Being a stockholder (one of many in our economy), I worked pretty damn hard for the money I earned. Instead of splurging that money on leisure or stuffing the cash in my mattress, I invested that money in other companies. Those companies are using my money to conduct their business.

Now, some of the companies I invest in are startup ventures - i.e. I am an original stockholder. These usually represent the highest risks. In a well balanced portfolio, I also invest in some "safe" stocks as well, where the risk is much lower, but so are the rewards.

In response to CRC, it don't make a damn fuckin bit of difference that I was not the one that supplied the original seed money. Any accrual in stock value that took place between the initial offering and the current market value of the stock is profit to the original holder of the stock. But by investing in the stock, I am assuming the original terms of the loan. As such, I become a primary stockholder with rights equivalent to supplying the cash directly to the company. The company is, in effect, still using my money. If it were not for the liquidity implicit within stocks - ie the ability to sell them when it serves my needs - then a lot of people wouldn't have put their money into stocks in the first place.

This is not to say that business should be totally unregulated, nor that labor should not attempt to organize. But the idea that stockholders do not do the work is misplaced. Look at any company who's stock became worthless, and you'll find that a lot of people - both inside and outside the company lost a lot of money. The employees may have to go out and find a new job but they did not lose money that represents past labor - unless, of course, they were stockholders.

...yet many of them went belly up. For each person that was in it as a scam, I would assume that there were many others that really thought they had a chance for success. Hindsight is 20-20, and based on current economic conditions, we know that only a few of them really ever had a chance of survival.

Actually the dot com bust is not particularly unique when it comes to new markets that open up. Simulataneously, state deregulation of power, telecommunications, and biotechnology resulted in a 'gold rush' of the same sorts - you could also look for parallels in the development of radio and tv companies earlier in the 20th century. Whenever a new line of business opens up, there is invariably an influx of money, capital and labor. In almost every situation, these are (a) extremely risky; (b) prone to scams; and (c) beneficial to the health of the economy in the long term (although the short term results can approach catastrophe).

Any individual whose primary objective is "job security" should steer clear of new markets. Even if the individuals involved are honest, the chance of failure is still very high - not all businesses fail simply because management and stockholders were greedy. Starting a business as an entrepreneur is an extremely difficult proposition. Finding people to doubt your sanity is very easy.

If you have a business plan that simply can't be executed without outside/venture capital, you pursue it.

Most startups have an extremely difficult time doing simple things like meeting payrolls, attracting talented people, paying vendors, etc. Without an influx of venture capital, many of them are doomed to failure. Since the investors are assuming some of the risk, it is obvious that they should share in the rewards.

Having seen many startups up close, one danger that the entrepreneur faces is that they end up giving too much away in order to get the needed funding. I've seen situations where the investors ended up owning everything, when all was said and done. I'm also working for a startup at the current time that has tried to resist outside investment, hoping to hold to 100% ownership - but the allure of getting some funding is a very strong attraction.

But if attracting outside investment is the point of the business you don't have what I would consider a valid business plan.

What you are describing is not so much a business as a scam. If it is a business, it is based on the model of making money by bilking investors, rather than setting up a business to supply goods and services to other businesses or consumers. These sorts of businesses will inevitably fail as they are based on unsound principles of making money.

The preference for blaming these things on fraud, though, misses another aspect - that of the culpability of the employees. I notice that there were not a lot of software developers that were complaining that these companies paying them too much money - offering to work for less money. Software developers were willing to change jobs at the drop of a hat and charge well over six figures for work that was, in hindsight, based on a fraudalent pyramid structure. Had these employees resisted the urge for short term megabucks, it's possible that not nearly as many companies would have bombed - thus increasing the total number of jobs in the economy over the long haul - which you consider the primary goal of business.

So I'm back to my original point: The main purpose or a business is, or should be, to provide a living for its employees.

That's quite a stretch. First you outline that business should be predicated on sound principles for making money over the long haul. Although I agree with that assessment, what you seem to really be implying is that only those markets which are not risky should be explored. The problem with low risk ventures is that they are generally few and far between or they are commodity markets. Yes, business must try to minimize risk as much as possible, but the system is based exactly upon the idea of taking risks - that's how new jobs are created in our economy.

Even allowing that owners of business should put in place a viable business plan, the plan is still geared towards making the owners money - you've just shifted the time frame involved - from short-term to long-term. The ownership still has a vested interest in making money over the long haul. If no money is made, or if it is a money losing proposition, then the company will sooner or later become unviable.

Or to analyze the [link|http://www.eagletribune.com/news/stories/20001210/FP_004.htm|Polar Fleece] example you cite:

"His company is a family business, and therefore, he can do pretty much what he thinks is the right thing to do," said Frank Leary, a professor of business administration at Northern Essex Community College. Publicly held companies have stockholders to answer to. And stockholders care about profits.

Implicit within this statement is that a family business is somehow more ethical than a corporation. Having worked for some family businesses over the years, I'd say that they are, on average, no more benevolent - with exceptions leaning both ways.

That said, this is a nice bit of public relations that was pulled off. Somehow, this owner has the media and employees believing that he has no interest in 'profit' - that's only something that stockholders care about.

"He looks at it from a long-term investment point of view," Mr. Leary said. "He knows he has highly motivated, highly trained people that are available, and if he moves, it will take him time to get up to speed, to hire, train, motivate and assure quality control. His advantage is that he produces a high-quality product and has great confidence in the expertise of his workers. He thinks that his workers are an asset of the same value that capital equipment would be."

So, what he really wants is to do is hold on the current employees as assets, so he doesn't risk his company in some foreign country that doesn't have skilled labor. In other words, in his valuation for making money, he thinks that the extra productivity of his current skilled workers may will outweigh the costs to shifting from a cheap - but unskilled - labor force.

Yes, the evidence seems to indicate that the owner made a sound economic decision - a decision that resulted in saving many "American" jobs. But the purpose of this businessman was not simply 'to provide a living for its employees', it was to make money. He should be commended for making a decision which will result in profit, based on a long term strategy. I wish that more businesses would get out of the quarterly time frame.

Anyhow, Polar Fleece is simply one example of how profits and treating employees like assets need not be mutually exclusive.

Consider Michael Douglas' speech in Wall Street where he basically lays out the capitalist owners' mantra: I don't produce things, I own them. He is willing to break up a company and sell it off, putting people out of work, as long as it makes him money. Is the purpose of a company really supposed to be that it gets shut down?

Wall Street was an unbalanced treatment of the subject, and although it is told mostly from the perspective of the investors, it is intentionally scripted in a biased fashion aimed at provoking a reaction against those same players.

A far better movie on the subject was 'Other People's Money' where the issues were presented much more clearer. Even though Gregory Peck is presented as a man of character interested in the employees and Danny Devito as a raiding scumbag, the argument they have in their final speeches cuts through all the crap and exposes it in a much better fashion than Wall Street.

Does the company exist so that you may invest in it? I propose that the company exists so that its employees may earn a living. The capitalist system has proven to be the most efficient at attracting resources to a given endeavor, but has caused people to believe -- incorrectly IMO -- that serving the investors is the primary purpose of that endeavor.

By definition, a capitalist system is based on the very foundation of ownership of factories. The ownership of that capital entitles the ownership to do with it what it wants. Employees have four options if they don't like the way a company treats them: (1) find employment elsewhere; (2) have or develop skills which increase your potential to generate profit for the company beyond which other such employees can attain; (3) live with it; or (4) organize a collective bargaining unit. Even in the case of Unions, collective bargaining does not bestow ownership of capital to the labor class - unless, of course, they arrange some sort of employee stock options.

If a company is breaking even and its employees are getting paid, I don't think it should be broken up just because it makes the owners more money that way. I don't think a CEO should cut a company's workforce by 30%, saving $16-million and driving the stock price up by 3 points in the process, only to be rewarded by the board with a $16-million bonus.

Well, in the case you cite, the market is saying that this company should be smaller - remember that the market says things by assigning a monetary value to actions - an opportunity cost per se. As the movie I cite above talks about, you want to use my money to keep people on the payroll - essentially robbing me of the freedom to invest in other companies that may, just may, be more efficient and viable in the long term.

More fundamentally, the problem with your analysis is that it is wishful thinking, when not accompanied by some economic motivation. Companies are owned by stockholders - it's a capitalist system where the investors, not labor, own the means of production. Just because we think that the system should care about their employees does not make it so. As I've stated several times, business (by which I mean the owners of business) are in this to make money. They are not in it just to perform some social good, especially if it effects their bottom line.

As for my own perspective, I would probably agree that a business should care about their employees - especially if I'm the employee involved. The difference is that I think it a self-delusion to think that business operates for any other purpose than to make money - be it for the sake of the stockholders, management, or employees. Since this is a capitalist system, employees are on the low end of the totem pole. And upper management, which are usually coaxed with stock options, is invariably going to side with the stockholders.

Any example of how abhorrent management can be in their treatment of employees is quite simply nothing more than proving my point - money is what talks.

You can very well start a business for some other reason -- even in America, you have the concept of "A Not-for-profit Business". Actually, perhaps only in America do you need to have that as a separate concept -- my guess is that this is because elsewhere, people aren't as likely to forget that the possibility exists, so they include it in the general concept of "A Business".

I think a case can be made that these other goals are not inconsistent with making a profit - indeed they can alter the balance in it's favor. Most business is run by bean counters who's very job is it to not just make the company survive, but also thrive.

I wouldn't be willing to stake a claim that many businesses (and individuals) don't have other goals in mind. But I have yet to find a company that isn't totally infatuated with the bottom line - even non-profits can treat their employees as commodities as they seek to maximize input and output.

99%[*] of the money "provided" by 99%[*] of current stockholders is "provided" to other, previous stockholders! Only the tiny proportion of money used to purchase stock in publicly (or privately, for that matter) traded companies that represents stock bought on initial (and various forms of additional) issue, actually goes to "the corporations" -- but of all the trillions of dollars of stock trading that goes on every day, all over the world, the overwhelming majority is paid to whoever happens to own the stock that you're purchasing from them, which is usually not "the corporation" in question, itself.

Are only those who are original investors deserving of compensation for their money? By delineating a difference between intial holders and players that get into the game later, you seem to make to case that a stockholder who buys stock on the open market is not supplying money to the corporation, and therefore is not an "investor" in the company.

The money supplied to the corporation in the original issuance of the stock is still floating around in the companies books somewhere - it did not suddenly disappear simply because the original stockholder got out when things were good. The new stockholder has assumed that debt and paid the original stockholder some additional cash based on the current market value of that stock. That additional cash that was supplied to the original stockholder represents a profit for making their original investment. As I said in another post, one of the primary attractions of stocks is the ease with which they can be bought and sold - ie their liquidity.

Or are you making the case that it is unethical for a stockholder to sell their stock at a profit? Such things would certainly discourage anyone from investing in companies - ie supplying cash.

As one consequence of the preceding, most of all current stockholders are NOT "the ones who provided the money to the corporations", nor are hundreds of "generations" of prior holders of the same stock. To (most of) them, the stock is not really a "share of a business" at all, but just a piece of paper that in itself represents a potential profit -- another kind of lottery ticket, pretty much[#].

Over the long term, investment in the stockmarket seems to be a good investment. As with anything in our economy, there are ups and downs, with certain losers and winners in the short term - ie speculators. But calling the stock market a lottery is a bit of a stretch. It might seem strange but lotteries and gambling are a much more predictable model of conducting business than is any investment in the stock market.

What makes lotteries and gambling so much a vice is not the risk involved, but rather the very lack of risk involved in the companies or states that are conducting such things. Take any casino, and I'll wager that they know exactly to the fractional percentage exactly how much they will skim off the top. Lotteries are even worse, where they legally designate the percentage of money that is removed from the pot before awarding to the winner. In other words, the lottery is not like the stock market because it represents a rigged game. The stockmarket shares the concept of risk with the sport of gambling, but I'd venture to say that risk and gambling are seperate concepts.

No, they really aren't. Imagine, Chris, the opposite: A "corporation" that is explicitly designed not to provide "the economy" -- society as a whole, as we who haven't been blinded by our MBA degrees like to put it -- with some tangible good;

You confuse two subjects. First, what is the purpose of going into business from the standpoint of the persons doing business? The second concept is much different - why do governments (from a societal standpoint) allow business to operate?

Now one can easily argue that businesses are in the business of making money. Depending on your political leanings, one can argue whether such self-serving behavior is good or bad. The free market economists try to make that case that behavior which is geared toward unfettered markets will tend to serve the public purpose by providing jobs and political stability as a side effect. But the creation of jobs and economic stability is not the primary purpose of business.

Even a resolute marxist would agree that the purpose of capitalistic business is to make money. But they tend to view it as a case of business (capital) making their money at the expense of employees (labor). Now I suppose it's possible to be an idealist and believe that business has some other goal in mind, but I'd say the evidence would be scant and assume a certain amount of benevolence to the corporate heads that I fail to see.

In my more (pragmatic?) view, companies will treat their employees like shit if their is money to be made at treating them like shit. If a company has an economic motivation to build up trust with employees and treat them as a valuable resource, then they will do so.

The only question is whether business really has the foresight to see which strategy leads to a maximum. Or whether they choose the easy, but possibly less profitable, route.

After the first wash of the day, the shirt is already clean. (Basically, any other make-work bullshit, or a Ponzi scheme [i.e, the same thing, only without even the illusion of useful work], will do for the example.)

Are you making the assumption that all business transactions have to represent some societal good? Many transactions have a very neutral effect on the overall good of society - they neither help nor hurt. Other transactions have a very deleterious effect - environment, etc...

Most governments are not too concerned upon money flipping, as eventually such schemes tend to economically unviable in the long term. Though there are rules and regulations (SEC) which try to minimize the amount of damage when such schemes tend to fail - i.e. they seek to protect investors. But the protection is not geared towards preventing people from spending their money on schemes they know are not producing goods and services. Rather the protection is aimed at preventing companies from passing off such schemes in a manner that it appears to be a valid business from the outside.

Not that such regulation is 100% effective. When you have companies like Enron doing such things, and a supposedly independent accounting firm giving their blessing, it's hard to judge these things as an investor. The harm is not in all the jobs created by such schemes, but rather the deception in trying to pass these things off as something which they are not.

As one consequence of the preceding, most of all current stockholders are NOT "the ones who provided the money to the corporations", nor are hundreds of "generations" of prior holders of the same stock. To (most of) them, the stock is not really a "share of a business" at all, but just a piece of paper that in itself represents a potential profit -- another kind of lottery ticket, pretty much[#].

Much of the modern economy is predicated on the invention of new forms of money. Cash - which is just an IOU - is simply one form that people use to conduct transactions. Barter is also useful in very limited contexts, though it tends to be much less efficient.

Other forms of liquid assets include things like stocks and bonds, which are also promisary notes. Like cash, they have no intrinsic value in and of themselves, but they do "represent" the ability to translate that piece of paper into goods and services, or at least other forms of paper (ad infinitum).

The modern economy is very much dependent on a variety of forms of money. Without said instruments, we as a species tend to sit on top of our money, resulting in less (efficient?) transactions. From a psychological standpoint, we tend to trust these little pieces of paper, even though they have very little value in and of themselves. We do a lot of exchanging of paper and the exchange of that paper is very fundamental to keeping the world economic engine flowing - albeit not always smoothly.

Attempts to regulate the flow of money have met with very little success. Some instruments, such as junk bonds, can be successfully regulated only to the extent that perceptions can be altered to cast doubt on their ultimate exchangeability - kind of like confederate dollars. But as long as people are willing to trust these soft forms of money as liquid assets, then there will be people that are more than happy to issue their IOU's in exchange for more widely accepted forms of paper.

The reason people do not invest in cash (beyond the currency speculators) is that they tend not to multiply very fast. If I invest an hour of my time and labor to get a dollars worth of cash, I'd probably be foolish to sit on that dollar, as it has no built in monetary interest - indeed with inflation it's value will likely go down in time. In addition, if the government is overthrown or decides that it will no longer respect said dollar, it becomes a worthless piece of paper. Of course, if the government is stable, has a sane monetary and fiscal policies, then I can somewhat trust that the dollar will retain some of it's value over time.

The same aspects are also applicable to stocks. If I invest in a stable company that has sound practices, I'll probably do better than if I hung onto the cash (and sometimes better than simply putting the money in a bank). At some level, I have to trust that the company is a safe investment, where the corporate heads won't have a meeting someday and decide to walk off with all the company assets and set up shop in Brazil.

Now to the original question. Why are there such wild fluctuations in the paper dollar to stock price? The answer is quite simple. Lots of people make mistakes in determining the true value of a piece of paper. No surprise there. From the stockmarket standpoint, such fluctuations are not just frivolous exchanges, but rather they are the instruments by which the true value of stock (ie the worth of that piece of paper) can be found. Without those fluctations, the economic value of stock will not get corrected.

There will be winners and there will be losers. Those that make the correct decisions will be rewarded. Those that make incorrect decisions will be punished. Such things are intended to provide a risk-reward relationship, so that the economy can move towards equilibrium at a much faster pace. It's all about money - with money being little more than the perceived value to translate a piece of paper into something more tangible or rewarding in the end. Instead of stocking up on nuts for our future, we stock up on the promise of something that can be exchanged for nuts somewhere down the road.

That's just simply a sign of a bad set-up; so, yes, again: "The concept of incorporation" may not be so fucking great as you seem to think.

Depending on what your "goals" are, it's the most incredibly efficient instrument of money invented in the last millenium. Not great at protecting the environment or providing job security. But incredibly efficient at supplying cash to the corporate world. Because the pieces of paper are passed out in a very liquid form of money, where the exchange amounts to the trillions of dollars (remember that dollars are as arbitrary in value as are stock certificates), a lot of people are willing to invest in business.

The U.S. economy may not be too everyone's liking, but it is pretty damn obvious that it is a machine that is hard to deny the level of activity associated with it. The stock market plays a very central role in that machine. So much so, that the stock market is almost an economy onto itself. It provides a form of money that a lot of people are willing to invest in, thus creating a sink for more businesses to thrive.

Are such forms of money any more illusory than say "information", which is yet another form of money - though not nearly liquid. Information is only useful to the extent that it can be converted into something tangible. Or are we tend consider the only real form of economic activity revolves around those items which involve survival of the species - food, clothing, shelter, etc (heck the case can made that most clothing is not a tangible good, since we could survive without it if we didn't have those pesky morals in our collective heads).