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"tomasz polly petia" Discussed on Business Casual

Business Casual

05:44 min | 1 year ago

"tomasz polly petia" Discussed on Business Casual

"Editor can be grant and now let's get into. This is part two of my conversation with venture capitalists billionaire and outspoken critic of Capitalism Tomasz polly Petia. If you haven't listened to part one of this interview with trauma I highly encourage you. Go check it out now. To today's conversation we just left off with trauma explaining why companies prioritized innovation productivity hiring the right people can theoretically succeed and even contribute to shrinking some of the negative impacts of wealth disparity but for every company. That is doing the right thing. There's a company that is not doing the right thing so we're going to start this conversation by talking about why those companies that should fail sometimes. Don't then we'll talk about why. Those Zombie companies seem to get endless. Second chances the role of here's where the government machine might be selling short and so much more moss why are these companies that aren't prioritizing innovation and prioritizing productivity failing they're not failing because there is enough debt in the world and there are enough banks in the world and there are enough of this debt bat will allow these companies to basically stay on life support so meaning when a company is sort of like losing money and hemorrhaging money if their product is fundamentally flawed which is a small strain. They go bankrupt and they liquidate and then they go away and they disappear but most companies fall into different grey zone the belly which is like eighty percent of companies which is sort of. You know what I call. Zombie companies and the Zombie. Companies are ones where you know some quarters break even some quarters a little bit of profit. Most quarters are unprofitable and instead of saving money and investing it in the future they become very short-term because they don't have any good ideas and this is where you know. Ibm is a is a perfect poster child for this Ibm as a company over the last fifteen years or so twenty years they they spent one hundred and forty billion dollars on buybacks. It's one hundred billion dollar revenue company it just printed its worst quarterly revenue since nineteen ninety eight. The last CEO who just stepped down she oversaw twenty. Four straight quarters of revenue decline yet. Saw her compensation go up? She made more than one hundred million dollars just on stock and so you know I mean. That just doesn't seem doesn't seem right to meet so if we think about this like say a game of Jenga this system of Zombie like IBM light companies. What what peace do we need to pull out to dismantle this corrupted version of the system that we're now engaged with is it. Removing debt from the equation is it. I don't know disincentivising buyers of of what. What can we pull on to fix this? I think that there are. There are probably three things that our highest priority. The first is that I think we need to have much stricter limits on what a balance sheet needs to look like to be rated as high quality debt number two is we need to disincentivize people from not investing in the future you do that by preventing buybacks and dividends only in cases where these companies have enormous amount of profit. And then the third is you need to create positive incentives so that you can capitalize your rnd better so that for example in Canada if you hire engineers to work on cutting edge things you get a tax credit from the Canadian government. That is up to almost three times the salary of what you pay folks and so there's a deep incentive to focus on long-term are indeed because it effectively subsidizes the cost of these people so those kinds of positive incentives combined with some more financial handcuffs would go an enormously long way. Those are what I would do I. Then what you can do is all of the participants in the market that may amplify short-term behavior. You can handcuff 'em a little bit more and the way that you do that is you. You just don't allow these hedge funds to have as much leverage as they do and the way that that game works. Is You know they get paid? A percentage of the profits. They make an every year. And so you know what they want to do. Those do that in the most risk way possible so they figure out a strategy where you know maybe they can make one percent a year and you. It's h mouth. Will one percent a year is not that great now? It's Kinsey right while then. What I'll do is I'll go to the bank and I'll get JP Morgan to lever me up twelve times and now that one percent twelve percent. And that's what happens all day long again. These incentives are set up. Where the bigger you are the less likely you are to fail because nobody can afford for you to fail. So the incentive is to get incrementally valuable to the system as it is because then somebody will bill you out right like it's this old adage if I owe the bank dollars it's my problem but if I owe the bank of billion dollars that's their problem and so you're incentivized to have massive obligations and massive leverage because you know somebody will be forced to come to your rescue so if you grow large enough. You can't theoretically outgrow resurrect you. You really do become too big to fail okay. Big Question but first we're gonNA take a quick break to hear from my partner. Sometimes I swear I could run this podcast. Twenty four seven if I wanted to which isn't exactly music to my producers ears but it's not just because I love what I do I also. Oh my quote unnervingly. Boundless Energy as Josh in Maryland like to put it to the extra boost..

Ibm Tomasz polly Petia Editor JP Morgan Canadian government Maryland CEO partner Josh Kinsey Canada