What does a BIDEN Presidency look like?

[alfred russel]

Those are kind of crazy amounts of money.

News reports Apple wants to enter the car business, but is having trouble finding someone to manufacture their car for them.

They could basically take that stock buyback money for one year and go out and buy GM (total market value $74 billion, though obviously you'd pay more on a takeover).  Ford would be even cheaper, but I think the Ford Family still has control over the company.

Exactly.

But who would be better at running GM, Apple management or GM management? Cynicism aside--the expertise of Apple is software and GM automotive--presumably the answer is GM.

Rather than Apple buying GM, wouldn't it be better to give the shareowners of Apple the $74 billion to invest in GM, or whatever company they want? Or for their kids college, a new house, etc.

[Barrister]

But who would be better at running GM, Apple management or GM management? Cynicism aside--the expertise of Apple is software and GM automotive--presumably the answer is GM.

I know Apple has basically no experience in manufacturing... but this is GM management we're talking about.  I'm not so sure about that answer.

[The Brain]

GE?

[DGuller]

There was a recent story about how TSMC of Taiwan is spending $24 billion on a new chip fabrication plant in Taiwan.  That is no happening in the US.  There are fabrications plants in the US - TSMC built or is building two of them and the other major player is US registered company that is actually owned by Abu Dhabi.  I'm not saying that a US company *must* be involved in building such plants in the US but they do have strategic value in an era of heightened conflict with China and there isn't any good reason why US companies shouldn't be involved in this kind of investment.  The money though substantial is no real obstacle - Apple alone spent more than three times that amount in share buybacks in 2019.

I agree that strategically it's very important for there to be a big chip fabrication capacity in the US, just like it should've been important for Canada to have a vaccine production capacity.  I don't see how stock buybacks have anything to do with this, however.  Companies typically don't make investment for the sake of strategic interests of some country out of the goodness of their heart; typically the country has to offer subsidies to companies if it wants to have more manufacturing capacity than what they get organically from the private sector.

[crazy canuck]

If the owners want short term thinking and even put bonus systems in place to achieve it, then why deny them this pleasure?

If only the world of publicly traded companies worked that way.

Every decision made in the board rooms are shaped by the current regulatory and tax environment. Changing the regulations and tax legislation will shape the decisions to be different, but there's nothing about the current state of affairs that's particularly objective or neutral or anything.

So the answer to the Brain's question is "because it's in society's interest to deny them this pleasure." Just like it - apparently - has been in society's interest previously to encourage them to indulge in that pleasure (that, or because society has messed up the way they've implemented various regulatory schemes).

There are two different issues here.  One is the one you have identified which is that the regulation is in the best interests of society in general.  I don't disagree with that at all.

However, I was addressing the second issue of whether it is even in the narrow interests of the shareholders.  I don't think that it is as a general rule, and so even if one discounts the benefit to society, and fixates entirely on what is best for shareholders, Warren's proposal still makes good sense.

Brain somewhat naively posits a situation in which shareholders somehow run the show.  There are a lot of efforts being made by shareholders' rights lobbyists and activists (if we can use that term in this context) who are pushing for greater shareholder rights, but we are a very long way away from the "owners" getting the corporate decision making they want.   

[Eddie Teach]

GE?

They bring good things to light.

[crazy canuck]

Those are kind of crazy amounts of money.

News reports Apple wants to enter the car business, but is having trouble finding someone to manufacture their car for them.

They could basically take that stock buyback money for one year and go out and buy GM (total market value $74 billion, though obviously you'd pay more on a takeover).  Ford would be even cheaper, but I think the Ford Family still has control over the company.

Exactly.

But who would be better at running GM, Apple management or GM management? Cynicism aside--the expertise of Apple is software and GM automotive--presumably the answer is GM.

Rather than Apple buying GM, wouldn't it be better to give the shareowners of Apple the $74 billion to invest in GM, or whatever company they want? Or for their kids college, a new house, etc.

Yeah, who would ever think a tech guy could run a car company and become the richest man in the world.  Crazy talk!

[The Minsky Moment]

And Apple has in fact been looking at autonomous driving and made some tentative investments.

[alfred russel]

If you guys think that Apple's competitive advantage is superior management skill and they are better placed to run companies in unrelated industries, you don't have to convince me. Apple has the money to make it happen: you just need to convince their board and shareholders, who are presumably unconvinced at this stage.

[The Minsky Moment]

The three principal places where people use electronic devices and interactive services are the home, the office and the car.  If I were on the Apple board I would want to know what we are doing on category 3 and why we are behind.

The premise stated earlier - "who would be better at running GM, Apple management or GM management? Cynicism aside--the expertise of Apple is software and GM automotive--presumably the answer is GM" is mistaken because it distinguishes between "software" and "automotive".  "Automotive" - to the extent that it connotes the substantial expertise and knowhow relating to the production of mechanically complex internal combustion engines is rapidly becoming obsolete.  The modern electric car is basically software on wheels.  The key value add components are battery technology, software, and interior design.  GM doesn't really have historical expertise in any of those areas except the latter, and even there GM outsources a lot of that work. 

Elon Musk correctly saw that the kind of skills and expertise found in Silicon Valley would be critical to the next generation of automobiles and that the traditional car companies would have to struggle to adapt themselves.  I would question why Apple didn't see that and why the roads are filling up with "Teslas" instead of "iCars"

[The Minsky Moment]

Another way to look at it is imagine it is 2005.  Apple has become the dominant player in the music industry with the hugely successful iPod and the iTunes store.  They also have a profitable niche line of premium computing products.

At this point someone goes to the board and suggests that Apple should enter into a completely new market.  One that is presently characterized by razor thin margins and brutal competition from powerful well resourced companies like Nokia and Motorola: mobile phone handsets.

If Apple had followed AR's reasoning, that suggestion would have laughed out of the board room.

[DGuller]

This line of discussion strikes me as a silly rabbit hole.  Taking the chain of logic from the beginning to end, it seems like we're saying that Elizabeth Warren is right to want to forbid stock buybacks because Apple needs help understanding where they can make profitable investments.  We think Apple management is smart enough to be able to do a better job in an industry completely foreign to its core competency, but dumb enough to not realize it.

[Berkut]

This line of discussion strikes me as a silly rabbit hole.  Taking the chain of logic from the beginning to end, it seems like we're saying that Elizabeth Warren is right to want to forbid stock buybacks because Apple needs help understanding where they can make profitable investments.

I think it is more that rejection of the Warren position that stock buybacks should be restricted based on the presumption that companies are all super smart and know best what is best for everyone is pretty easily refuted with some examples that in fact companies often do not make optimal decisions, and there is no particular reason to believe that buying back stock is somehow magically a thing where simply because a company does it, we should a priori assume that was the best possible use of that money for all stakeholders involved.

[Sheilbh]

The three principal places where people use electronic devices and interactive services are the home, the office and the car.  If I were on the Apple board I would want to know what we are doing on category 3 and why we are behind.

The premise stated earlier - "who would be better at running GM, Apple management or GM management? Cynicism aside--the expertise of Apple is software and GM automotive--presumably the answer is GM" is mistaken because it distinguishes between "software" and "automotive".  "Automotive" - to the extent that it connotes the substantial expertise and knowhow relating to the production of mechanically complex internal combustion engines is rapidly becoming obsolete.  The modern electric car is basically software on wheels.  The key value add components are battery technology, software, and interior design.  GM doesn't really have historical expertise in any of those areas except the latter, and even there GM outsources a lot of that work. 

Elon Musk correctly saw that the kind of skills and expertise found in Silicon Valley would be critical to the next generation of automobiles and that the traditional car companies would have to struggle to adapt themselves.  I would question why Apple didn't see that and why the roads are filling up with "Teslas" instead of "iCars"

For what it's worth - and Zanza will know a lot more - the whole connected car market and use of software in vehicles, but also use of data from vehicles is from my understanding very big and very important for the car manufacturers (and insurers) now.

From a quick look at Wiki the US manufacturers seem a little behind the South Korean, Japanese and German ones in getting into this market.

Another way to look at it is imagine it is 2005.  Apple has become the dominant player in the music industry with the hugely successful iPod and the iTunes store.  They also have a profitable niche line of premium computing products.

Yeah - this also goes for other areas like payments where they're not dominant but you would not have expected them at a certain point. And it's a big fear of the banks that a company like Apple or Amazon moves into the profitable areas and the banks get turned into low-margin utilities businesses like water or electricity companies.

[Sheilbh]

This line of discussion strikes me as a silly rabbit hole.  Taking the chain of logic from the beginning to end, it seems like we're saying that Elizabeth Warren is right to want to forbid stock buybacks because Apple needs help understanding where they can make profitable investments.  We think Apple management is smart enough to be able to do a better job in an industry completely foreign to its core competency, but dumb enough to not realize it.

So my point isn't that it's about the companies but about the economy. There may be lots of good reasons for individual companies to make this decision - looking at it from a macro/regulatory perspective do those decisions help or harm the economy in general and then we should try to create incentives for decisions that do and restrict decisions that don't or at least make them unattractive.

This is why my question to AR wasn't what are the benefits to a company for doing buybacks, but what are the benefits to the economy for buybacks because I think that's the frame that government should look at things.

Edit: Just as a tiny example - AR could be right that the companies using bonds to fund buybacks are actually just making a smart decision given the cost of debt right now. That may be true on an individual level but does it create credit risk looked at from a wider perspective - are there companies issuing speculative to fund this, is there concentration in specific markets, how much are companies already leveraged etc.