Companies Have Given Up On Being Profitable
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- Опубликовано: 28 июн 2024
- Have Companies & The US Government Pay You!
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Net profit is virtually useless for modern companies as it doesn’t benefit founders, shareholders, or employees. This might sound a bit counterintuitive, but it’s the case with basically every tech company and startup. Even more legacy companies like Disney are starting to adopt this mindset when it comes to new products. The only thing that these companies actually care about is revenue growth and user growth. As long as these two aspects are growing rapidly, the stock of the company also skyrockets. Historically, this would only benefit founders and shareholders, but in recent times, employees are given larger stock awards than ever, especially in tech. Most tech employees nowadays actually care more about stock compensation than cash compensation. They simply want a comfortable cash wage and everything else to be paid in stock. This creates this unique situation where the company making net profit is basically useless. This video explains how the importance of corporate profitability went down the drain and why modern companies don’t care about profit.
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Timestamps:
0:00 - Money Losing Giants
3:01 - Founders Succumb
6:59 - Shareholders Succumb
11:02 - Employees Succumb
13:10 - Modern Companies
Resources:
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This video is not a solicitation or personal financial advice. All investing involves risk. Please do your own research.
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Remember there is difference between paper loss and actual loss
Most of companies have paper loss so they can avoid paying taxes
That's for small businesses.
These are publicly traded companies and want to show the biggest profits they can.
But they hemorage money like no bodies business and need to keep raising new money from investors to keep the lights on
@Flak153 that's not entirely the point. Amazon avoids taxes by re-investing earnings into building new infrastructure. Through tax code black magic, that is seen as "growth" in the eyes of the IRS and allows for tax circumvention simply by immediately spending on building more warehouses and, especially in Amazon's case, putting their money more and more into rail logistics.
=NOT EXACTLY.......THEY'RE *REALLY* UNPROFITABLE.......BUT STILL MAKING LOTS OF MONEY
=HOW????.....THE ANSWER IS SIMPLE-- *_THEY ALL SECRETLY BECAME STATE OWNED COMPANIES SO THEY'RE TAKING WHATEVER THEY NEED FROM TAXPAYERS' MONEY!!!!!!_* .......THAT'S WHY THEY'RE LEAKING USER DATA SO MUCH,YEAH...
@Bernhard Schwarz it's the same "funny money" banks use to make profit, iykyk.
@@flakgun153 tell that to amazon
So, basically, profitability fell by the wayside because people became more interested in potential money than actualized money because the former isn't taxed and that has formed a growth feedback loop.
It's a giant house of cards, once the growth stops or even just slows, the entire economy collapses. It needs to stop because it's literally destroying society. "Growth companies" that have no interest in profit contribute very little in taxes but gobble up enormous quantities of taxpayer resources (example, the average Wal Mart store consumes over $1 million in taxpayer funding a year in government assistance paid out to their employees who work for poverty wages).
If employees are paid in stocks, those stocks are taxed when paid.
...and employees have to pay taxes when they sell the stock if the stock raised in value.
So, it's not tax free.
However the capital gains taxes usually are lower than the income taxes, and they don't need to pay capital gain taxes until they sell, so they can wait until retirement to be in a lower tax bracket to sell.
@@luisoncpp Ah, OK, I almost had it.
Not only that, getting taxed at the end (when they sell) is much better than getting taxed multiple times in the middle (income tax), because the latter would affect compound growth.
=NOPE..........THEY'RE MAKING PROFITS BECAUSE OF LOTS OF THEIR INCOME IS UNDER *TOP SECRET* BECAUSE OF THEY'RE BASICALLY OWNED BY GOVERNMENT WHAT KEEPS THEM AFLOAT TO SURVELLIANCE PURPOSES
..........YEAH YOU'VE GOT IT RIGHT-- *_THEY'RE DRENCHING MONEY OF TAXPAYERS AND THIS IS A FACT!!!!_*
I think as long as they keep borrowing against their own assets, they don't care about being profitable because most are already monopolies. That is what it is!!
And that's going to hurt them in the long run.
It would come crashing down once the market changes.
But those assets are overvalued, so if they go broke the money its gone
Sounds like a ponzi scheme
@@forte609 not with daddy government to bail them out
I hate competing against companies that never make a profit.
Why?
@@PeterGriffin567 probably because they don’t care to lose money to compete against small businesses, who need to make profit to stay afloat, to shut down.
Just like some legacy airlines would risk losing some money by lower flights or ticket prices on some routes to force low-cost airlines out of business.
@@ripp3ifyy I mean but those small businesses will just keep popping up. How long can they really keep prices low and sacrifice profits just to create a monopoly
@@fern5811 a very, veey long time.... depressingly
My competitor did that. Lots of government funds, over marketing everywhere, lots if investors. They lasted 5 years
It'll be interesting to see what will happen to these giants as the age of easy money ends.
You are correct, as the cost of money goes up cash flow will be difficult to maintain without some level of profitability. As soon as a company is unable to raise money by issuing stock, as occured with SVB, the party will be over.
We have been in this place. . And we have seen what would happen
@@WahyuSetiawan-sz4lc has there been a period of such extended amount of credit before?
@@Waitwhat469 I think we are already seeing the effects. Allot of layoffs from big tech companies.
Having that most investments are in themselves, it usually involves hiring allot of people. The solution is the reverse, lay off allot of people.
@@ionut-cristianratoi7692 It'll be interesting what the next innovative small company will end up doing now that Big Tech can't as easily just buy them out or spin up a competing division.
You should do a logically answered on how laws are affecting industries from place to place, but with a twist of how corruption might make a company expanding outwards more profitable.
Thanks for the suggestion bro!
That's a great video idea ! Hope he does it
we know the answer to that already, it lies in Vertical and Horizontal integration and may need (the repeal of) amendments made to outstanding monopoly laws. There are some serious conversations to be had when it comes to monopoly law and communications law, as the existence of "social media" would require the synthesis of both to solve.
would love to see a deep dive into both and an articulation for the public's sake of what those laws actually imply and how the implementation and enaction of those laws allows operations as they appear to be to the ley person. a good place to start is the liability of publishers (because social media curates content in such a way as to be acting as such while suffering none of the liability for acting in such an editorial way, which falls under section 230 of the communications act).
Consider this. When we decided to implement a minimum wage we opened the gates for the 1% to influence minimum wage.
Our attempts to create equality are just opening up more oppurtunities for the 1%. We need to cut them off at the source. Start a UBI, create a ground floor and let corporate decide what minimum wage should be from there. They want to decide what entertainment we have and that might be ok if we are covered for our water, food, shelter and education.
This sort of thing could create massive "too big to fail" bubbles though. Like, if a company borrows and bets on its growth, any tiny hiccup could make them default and their stock price plummet. As long as a company remains a monopoly, I could see them maintaining this trend. So, I guess the caveat is betting whether they'll be able to buy out possible competitors or stay at the forefront of their fields.
US as a country was doing this for last 50 years. That is a good example of possible behaviour
You just reminded me of something. "If you owe the bank 10k dollars, you have a problem. If you owe the bank 1 million dollars, the bank has a problem."
@@BusinessWolf1 hah, that one is funny
@@BusinessWolf1 this is quite true. the bank will even be willing to negotiate for lower interest or restructure the loan with you if u tell then you r defaulting that 100million dollar loan
Reminds me of the south sea bubble.
This only applies during near-zero interest rates; as you bring rates up and away from clown world these money losing companies are forced to profit or close.
Don’t follow. Why?
@@TheBooban They currently survive by borrowing at near-0% interest against their market value. Once interest rates go up or their market value goes down (or both in this case) they won't be able to keep borrowing to survive.
@@Kwijibob They don't just borrow. They issue secondary shares on the market for funding. Amazon did that a lot.
@@Kwijibob The problem is that as long as there are investors willing to buy their overvalued stocks, they will be able to borrow against their value no matter the interest rate as they don't need to turn profit to cover the interest, they can equally cover it with 'growth' and issue more shares. What higher interest rates might bring is that people are less willing to gamble on imaginary stock values/growth and have more concrete options to turn profit from their investment. And once investors start asking for something more tangible, like path to profitability and such, Amazon, Tesla, Shopify and the likes are very much screwed...
@@gilgamesh310 issueing shares is some kind of borrowing. It's like mortgaging part of the company.
If the company is "big enough to affect the economy", then the government will just bail them out if they fail anyways. The only time we've seen anything otherwise is in China with Evergreen, but that might have a political will behind it.
I believe any bailout must come with the stipulation that the company will be broken up into smaller companies. If one company is deemed too big to fail that they have to be bailed out, then it is too big to be a single company anymore.
@Evan Combs you and everyone with a brain man. I wish our government made sense.
@@phantomcollective901 Your goverment makes sense, they do what is the best for them and their friends, not for you and common folk. Class solidarity at its finest.
yeah :(
@@phantomcollective901 sadly it's often not that easy. Breaking up big company's often results in a situation where all the new company's combined have less market power which would be good expect that most company's have foreign equivalents that will that advantage of the situation.
If you bail out a company just to break them up, you have a high chance of loosing the bail out money and the company.
It is important to note that even though Google and Facebook are losing money on certain parts of their business, they are very profitable overall.
Google and Facebook certainly have large profits overall, but some sectors of their business are money pits.
Uber and it's ilk don't have that. They move enormous sums of money, but don't have any cash in the bank, so they're more or less at the mercy of the regulators.
For every Google, there is Tesla Motors. For every Facebook, there is Shopify... There are far more companies out there that are peddling their imaginary value and borrow against it, and that gravy train will not last forever... Even Google and Facebook will eventually be forced to kill off parts of their businesses that are endless money pits.
The reason for creating those "money pits" it's in hope that some of them will become profitable and compensate for all the remaining loses. It's the same principe that use venture capital or even small cap index funds.
This may be seen as a luxury, but it's vital for the survival of the companies, because their main business cannot stay on top forever, so they need to find alternatives while they can.
Google and Facebook are profitable because advertisers are afraid not to pay high prices. Many advertisers aren’t getting good value for what they’re paying. Ad rates and profits will certainly fall faster in the future.
@@zwerko Tesla is highly profitable, they are also sitting on 22 billion dollar in cash
I sometimes forget that most of the top-value tech companies don't make any money. Damnn.
For real haha
Apple, Google, and Microsoft make loads of money. And they're three of the biggest tech companies in the world.
@@me-myself-i787 that's only 3 not all
@@Clownk1lleryeah, and 3 I smaler than 18
I’m the founder of an hardware electronic OEM technology company. Hardware is hard.
Software is easy.
As a ground level employee for way too many companies I've never had access to an attractive stock option. Some of them had programs that would allow you to dock your paycheck with whatever you had left after taxes for shares. Even that was very rare.
Wouldn’t a big recession tank those companies without a bailout
Too big to fail. They expect the government communism to save them
Maybe, maybe not. Amazon isn't gonna fail for sure.
@@nk4j272 this is with the assumption that they won’t get bailouts and in reality Amazon will get a very very large bailout and so will many companies who don’t try to be profitable because if a good chunk of them went down many millions would lose their jobs and make it either worse or way longer than with the bailouts. That’s the point of “Too big to fail” because of the fact that if they were to fall like the market would indicate it would be disastrous economically
@@simonpetrikov3992 I don't get it, there's nothing "too big to fail"
@@JorgetePanete while that’s correct I’m just using the same line of reasoning that the Lehmann brothers used to justify the government giving them bailouts during the Great Recession in 2008. That’s why I put “Too big to fail” in quotes
"Do I even have to say anything about Metaverse" this statement is exactly the same in 2 adjacent videos😃😃😃
Hahaha
The metaverse idea is /almost/ sensible. VR is poised to explode - we've got low-cost headsets now that pack enough processing power not to need a computer tethered. It would make sense for some company to get into the field, and use their resources to secure an insurmountable dominance early on. It's just that Meta took this sensible idea, and went about following it with astounding ineptitude.
@@vylbird8014 The thing about the metaverse is that it already exists, it is called the internet. The metaverse is just the point of the internet where VR webspace become as common as webpages, it is not an application for a company to build, it is an emergent property that will naturally arise when the VR and AR market reaches a certain critical mass. At best if you wanted to "build the metaverse" you could write a set of different protocols and standards for it, because for a thing to be a metaverse means to anybody could make a client for the metaverse by following the specifications and using the protocols, and anybody could create a "space" on it by following the specs and the protocols, and that any client could connect to any space. IE what is today the internet, we have http/https as protocols, and we have a series of specifications of what a webpage is and how to render it, so anybody can create a browser to open a webpage and anybody can create a server to serve a webpage and anybody can write a webpage and everything is intercompatible as long as the spec and the protocols are implemented.
One simply can't create the metaverse without open standards and open protocols. standards and protocols that on top of that everyone agrees to use. The metaverse can't be proprietary by its nature, and we are not close enough to care about defining the protocols and specs, the VR/AR market still needs to grow a lil bit to make sense to care about defining those specs. And the specs and protocols most definitely will come from either academia or a non profit org made in conjunction by all industry leaders.
The market is just not ready for it, it would be more sensible to grow the VR/AR market with games where it exels until it has a big enough % of that market for it to not be considered a novelty and only then it would make sense to start making protocols and specs for the servers, content and client of the metaverse. VR is first and foremost a gaming device, It can be used for other purposes but the thing that gains most from it is gaming. Until VR has not penetrated on gaming which is the easiest market for it to penetrate, it will not be able to penetrate other markets. AR is a lil different but AR tech needs for VR tech to be a lot more developed than it is today as AR needs much smaller devices and better processing for it to be practical which will come naturally from the advance of VR tech as while VR doesn't necessarily need it to be practical, it is still the things that needs to improve to be better.
So in general now is definitely not the time for the metaverse, first we need for VR to penetrate deeply in the gaming market, this would give VR the time and money to be improved and developed with the consumer in mind, this would lead to smaller, cheaper, lighter and more potent VR googles, at some point those point would be good enough to create practical AR devices and with the coming of very practical AR devices at reasonable prices, the metaverse would start to make sense.
Modern corporations rely on manipulating their share price, and shareholder sentiment, and the way to drive that is to become either monopolies or a member of a cartel. That's bad for the consumer as can be seen by the Baby formula market for example.
Not only for the consumer, but for society as a whole. The share market should be more regulated, it has a corrupting effect in too many companies.
I don't think this is a new idea. I think it's what happens when interest rates have been near zero for the last decade.
Dude, you make an absolutely enjoyable content, not only to entertain but you can learn something for yourself even if it is a tiny lesson.
Really appreciate the positive feedback blitz
Fascinating. I am actually in the process of starting a company and I have briefly thought about the growth strategies. For my company I will prioritize creating economic buffers over growth so that I can keep my staff even if the company has a major setback. I also want to avoid taking on staff that I don't have a long term use for, for instance, if I need sales representatives for direct sales in a small market segment that will be exhausted quickly I better have a backup role for them because I really don't want to later realize "Oops - I don't need you anymore".
Your company will grow pretty slowly with this setup. Though the growth should last and be more resilient to turmoil as a result.
@@mamotalemankoe3775 Always a tradeoff but I rather take it slow than be reckless, especially when I get to the point where my decisions affect other humans.
They are beholden to the stockholders, and what the stockholders want more than profits is predictable fluctuation.
They’re only beholden to the stockholders in theory. About 40% of google’s shares are non voting, meaning heaps of shareholders have no influence over the company. In Snapchat’s case, 95% of the stock has not voting rights, so they have no influence at all. When in the case of Facebook, Zuckerberg controls the most voting shares, so he can pretty much do what he wants with it. But more importantly than even all that, most stockholders, only care about getting the bigger fool to buy the stock from them at a higher price. They hardly ever exercise their rights to remove a board of directors even if they had voting rights. Is not worth it, when they can just sell their stock and invest in another company instead.
@@gilgamesh310 "most stockholders, only care about getting the bigger fool to buy the stock from them at a higher price."
@@diablo.the.cheater I don't think it really effects the company itself much. If anything it causes them to hoard profits more, because they know investors don't care about receiving dividends. At least in the tech companies. But it could have a detrimental effect on the economy as a whole.
The last two years has been absolutely brutal for growth stock investors, most people have lost a ton of money
When these tech company do mass layoffs, wouldn't that cause a large portion of employees to dump their stocks and lower the stock price?
That's why they often pick employees without a lot of vested stock options to lay off. An unvested stock option goes poof if the employee is laid off. Also a lot of those employees with lots of company stock already sold their options in the last couple years.
They did the layoffs when the stock prices were already down by a lot, so it's not appealing for the holders to sell them.
@@mrvwbug4423 A lot of severance packages actually have accelerated vesting for some portion of your stock grant, if it hasn't already vested.
Also @crazycool1128, many employees sell their shares instantly on the open market as soon as it vests. So the chances of these large scale layoffs having a large impact on the share price is probably not a huge deal. In fact, the subsequent stock rise that comes after the layoff will far outweigh the vested shares that people may be selling.
Long story short, it's tax evasion.
No deductions on dividends, no deductions from profits, no deductions from pay because simply the government can't tax an asset.
Same reason why millionaires by so many fancy cars, yachts, paintings and a big fancy house.
It's not because they can sell it if one day they become penniless, it's because they have cash value that would push up their wealth bracket into higher taxation.
*edit* so people stop commenting about income is taxed not wealth, inheritance tax exists, that 100 mil in the bank can't get taxed if it's actually an art gallery or a parking lot full of teslas, the government isn't going to reposses 40% of your house when you die but they will tax 40% of your cash when you die.
again, it's tax evasion at all levels of upper class society, stop calling millionares middle class, middle class are the people making your fast food and dealing with karens at the supermarket, not the people sitting on assets and contributing nothing to society, if they were the majority nothing would get done.
In USA most millionaires don't have all that fancy stuff, with 1 million dollar you can buy a medium-sized home, or a small appartment in a more expensive area(like the Bay Area) or live as a retiree in a manufactured home.
This is why most millionaires self-identify as middle class.
@@luisoncpp I'm mostly talking multi millionaires here.
Also millionaires middle class? Really??
@@luisoncpp Warren Buffett is living in middle class family
That is not how taxes work. You are taxed on your income, not on your wealth.
@@evancombs5159 part of the video literally mentions people taking stocks instead of pay.
Just cause I'm shit at explaining things doesn't mean I don't grasp it.
In any business, survival should be the priority in the early days, profits comes later if good and reliable products and services are delivered.
Now however survival comes not at the expense of a loss, but from constant investment from random people.
I work for a company who had one investment round of 2mil and is consistently profitable. Another company hiring that I was looking at has had multiple investment rounds on 5-10mil each. No idea what the point of their product is. No idea if they will ever be profitable.
Yes indeed. Another excellent video brother!!
Thank you as always Daniel!
You should do a video explaining how they afford to operate at a loss financially. Like the accounting behind it.
Cash Flow will always remaining critical and when a company is losing money cash flow can only be maintained when the cost of money is very low. I suspect the high levels of inflation, mainly caused by massive money printing, will cause major cash flow issues if a company maintaines a loss.
Informative as always!
Thank you for explaining this so well! This explains a lot of the endlessness of the workforce vibes that have infected today’s consciousness. Self awareness is the first step to healthier functions!
@SniperShivOfficial It’s a crop from a frame in a Manga! I enjoy eye drawings, done by myself or others, and the vibe the girl in this original phone had sparked joy, so I’ve been using it!
I can’t find the origins image right now though! I can look for it later though to see the manga it’s from!
@SniperShivOfficial Hell yeah, same here! I will definitely share that title with you when I get it! ✨
loved the chip clip when you were saying 'or videos like this' heh heh. another interesting video as always, thank you!
As you mentioned the growth vs profit tend really only took off in the last 10 years. What else happened in the last ten years that might have enabled this trend? Zero percent interest rates and QE has enabled these companies to borrow money and operate at huge losses because money was cheap. This is why the stock prices of companies like Shopify Zillow etc have taken a huge hit in 2022-2023, money is no longer cheap!
I don't know about the US Stock markets but I definitely know that right now the indian stock market definitely cares about Profits
India's economy is a bit different. it is mainly comprised of two mega-conglomorates Tata and Mahindra, they are basically the entire economy of India.
@@mrvwbug4423 what about RIL
I would too. If I was running those companies. I still get paid. 😂
I love the sound of the old transition,please bring it back.
The crazy thing is most of their “losses” are payouts being paid out to shareholders and investors. There is definitely bad money decisions but they don’t care
The only thing that gets me is a lot of corporations are posting record profits as of late. Seems they piggybacked off the pandemic’s increasing prices for everything and took it to the extreme. But as for tech yeah they frequently operate at losses
Reinvestments AKA stock buybacks
Great video!
So this system works great, just as long as the company keep growing indefinitely. What could possibly go wrong...
One interesting topic for you: the profit-growth dilemma is basically the explore-exploit problem (mentioned in the book "Algorithms to Live By, by Brian Christian).
The valuable thing is the data.
Great topic and coverage ❤
Exceptionally well made
I survived that Internet Bubble of 2000, and I do remember when everything exploded. Now waiting for Internet Bubble 2.0.
i view this post as a harbinger of a pivot from a "do earnings matter" economy. earnings always matter. because there is a return of the risk free rate.
Non profit means there will be no fresh money for the shareholders. They can only make money if they become a monopoly by killing off the competition.
That’s an interesting point. Wow, great production. Congratulations. I think the honest thing would be calling those organizations another word, not companies. Or do we have to redefine what business is?
Great vid, cheers
thank you for the content
One big reason is that taxes get implied on the profit a company makes
Convincing investors is a better ability then making good products
Great video....
Thanks...
My Kellogg finance profs presented the notion of "double dividend taxation" as an opinion (of the rich) that keeps getting pushed (by the rich). ALL money is taxed every time it changes hands. Dividends are not magic money.
4:11 - The K in William Knudsen is not silent. He was born in Denmark. So it would be k-Nood-sen. Btw, Knudsen is attributed to popularization of the phrase "Arsenal of Democracy", borrowed by FDR in the famous speech just before the WWII.
Companies suffer from stupidly greedy CEO-s that company employees are fed up with. Bankrupcy mostly are caused by decisions of higher management which try to sqeeze every penny out of everything until people had it enough.
Another great video
Thanks bro!
Due to internet which benefited the globalization of companies allowing to serve a bigger market and the secondary market for securites too have grown where a lot of angel invetors are interested in as more individuals are interested into pouring more money into share prices of companies
Nice video man :]
Harry a small suggestion for you. And that is can we call this growth companies as Internet companies cause Tech word includes Hardware, Sofware and Internet giants. And Most of the low proftible companies fall in the internet category. Any way keep your good works on. Love you videos. 😊
I think there are some bad assumptions here. You're ignoring bubbles and government safety nets. A lot of these companies are cardboard armies and their existence relies on investor faith and confidence BECAUSE they lack profitability meaning in reality its a lottery. One day that bubble will pop and I think that's why you're seeing these companies with negative profitability.
All I know is it's really gonna suck when there's no more room for growth...shame they don't seem to care about that 🤷♂
As an employee I would not be interested in stock compensation being anywhere near 50 percent of my income. You can't have all your eggs in one basket
Depends on your risk tolerance haha
You're thinking about it backwards. In reality, due to the actual numbers, it psychologically feels more like the stock is +100% rather than -50%. At these kinds of tech companies, your base (cash) salary is anywhere from 200-400k, then there's stock on top of that.
Assuming you live reasonably, you can live comfortably, save for retirement, and have a big tax-deferred lottery ticket in the form of equity.
@@Tom64735 I worked at a big tech company and agree with you. The thing about the "eggs in one basket" statement is that a lot of employees actually sell their shares as soon as it vests and move that cash into more diversified assets. As of now, there aren't many companies actually letting you chose between stock and cash compensation (Netflix is the biggest one I know of), so you don't really have a choice anyway. Also with the meteoric rise in tech stocks over the last few years, getting an equity grant is probably better than getting cash.
So yes, your actual share value could go up or down while full cash compensation does not, but you also get "free" shares in a company.
Also to be clear, you _do_ get income taxed at the value of your equity when it vests, in addition to capital gains tax on any delta between the vest price and the sell price.
Most of the "losses" are creative bookkeeping, declaring losses to get out of paying taxes, transferring ownership of IP & assets to the lowest taxing countries they can find, then charge high enough rent & licensing fees to make all subsidiaries "unprofitable". It is time to start taxing corporate turnover instead of profit.
I have heard that blitz-scaling is the term for this. I Imagine that the most reasonable way to put an end to this business practice would be for the IRS treat companies with net losses over more than a few years (3-7) like I have heard the IRS treats MLM members: they treat it as a hobby instead of a business. No tax benefits. It would end real quick if they did that.
That's a great idea! I'd also like to see a legal requirement that if you list on a stock exchange, you have to pay out at least 10% of all profits as dividends. And sure, these growth-focus companies would be mostly unaffected as they're hardly making any profits, but it would ensure that they actually be assets and not just Bitcoin-in-disguise.
This is only the latest permutation of the old adage, "they lost money on every sale but made up for it in volume" - and about as sound in the long run.
This is one of the many reasons why I will never start my own business. The structure that exists has such a burden of perverse incentives and Faustian bargains that the only way to really win the game without compromising your integrity is not to play.
I would declare bankruptcy before taking a company public.
How strang it is that the US taxes dividends twice. In Australia, only the stockholder pays tax as part of their income tax.
Lol. 11:23 I like the ‘Suits’ footage!
Excellent video, dear Harry. A simple but very effective and precise explanation of modern companies dynamics.
Very appreciated, thank you!
Greetings,
Anthony
Strategies relating to profit, cash, and stock change according to times of war and peace, tax changes, currency changes, and investment trends. The only bad strategy is implementing the wrong strategy at the wrong time.
Growth for sure. Its a numbers gain of syphoning money at a global level. Even in an unhealthy economy with liquidity issues. As long as theres bailouts and even if there isnt, if your big enough you still get the government involved if someone wanted to buyout the collapsed business for its own growth (Merger). Where if you dont compensate yourself from stocks and leveraging that; you'd give yourself a bonus and sell at a loss after a stock split. (From the merger)
8:14 also known as the ceiling
Dell Computers did the growth game before amazon but they had other issues.
This is what happened when a creator doesn’t go to business school. 1: these tech companies are tanking in the stock market. 2: they run a loss either a eye for growth because that’s the stage of market they are in. When a market is growing, there are different priorities. Once there is no more growth then you focus on profit
>business school
lmao
Hospitals have also taken this route in spades from my experience.
(FACTS OVA FEELINGS). The major reason y Companies do a bad job on moving forward is because the group is not moving forward az a team in order to do tha these emotional conditions that r causing ppl to put the brakes on have to bee resolved first
It's only for short time. Longer timeframe will bring everything back to normal. "This time is different" is just another name for scam, bubble or finding someone more stupid to sell him useless stuff. People never learn. And that's good because it creates new business opportunities.
Company and dividends tax policy in US affect only US based businesses. Other countries can pay smaller taxes and pay higher dividends.
what about the engregious business models that are flat out anticonsumer? Artificial scarcity (disney vault), subscription on *products* like heated seats (BMW) and faster acceleration on a car (Mercedes)?
Sounds like this could explain some of the economical turmoil that has been happening.
ive been thinking for a while that it feels like many companies have stopped to compete? like its all a monopoly
That's how corporations avoid paying tax, how can we pay tax, we lost money even though they have 300 billion plus sitting in cash reserves
Well, as a Tesla shareholder, I want the company to be profitable. I also don’t want the company to pay me a cash dividend. This video explains that.
When they switched from profit to growth, didn't that screw up their quarterly projections, earnings, which either raises or lowers their stock price?
I think it was a misstep to not differentiate companies that have no profit because they reinvest all their income into growing the company (Amazon) and companies that don't have profit because their business model does not work and they are kept afloat by a constant stream of new investment money (Uber).
In here disney has partnership with mobile network telco, they giving disney+ subs free if you buy their internet plan.
It's crazy, cz sometimes their internet plan cost as low as $3/month, cheaper than disney+ subs itself.
Great video
Thank you Philip!
Then came the buyback, founders and ceos could use their companies to purchase or upvalue their own stocks issued as compensation.
US changed regulations that drastically changed CEO pay and continually raising stock price the primary goal. Makes taking out large loans far easier and they still get plenty of dividends
This only works because of cheap debt, if rates continue or hold longer than expected you’ll see this model change.
I would rather do growth then profit. It’s good to keep on growing but not good for long term goals. If you want your company to last of or decades then profit is a must.
Weird. Reminds me of Japan and the Asian tigers. They dumped their products below cost and didn’t care about profit. Old play book by monopolies.
How are new stocks constantly granted? A company might run out of ESOP pool after some years and the existing shareholders might also not want to dilute.
So stocks have turned into a type of currency we didn't know we had.. Genius AF! How creative people can be to avoid taxes...
**Buys bread**
Cashier: That'll be 0.5 stocks please(no taxes)
@@MangaGamified with apps like freedom24 where you can own a fraction of a share that would actually be a realistic scenario.
I mean there is a reason why cryptocurrencies started to work like stock rather than currency.
@@MangaGamified Oh god don’t give them ideas
Now without making profits , how are they paying bonuses for their employees ?
Another thing in my opinion is that a lot of companies are not as tech savvy or life changing as they seem. Google getting ad revenue is nothing new. We work shouldn't be a thing. Even if they get a hit like chrysler with the k car and minivans or Apple and the iPhone it's not the norm
When Executives are paid mostly through stock shares the only thing that matters is the price of the stocks and betting against the stock when they know each quarter that the companies will not show profits and stock prices will go down. This is how executives are earning money. And when the company earns profits, the company can buy back shares of the company.... See: Do corporations pay tax on share buybacks?
General. 1% Excise Tax: The Stock Buyback Tax imposes a 1% excise tax on covered corporations on the fair market value of any stock of the corporation which is repurchased by such corporation beginning after December 31, 2022. Inflation Reduction Act of 2022: Excise Tax on Repurchases of Corporate Stock and Interesting Applications to SPACs......
Even small business owners quickly learn that profits are taxed, but growth is not. Reporting high expenses keeps operating costs down. "Hiding" profits in liquid assets has its limits, reinvesting any remaining profit into growth minimizes tax expenses. Not only does growth increase stock prices, but most kinds of "growth" can be liquidated if a company ever wants to downsize for some extra capital. That way they can take the profit when they *actually* see losses in an economic downturn, and they still won't be taxed on profits from the sale as long as they don't exceed expenses. It's long-term tax evasion by any other name.
"we lose money on everything we sell, but make up for it on volume" - 50 yrs ago, this was a joke. today. it's common business practice. and people wonder why everything is a scam
Is this also why bringing back company towns is on the table? To save taxes?
At some point you got to make some money. Amazon is great and all, but when their growth finally stalls the only way their stock is really worth holding onto it is if it pays some form of dividend.
Should do a video talking about how these sorts of tax evasion schemes impact the economy.