, Columnist
Private Companies Will Take Money Public Companies Don't Want
If the public equity markets are mostly about giving money back to investors, what should the investors do with it?
One of my favorite simple dumb models of corporate finance goes like this:
This model is, like I said, really simple and dumb! Most companies can do more than one thing, and many companies successfully evolve over time. And the choice of investing in the thing versus giving money back to shareholders is actually way more complicated than that; companies can choose to pay workers more or cut prices for consumers or otherwise proceed along dimensions that aren't perfectly captured in that simple binary choice.