As the news settles down about Microsoft-Yahoo-Google dealings, I can’t help but reflect on a few things. Namely, the fate of these companies–at least in the stock market–is almost always tied together. They’re independent companies, yes, but when one is impacted by something they either all trend up or down together. Just look what happened over the last six months or so with Google, Apple, and Microsoft stock. There are very similar patterns in all three. Yep, their fates are tied together–not strongly, but tied enough.
Think back to when the DOJ made its anti-trust ruling against Microsoft back a few years. Is it a coincidence that it wasn’t just Microsoft that got hurt in the stock market after the decision, but almost about everyone? Put another way, almost all the tech companies rode a wave up and almost all rode the same wave down.
Now not all of the companies perform exactly the same. That’s where the real money making comes in for the traders. They predict when Apple will outsell the bunch or when Yahoo will fade back from the pack. But there’s no denying that one can affect the others.
The other point I’d make is that all of this focus on shareholder value isn’t the healthiest thing to do. The only focus of a business is not to maximize the return for its owners. Never has been. Never will be. Show me a company that’s doing this and I’ll show you a company that’ll be gone in no time flat. It’s important to keep making money, yes, but it’s not the only thing and there are many, many legitimate things that a company may need to do which at any given time do not maximize the returns for its owners at that time. It’s the time period that’s so crucial to everyone. And that’s the key. That’s where the money’s made. When a handful of people maximize their returns relative to the others because they did or did not maximize their returns earlier. Put another way, owners don’t cash out at every chance they get. It doesn’t work that way. I can appreciate why there’s talk of “maximizing shareholder value,” but it’s implementation is quite nefarious. There’s no recipe–except for sell now and if everyone did that right this minute, there’d be a terrible collapse in all businesses. They’re all that connected.