Comment by xbmcuser
2 days ago
The major reason is they are a private company with good business. The don't have a need to keep adding to shareholder value ie stock price instead just need to generate a yearly income. We have reached a point where the shareholders are a companies real customers and that is who they all try to attract.Everytthing else a company does is just to attract shareholders
There's a little known alternative: Steward-ownership [1]. It's the kind of structure used by Novo Nordisk, Bosch or Patagonia.
LLM summary: "Steward-ownership is a model where a company’s control stays with long-term stewards (founders, employees, or a mission-aligned foundation) while profits are limited and the company cannot be sold for private gain. The goal is to protect the mission permanently."
The key, if I understand properly, is that these company cannot be sold (not even by the founders), so there is no "shareholder value" per se to maximize. It is also probably not a good way for founders to maximize their net worth, which is probably why it's not more popular...
[1] https://en.wikipedia.org/wiki/Steward-ownership
Plenty of countries have corporate laws that are less shareholder focussed than those of america. In the Netherlands for example boards are obligated to take into account broader sets of interest such as employee in their decisions and this is enforceable in court.
One of the issues with founders is that they get really into one specific idea and sink the company, rather then to switch strategy.
As opposed to shareholders, who ravenously seek to maximize short term profits and sink the company.
3 replies →
This model, unfortunately, often leads to a "well, we might as well spend the extra profits on executive benefits"-issue. Whenever you have money without oversight, you always face a moral hazard.
If the company makes a profit and there aren't shareholders there to keep the stewards in check, excesses can and do develop.
I get the first point, but having shareholders doesn't solve that in any way. Shareholders would just give themselves payouts instead of letting the execs take everything as bonuses. And unlike the execs, whose bonuses could be limited by charter and who could be chosen on the basis of trust, shareholders are "whoever has the most money to throw around", so there's no mechanism to align them with company values.
So it's not perfect, but it sure as hell beats having shareholders.
1 reply →
It's not as if public companies don't overspend on executive compensation. I think one CEO recently asked for a trillion dollar compensation package?
4 replies →
Shareholders are not an effective check in most cases. They are with private companies where individual shareholders have a lot at stake - its their money that is being wasted.
If they can just easily sell the shares they will do that instead.
Steward-ownership is a philosophy more than an actual structure, my understanding is that each such company is in practice structured somewhat differently.
This article explains roughly how Patagonia is structured: https://medium.com/@purpose_network/the-patagonia-structure-...
For Patagonia a trust owns 100% of the voting rights, while a charity collects 100% of the dividends. I don't doubt that there are ways the structure could be subverted, but it's a far cry from "money without oversight".
Do you have examples of Steward-owned companies that ended up with "well, we might as well spend the extra profits on executive benefits"-issues?
(I personally think Steam should go in that direction, otherwise I'm afraid enshittification is unavoidable once Gabe Newell is no longer at the helm)
1 reply →
I find it a touch strange, in the abstract, that a corporation being public is a bad thing. On paper it should be a good thing; being publicly owned should mean that your corporation has turned from a private business venture into effectively public infrastructure that's impossible to boycott and depended on to some extent by everybody. As a result, financial statements should be (and are) public and transparent, and the company should be able to be externally steered via regular elections in a manner that benefits the public and not just its founders.
The issue really lies in the fact that the (long-term, majority) shareholders aren't much, if at all, related to the customers or employees of the business, but first the founders, and then parties who are merely interested in rising stock prices and dividends. It feels like the solution here ought to somehow desegregate voting rights from how many shares are owned, instead of dismantling the concept of public ownership entirely. (Or, perhaps, allow the general public to proxy vote via their 401(k) index funds?)
(There's also strange situations like Google/Alphabet, which is publicly owned, but effectively does not allow shareholders to vote on anything.)
The wealthiest 10% of Americans own like 90% of stocks, and the top 1% own 50%. While the poorest 50% of the population own about 1% of the stock market.
So "publicly" traded (the term public ownership can be confusing because it can also mean state control) just means it's open for the elite to invest in.
Could you link to how that measurement was taken? Because I very much want to know whether it counts things like mutual funds, or whether it only measures direct ownership of stocks. E.g. I have a bunch (though not all) of my retirement savings in an index fund that owns partial shares of the top 500 US companies (as listed by Standard & Poor's). So depending on how that S&P 500 fund is measured in those statistics, I either own shares in the top 500 companies, or I'm counted as not owning any shares. The latter would produce a very misleading statistic, because I am very much not the only person who invests in the stock market via mutual funds.
So a link would be much appreciated, in order to judge the quality of the info. As it is, I'm skeptical that the info is accurate, precisely because mutual funds are so wildly popular among the middle-class people I know (none of whom are in the top 10%, though most of them would likely be in the top 50%).
1 reply →
It's amazing to me how many people don't get this.
4 replies →
“Just”? As if there aren’t pension funds and 401(k)s and IRAs serving >100 million Americans via investment in public companies?
“Open for the elite” how?
2 replies →
Not sure what does that mean. Americans poor and wealthy are in the top 10% of the world wealthiest and own a huge part of the world stock value accordingly.
That's simply capitalism, money is spread unevenly across everyone, that does not make everyone an elite
2 replies →
"The major reason is they are a private company with good business..."
This is unquestionably, undoubtedly incorrect. It is a really low information meme that's racing around the Internet right now. If you want a contemporary counterexample take a look at NASCAR. They're also not publicly traded, they're family owned, yet they are abusive toward drivers, teams and fans, and they're gradually ruining the sport that made them rich. We know all of this because it got so bad Michael Jordan decided to sue them and there's a ton of information coming out in discovery at the moment.
The real reason Valve are being the "good guys" at the moment (not really, but yes they're doing some amazing stuff for Linux) is because they feel threatened by Windows and Microsoft, they perceive a long term competitive threat to Steam. Competition makes businesses both private and public work for your dollar. The US economy has been characterized by a decrease in competition and an increase in monopolies for decades now which is the root of many price hikes and anti-consumer practices.
It's not that being private guarantees that the company will behave well. But it does make it possible.
>The real reason Valve are being the "good guys" at the moment
Ok, but this “at the moment” has lasted at least since 2011. Basically my whole adult life Valve gas been a pretty great company delivering value and not being annoying.
> The real reason Valve are being the "good guys" at the moment
Yep. Valve is seen as virtuous because Microsoft is greedy and the default Windows 11 install is generally viewed as a tire-fire of an OS
Are they doing good things for Linux? Absolutely. As a long-time Linux user I am over the moon that we are where we are. But the general populaton only gives a shit because Microsoft is abusive.
2 replies →
> ...they're family owned
Well that's your problem there.
I do overall agree that Valve is only situationally the good guy here, but they do also have a sustainable approach to business and growth which I think helps this.
Companies doing things for the common good because they feel threatened by competiton is the whole idea behind Capitalism.
5 replies →
I think there should perhaps be a law that any corporation automatically has a new class of un-tradeable VOTING shares, worth 50% of the overall vote, held by the employees. Everybody with an employment contract with this company is entitled to 1 vote, no more, no less; whether they're the janitor or the CEO.
Employees of a company are the ones who are the most affected by the company's decisions, it's only fair that they have a say.
How much is a vote worth in dollars? Because there would be a market for those votes, not just a spot market for dollars or internal market using vacation days, it would be reflected in salary and benefits and company policy etc.
1 reply →
A law like this just means getting full time employment becomes that much more difficult and the vast majority of people working for a company will be non-voting contractors without benefits. The existing employees would even vote for changes that make full time hiring more difficult in order to avoid diluting their own votes.
2 replies →
You can at least in part blame Milton Friedman for this mess. His reframing of ficudiary duty as profit maximisation in his "shareholder theory" has done a tremendous amount of damage. The wariness of people when it comes to public companies is a direct consequence of this.
My understanding of the contemporary argument against publicly traded companies, though I'm not completely convinced of them personally, are that the fiduciary obligations inevitably drive those bad behaviors, and/or that shareholders often demand short term returns at the expense of long term value.
As far as "fixing" the problem, I think it would be important to expand voters' influence over the company in addition to voting changes like you described. I don't know how to make it feasible, but IMO voters should be able to influence or directly decide much lower level business decisions than they currently do
> (There's also strange situations like Google/Alphabet, which is publicly owned, but effectively does not allow shareholders to vote on anything.)
You mean the special class B shares that gives 10 votes per share, right? It isn't just Google though. Facebook and Snapchat also do the same thing, iirc?
Share classes can be very varied(such as preferred shares that get what's left after bond debt is paid off on bankruptcy) but generally what he's proposing(a coop-style one-head-one-vote class) is not common. Not sure if it's legal for US corporations or not(I could swear it is but in any case it's exceedingly rare). The usual principle is one-share-one-vote.
And, famously, Berkshire Hathaway
>On paper it should be a good thing
Not really. Most people have terribly low time preference. Democracy for example is a very bad idea when you account for that (read Hoppe for a detailed explanation). Public company ownership is much better because it doesn't suffer from one vote per person, but still susceptible to much of the same management problems, specially in a society that already favors lower time preference by other means.
I do not deeply disagree with your statement but I do not see the two as exclusive.
I think distributed public ownership placed in a corporation ruled as proposed here provides a chance to harvest residual good decisions from a citizen/shareholder who cares as opposed to having a single decision derived from some other issue a majority of citizens favor.
Unless you're talking about doing away with any kind of voting but Communism doesn't exactly have a stellar track record.
fwiw, Hoppe has become a darling of the extremist authoritarian "alt-right" (curtis yarvin, etc) but has been rejected by more mainstrean thinkers including most libertarian factions.
It's a common pattern. If you're in their service area compare both the food served by, and the employment practices of In-n-out Burger (private) vs McDonald's (public).
>and the company should be able to be externally steered via regular elections in a manner that benefits the public and not just its founders.
Why would anyone believe that this means an organization is well run, or to everyone's benefit? Here in Germany we're notoriously unfriendly to public companies, most of the (well functioning) Mittelstand is private and family owned. And I pray to god it stays that way because I'd rather trust a company whose leaders have their family name and reputation staked on it for the next three generations than I do the amorphous blob called "the public". As Kierkegaard said, in the crowd nobody is responsible.
If you want to see what happens under public ownership visit a public bathroom. I don't want anything externally steered by nobody in particular, I want something steered by a handful of people with names and addresses.
[dead]
Yes, exactly. It's kind of a wink-wink nudge-nudge at this point. A company citing "public good" under the guise of "shareholder value" is not actually supporting the public good at all.
Not that I condone capitalism, or socialism, or communism, or fascism, or any ism for that matter. Ism's in my opinion are not good. A person should not believe in an ism, he should believe in himself.
But a private company, at this point, can arguably affect the greater good just as much as a public company. The rich are getting richer, and the corporate model is just there to support that transfer of wealth.
>We have reached a point where the shareholders are a companies real customers and that is who they all try to attract.
We currently have a handful of AI companies who make no profit, have revenue far below operating costs, their entire business runs on investment and they're posturing themselves for IPOs. Meaning that the reason they can keep the lights on solely comes from attracting investors (and will likely be that way for the foreseeable future).
That's not unique to AI though. That's very common for tech startups.
If they keep doing it, it must be because sometimes it works.
[Slaps roof of barge]
You can fit zo many tulips in this bad boy
While AI is an example, it's an extreme one - the uniqueness here is that the AI companies have very large spend commitments that exceed expected cash generation, even under presumption of no faults and very strong revenue assumptions because infrastructure costs outpace revenue by a significant margin.(1)
This differs quite a bit from a typical venture-backed or boot-strapped entity, which has a realistic pathway to profitability.
https://www.analyticsinsight.net/news/hsbc-warns-openai-coul...
Ponzi schemes work* too.
*At a specific point in time and for certain investors
2 replies →
What doesn't work are the predictions of Uber's collapse, of which there were many, cheered on by a great deal who still gather here looking for the next things to see through.
6 replies →
It’s definitely more than just private ownership. In fact I’d say that’s the least part of it.
Look at all the horror stories about businesses that were bought by PE firms; those are all privately held too.
If you want to be specific that general idea could be elaborated as "private ownership by people that only need the C-suite salary, instead of needing a C-suite plus a fat % RoI on the company's entire valuation because that's how much they just put down as a sunk cost."
In that regard "bought by PE firm" (or most any prospective buyer, really) is functionally equivalent to an IPO. Selling out is, in fact, selling out.
Furthermore, PE ownership generally means (a) achieving ROI as quickly as possible (including by dismantling the company and/or mortgaging its assets), (b) installing leadership who has no ties to the business, and (c) cutting costs to the bone.
It's not just functionally equivalent to an IPO... it's an IPO if all the buying new shareholders were sociopaths.
(Yes, there are the PE companies who run businesses better like Berkshire, but that's far from the most common type of PE)
Private ownership is a necessary, but not sufficient, condition to have a business which has a healthy relationship with its customers. You also need the owners to be people of reasonably good character who understand that the best way to run a business is a win-win approach on both sides, not people who see nothing wrong with extracting maximum profit from the business no matter whom it hurts. The PE horror stories you hear are cases where the owners are in the latter group.
You hypothesis then is that there is not a _single_ public company that has a healthy relationship with its company? Not one, in the entire global public space?
When does this relationship with customers happen? Is it at the IPO? When they file the paperwork? When they contemplate going public for the first time? Or is it that any founder who might one day decide to contemplate going public was doomed to unhealthy customer relations from birth?
The obvious next thing we in society should do is abolish public equity as a concept as a customer protection mechanism?
9 replies →
Theory of abundance, you could classify your approach as. Rather than artificial scarcity to exercise market power.
Could also consider: employee ownership and public ownership
People complain about the latter because they have higher expectations because the institution is supposed to serve them and often has all the diseases of true scale without being able to pick and choose customers. Private industry skates by because people assume it's out to screw them and they can cherry pick.
The difference is that PE firms own firms as investment vehicles, while Valve is owned by people who see making games as their calling.
No, I don't think Gabe's averse to the nice checks, but he is in a business he deeply cares about on an emotional level. He doesn't just want to milk it to the last drop, he wants to leave his mark on gaming.
Passion matters.
But does he have a plan for when he retires?
Is it good enough or should we be monitoring his health and hoard torrents of our steam collection just in case?
1 reply →
Exactly. Going public is like leaving your baby to be raised by wolves.
If you IPO but the founders still have more than half the voting rights, you can fully ignore the public in all your decision making and there is nothing the other shareholders can do.
Can't they sue you out of control? Fiduciary duty and all?
2 replies →
Only kind of. The most obvious examples are big tech companies such as Meta or Alphabet. But they pay their employees in RSUs. If the stock price falls employees make less money and can be lured away.
Private or public, they are making stacks hand over fist. Why cant other companies learn that being good to your customers is a winning strategy?
Because it's not, all other things equal.
Valve can be Valve because HL + Steam, in the same way that Google ~2010 could not be evil because search + ad revenue.
The difference is that Google IPO'd and took market capital, and Valve didn't.
Once public investors are onboard, you maximize profits or face lawsuits.
But thats the point, Valve IS maximizing profits. If they treated their customers like Epic does, do you think people would still be using Valve when Epic is generally a bit cheaper?
7 replies →
I'm not really a fan of this reasoning when in the same breath: Epic is also a private company but has its share of stuff.
It's done some good stuff for the industry and even contributed to some bit FOSS projects. But business is still business.
I think the point was about publicly traded companies becoming inevitably evil due to shareholder expectations, not about private companies being inherently ethical.
This is a pretty serious problem, since we would like lots of companies to participate in public markets so that regular people can gain some of the upside and so there is transparency and increased oversight.
3 replies →
Attributing it to private company behaviour really minimises what Valve chooses to do. Per your counter example: Epic Games has been having a very public meltdown this week regarding Steam's inclusion of Gen-AI labelling - here we have two private companies, with two very different priorities.
It's also worth reminding ourselves that Epic settled with the FTC for over half a billion dollars for tricking kids into making unwanted purchases in Fortnite.(1) Epic also stonewalled parents' attempts at obtaining refunds, going so far as to delete Fortnite accounts in retaliation for those who arranged charge backs.
Furthermore the FTC's evidence included internal communications showing that Epic deliberately schemed and implemented these dark patterns specifically to achieve the fraudulent result, even testing different approaches to optimise it.
https://www.ftc.gov/news-events/news/press-releases/2022/12/...
I don't really get it myself. I personally don't give Steam credit for weakly saying 'hey you need to label something'. Let me know when really enforce it. Heck, let me know when they at least add a filter. That's when you can really impact the behaviour (or prove consumers really don't care).
But yew ,both private companies do their own forms of evil.
1 reply →
Valve's employee handbook: https://assets.sbnation.com/assets/1074301/Valve_Handbook_Lo...
They seem to have a high ownership, consensus driven organizational structure. The only time I'm aware the consensus model was violated was when Gabe overruled a veto to ship Steam with half life 2.
It's very interesting to me because it seems to operate similarly to a lot of anarchist shit I've been involved in, but at a highly effective level. And they make oodles of money.
this is widely known (been discussed on here many times) that the employee handbook was marketing apparatus and doesnt reflect how the business actually works day to day, and never did
1 reply →
> And they make oodles of money.
I see it the other way round: they can do all that because they print money.
Not that it's necessarily a bad thing: maybe they stay relevant because they are doing that.
But isn’t Valve extremely profitable compared to pretty much non private company in the industry?
They have few employees and massive revenue.
They're the #1 most profitable per employee. There are plenty of companies more profitable than Valve, but they have more employees. Valve could hire more employees.
Yes, I meat profit margin which is what public investors care about (in addition to growth).
And IIRC Valve and EA had almost exactly the same revenue figures last year, yet EA had 10x more employees.
On paper it would seem extremely appealing to public investors.