their structure, they cannot actually be independent of their funding source, the sovereign that organizes their funding).
It would have been nice to read an analysis like that in TFA, but alas it was published in jacobinmag.
I should add we're not doing this because we need to cut costs.
The one streaming subscription I have now is Peacock because it is (1) well priced and (2) has some pretty remarkable sports content such as Premier League soccer (stupid of MLS to stay behind the Apple TV paywall because the one thing that will convince people American soccer is worth watching is... watching it) and events like the Rugby World Cup. That's despite my being entirely uninterested in network TV fare such as "Like Columbo but he never talks to anybody because he only uses forensic methods" and "Like Star Trek but set in a hospital" etc.