Comment by imperfect_light
2 years ago
>So the market price for a company tends to favor short-term cash extraction over long-term value creation.
Then why did markets favor companies that literally made no profits for years, Amazon and Uber being examples?
If your point is that generalizations aren't universals, I agree. That's why I said "tends to". I further agree that markets like more than one thing, and you can see that with things like "growth stocks", "meme stocks", and "pump and dumps".
Amazon is particularly notable for how long and how energetically they resisted investor pushes to take short-term gains. They were famous for it, or perhaps notorious. So although it's a counterexample to my point, it's also great proof of it.
Opinions differ on Uber, but personally I think of it (and WeWork) as pump and dumps. After Facebook and Google ended up with quasi-monopolies, investors were hungry for another "to the moon" technology stock. I should say that was true of both VCs and retail investors. The VCs saw an opportunity to make things that looked vaguely Google-shaped, which they did, trying to sell them off to the general public before anybody caught on. They succeeded with Uber and failed with WeWork. But in both cases, it's still VCs favoring short-term cash extraction over long-term value creation.