For all the hype about U.S. President Donald Trump’s alleged business prowess, the painful truth is that high-speed trading, modern financial analytics and political corruption have produced an auto-destructive loop which is killing publicly traded companies before their time.
Companies survive now almost solely on their ability to generate continuous profit growth. Not by offering good products and services which generate long-term stability.
The result is a kind of corporate feeding frenzy where the survivors get progressively bigger and less numerous. Meanwhile, billionaire investors like Bill Gates and Leon Black becoming more and more like modern-day royals with each passing day.
Politically, this dynamic is a pathway from representative democracy to corporate oligarchy. As near monopolies like Wal-Mart, Amazon, Goldman Sachs, Apple, JP Morgan, and Google purchase political protection and write their own government regulations.
No company which sells shares to the public can survive for long in this unsustainable climate. Young companies like Cabelas (which held its initial public offering in just 2004), Blackberry (IPO 1997), Under Armor (IPO 2005), Boston Market (IPO 1993) and The Sports Authority (IPO 1994) are growing fast and dying young. Meanwhile, older companies like Sears, IBP, Radio Shack and Toys-R-Us are struggling to attract investors to proven business models and going belly up.
Sadly, our corrupt elected leaders are too busy running their political protection rackets to address these unintended consequences. CEOs are too busy spinning the corporate hamster wheel to grasp the downward spiral.
Here’s how the auto-destructive loop works:
Pretend the U.S. Congress and the President run an orphanage with 200 kids. They have enough Beefaroni in the presidential pantry to feed them all, but are required to serve only the strongest 10 percent and ignore the rest.
After six months only 20 kids are left. The rest have either starved to death or run off.
The survivors have names like Apple, Wells Fargo, Facebook, Apollo Global Management and Berkshire Hathaway. The dead kids have names like MySpace, Enron, General Motors, and K-Mart.
After nine months only Amazon and Apple remain. They’re big strapping lads, but Congress is not allowed to feed them both. Even though it has enough food for 200.
The rules still dictate that only the strongest 10 percent get fed. Meaning the strongest one out of each 10. So, they wind up with only Amazon after 12 months.
One day, Amazon CEO Jeff Bezos takes a long hard look around the orphanage and realizes he can pretty much do as he likes and the Congress and President he owns are powerless to stop him. He doesn’t want to collect online sales tax anymore and compete fairly in a free market. So he doesn’t.
The politicians on his payroll say and do nothing – which is essentially where we are politically with the gun lobby right now.
Jeff is sick of Beefaroni. So he joins federal lawmakers in the Senate Dining Room one day and barks out “make me a sammich.” Like he’s running the place.
A few weeks later, Jeff realizes the federal government exists only at his pleasure and is incapable of defending itself. They’ve got no friends left but him, because everybody else is either gone or powerless or on his payroll. Just like them.
So Jeff quietly takes their keys, orders Congress and the president out of the District of Columbia, and locks the doors of The White House and U.S. Capitol Building behind them.
This is essentially what’s happening right now in the world of for-profit corporations. Sadly, our government is so broken it can’t do anything to stop the carnage and protect itself. Or us.
We’re not talking about profits and losses here when we talk about what ails our publicly traded companies. We’re talking about the need to generate annual profit growth of at least 8 percent a year and qualify as a growth company with investors, or die.
Big data is fueling this loop. Forever profit growth is the reason why profitable publicly traded companies like Carrier lay-off workers, force them to work OT for free, charge more for cheaper ingredients, and even break the law to rig prices like Enron. Year after year after year.
It’s the reason our multinational companies got away with warehousing their profits overseas and were allowed to bring them home this year without paying all their taxes, thanks to our corrupt lawmakers.
It’s the reason Big Banking CEOs aren’t eating cold pancakes in the Lewisburg Federal Prison Camp in Pennsylvania for precipitating The Great Recession with their toxic mortgage backed securities.
It’s the reason companies like Under Armor are burning out and dying young, instead of maturing into stable job hubs.
It’s the reason companies like Apple are offshoring jobs to low-wage nations like China, where they make their iPhones, while still charging high-wage prices for them here in the U.S.
It’s the reason Human Resources is engaged in systemic age discrimination against older workers, who cost more for companies to insure. With our own government’s tacit approval.
It’s the reason Wal-Mart just eliminated all of the assistant store managers who traditionally served as its Uncle Toms, by exploiting underpaid rank-and-file workers, and ordered the layer of management above them to do more for less.
It’s the reason fast food companies like Taco Bell replaced 40 percent of the beef in their tacos with wood cellulose.
It’s the reason fast food companies like McDonalds turned from real beef to “pink slime,” which is a kind of Jello made from “offal.” Meaning the bovine intestines, teeth, bones and hooves once reserved for conversion into animal feed and fertilizer.
It’s the reason sodium levels in processed foods are giving 40-year-olds high blood pressure, heart attacks and strokes with our own government’s tacit approval. Sodium is used in preservatives, which boost corporate profits by reducing corporate losses due to spoilage.
The U.S. had about half as many publicly traded companies in 2016 as it did in 1996, according to Credit Suisse. Listings fell from 7,322 to 3,671 during that 20 year span.
The U.S. population grew by 54 million people – nearly equal to the population of Italy – to 323 million during that time.
We lost 50 percent of our publicly traded companies while our population was growing 20 percent because the money pouring into the Amazons and Facebooks of the world doesn’t come from no-where. It comes from less profitable companies and from exploited consumers and employees.
Before 1990, it was a lot harder to accurately compare all the publicly traded companies in the world to determine which were growing fastest. Investors had a rough idea and were willing to put up with the modest ups and downs of a profitable, mature company like Sears in exchange for their relative stability.
Today’s computerized trading programs have no such compunctions. They’re in and out of stocks hundreds of times a day, which creates a feast of financial resources for those with the strongest short-term profit growth and famine for the rest. That’s why the rich are getting richer like never before.
Corporate stability is a thing of the past now. Growth has become a breakneck race to the bottom.
When it doesn’t happen organically, companies are not shy about creating the illusion via aggressive cost cutting. That’s why most American workers have been laid off at least once since 2001 and will be again.
This is a downward spiral and self preservation is no longer a collective instinct our nation possesses.
How’s it all end?
You tell me, you’re living it.
This isn’t something that might impact you personally down the line, like Climate Change, or is happening to someone else, like last week’s mass shooting at Marjorie Stoneman Douglas High School.
You can’t hide from this decline while you wait for some political hooker to do your fighting for you. If you haven’t been laid off yet, you will be, and if you’ve gotten a pink slip then you will again.
So I guess I’m the one who should be asking you the questions. Instead of your asking me.
Question No. 1: When do you get off your ass Mom and Dad, pull the Fox News propaganda drip out of the back of your head, and do something?