How the markets ruin great companies
It gives me no pleasure to once again have to discuss the long-standing issue of the way companies are capitalized, which in practice is a disincentive to good management and innovation.
This can be perfectly illustrated by two recently published articles: “TikTok’s enshittification”, by Cory Doctorow; and another in similar vein by John Herrman in New York Magazine entitled “The junkification of Amazon”. The authors’ choice of words leaves little to the imagination: companies, driven by the dynamics of the markets and their analysts, tend to become shittier, junkier.
Why role do the markets play in this? In practice, that depends on the forces behind them. Markets are not short-sighted for no reason, but because a cohort of incompetent analysts whose choices are often bettered by a monkey throwing darts at a wall, decide to make completely misguided value judgments about the companies they supposedly analyze.
Examples of companies clearly damaged by the tyranny of markets that value only the short term and quarterly numbers abound. Amazon is a particularly interesting case, because we are talking about a company that, for many years, was willing to ignore those analysts, favored growth over profit, reinvested everything it earned and more, and continued to rise consistently. Now, however, it is incapable of making the right…
