Short term mañana thinking is endemic in business, too.
Were companies prepared for these “black swans,” these “highly improbable events” like corona virus? It turns out, as The Economist observes, that,
It might be possible, in principle, to self-insure against a disastrous drop in overall demand by sacrificing margins in order to build up buffers and to keep open strategic options the company will probably never willingly choose to use. But good luck convincing investors of that approach. Strategies which pay off handsomely in the event of even the worst case are terribly expensive.
Given the wealth transfer initiated from small to big business, due to the structure of the state’s stimulus, it is no surprise to learn that gargantuan business has endured quite well:
… many companies are already sitting on stacks of cash. Few boast sofas as plumply padded as Apple, Microsoft, Amazon, Alphabet and Facebook, which have $270bn in net cash between them, enough to finance many countries’ covid-related fiscal stimulus. But the total cash holdings of the world’s 2,000 biggest listed non-financial corporations increased from $6.6trn in 2010 to $14.2trn today.
- Image: Supply chains courtesy The Economist
- MORE: [SOME] “Businesses are proving quite resilient to the pandemic”RELATED: “The pandemic led to one of the greatest wealth transfers in history”
UPDATED (8/5/020): “The pandemic led to ‘one of the greatest wealth transfers in history’: The stock market is rising as big business rebounds from state-ordered stoppage of nonessential activity, while small businesses drop like flies.”