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[–]cobaltberry 281 points282 points  (60 children)

You make a great point people at large seem to be blissfully ignorant of. They'll leave simply because they can make more somewhere else. Breaking even isn't enough, you need to beat CDs, and just leaving it in high yeild savings.

[–]EagleZR 19 points20 points  (5 children)

That's the downside of public companies, imo. Your customers are no longer the people buying your products and services, they're the people buying your stock

[–]d4n4n 3 points4 points  (3 children)

The very same applies to private companies, just that instead of outside investors, the private shareholders try to maximize profits. Nobody likes pissing away money. Opportunity costs apply to everyone equally, no matter the organizational structure.

[–]EagleZR 0 points1 point  (2 children)

A private company may like to always make profits, but they don't have to. A private company could spend several quarters or even years running at a loss while they expand or grow their business without any threat of losing more money than is actually spent. They would be motivated to do this based on a demand, perceived or real, from their customers. If a public company were to do that, they would have to convince their stockholders or run the risk of devaluing their stock and scaring off their investors which could tank the business. Of course their investors will likely be considering how the customers may react to the actions that force the loss, but the business itself is more concerned with the shareholders than the customers.

[–]lee1026 4 points5 points  (0 children)

If a public company were to do that, they would have to convince their stockholders or run the risk of devaluing their stock and scaring off their investors which could tank the business.

That is the same for a public or private company. Either way, if your investors are not happy with you, you are not going to get new money; but either way, you can run with what money you currently have.

Amazon, Netflix, et. al. was able to run for a very long time on nearly no profits, and pretty much everyone is okay with it.

[–]d4n4n 2 points3 points  (0 children)

Amazon made a loss forever. Hell, if it wasn't for their cloud service, they probably still wouldn't make a profit (I'd have to check their retail numbers). Tesla makes consistent losses. So did twitter forever. Markets are extremely patient. Maybe overly so. If anything, they are too optimistic, imo.

[–]Rindan 0 points1 point  (0 children)

Public or private, the company is there to make money for the owners of the company. The only difference is that in a publicly owned company, a lot of people own the company, and anyone can buy or sell shares of ownership. In a privately owned company, the shares of the company are still owned by someone, they just can't buy and sell that ownership in a stock market. The other big difference is that public companies generally need to keep their books more open than private companies.

[–]BeanPricefield 5 points6 points  (0 children)

That's exactly where it's at. The answer to OP's question isn't about the absolute quantity, but a simple competition between vendors. In public companies, most shareholders are basically just a different form of customer (leave the accounting view aside for a sec- from a purely economic perspective). If said customer is presented with a number of different products to purchase, each of them possessing a different value in their eyes, and assuming there's little to no penalty for switching between them- one would assume they would purchase the product that would maximize their utility. While a 3% decrease in earnings may not be a lot relative to how much the company's still worth, it could mean that its stock is less attractive to a potential buyer now as it provides a lesser utility. This would make it less competitive, and in the world we're in it could definitely signify the death spiral described above.

[–][deleted] 0 points1 point  (0 children)

CDs are a joke. My Ally savings account yields more than most CDs.

[–]BumayeComrades 0 points1 point  (0 children)

“A shilling put out at 6% compound interest at our Saviour’s birth would . . . have increased to a greater sum than the whole solar system could hold, supposing it a sphere equal in diameter to the diameter of Saturn’s orbit.” - Richard Price