Umm, Ritchie

Companies have forgotten how to make money

Well, OK, could be true.

If you want me to suggest a company that has no clue what to do with its money start with Apple.

The company that has just posted the largest quarterly profit in history is an example of a company that has forgotten how to make money.

It’s cash pile exceeds $100 billion.

A company with vast cash piles of retained profits is an example of a company that has forgotten how to make money.

34 thoughts on “Umm, Ritchie”

  1. Umm, Tim….

    His point wasn’t that they can’t make the stuff, just don’t know what to do with it except let it sit in the bank 🙂

    Which isn’t the cleverest place to leave it apparently, when the comrades of proven worth like Ritchie could find so much better ways to spend it….

  2. @Rupert,

    “just don’t know what to do with it except let it sit in the bank”

    Except, in usual Ritchie non-joined-up thinking, he blogs later that Apple are being scum for lending the money they don’t know what to do with back to the US government.

    He doesn’t even remember what words he’s angrily bashing out on his Mac/Macbook/iPad from one minute to the next.

  3. Noel Scoper

    This reply on the Green/UKIP/SNP post is one of those ‘Facepalm’ moments I always enjoy when reading TRUK.

    In response to the post of Ed Ryan:

    ‘So speaks the voice of the elite

    No reasons given

    Just dismiss

    That’s the only sort of debate you are comfortable with, isn’t it?’

    The man truly is, at best a moron – and I think the ever-apposite description of him by GlenDorran (which I’ll leave him to post) is also appropriate.

  4. Maybe they like the interest on their cash, and the ability to fund future investment without borrowing, or something crazy like that.

  5. Rupert Fiennes

    Absolutely – Apparently any excess profits need to be appropriated by the state which will, of course, know so much better than these boards how to spend that money ‘for the greater good’ – I tend to associate Ritchie with the former USSR, but many here who have pointed out the near fascist nature of some of these proposals, and that’s also a fair analogy.

    His historical ignorance is probably only matched by his lack of understanding of economics, but it cannot be said often enough how dangerous he, and his proposals are. Luckily, his penchant for gaffes and inability to work with anyone else mean his influence appears to be diminishing, but the mindset he represents needs to be confronted and the harsh reality of life in countries which have followed his precepts to varying degrees (Venezuela, Cuba and North Korea) needs exposing/linking far more prominently…

  6. @Van_Patten,

    In the “Green Party Tax policy is the greatest” blog I pointed out to him there’s no point in paying the Green Party wealth tax since:

    – nobody goes to prison under another Green policy
    – I’m going to declare myself a “tax terrorist” which, in another Green policy, means I need understanding and changing of government action to sympathise we me.

    I also pointed out his kids won’t be allowed religious instruction at school if the Greens ever got in. Deleted of course.

  7. @Noel

    I am a Facebook friend of one of his closest sympathizers (Is that guilt by association?) and on one thread said that Green Party policy on ISIS was one of both military surrender within Iraq and Syria, compounded by surrender at home by removing them from a list of terrorist organizations – the standard, almost reflex response was to accuse me of racism, Islamophobia and fascism – the type of pure Ad hominem seen on his blog day in day out. As in the quote above, he seems to have no sense of irony whatsoever. Lest I forget however:

    ‘The comment was absurd

    I am a friend of the truth’

    which still makes me shake my head in amazement.

    Do you have a list of his gems stored somewhere – it could form the basis of a blog even more hilarious than Murphy Richards…

  8. @Noel

    As for the Green party manifesto – might be worth Tim looking at it and doing something along the lines of his fisking of Ha Joon Chang. I have gone through three policy areas ‘Peace and Defence’, ‘Natural Resources and Waste Management’ and ‘Transport’ and the critique I had just in terms of notes hits 50 pages plus, and that’s only three areas (out of 35) where I have some expertise…..

  9. “Do you have a list of his gems stored somewhere – it could form the basis of a blog even more hilarious than Murphy Richards…”

    I have a good memory – and a pile of screenshots 🙂

  10. I recall Nintendo back in its boom days of the 90s sitting on a similarly large cash pile. The President said it was useful that in the event of a major downturn they could continue paying their staff without the need to sack any long serving loyal workers.

    Clearly not ideal for Nintendo shareholders but I wonder whether Ritchie would be dismissive of this company’s strategy.

  11. Bloke in Costa Rica

    Apple’s dividend is $1.85 a share. They did not even pay a dividend for a very long time. But if the shareholders want the cash disbursed then I’m sure they can instruct the board to make it happen. Isn’t that how it works? Or it could be the shareholders are quite happy to leave things as they are.

  12. Apple have been operating a share buy-back programme that has helped the sp for c$60 in 2013 to c$110 today.

    I read somewhere that if you’d bought an iPod when they first came out, you’d now have a crappy 13 year old iPod but if you’d put the same money into Apple shares you’d now have about £20,000.

  13. I think his point is, since you have to spend money to make money and they’re sitting on a big pile of money, they don’t know that they need to spend it to make that pile bigger.

    Of course, he conveniently leaves out that before your spend that money you have to *repatriate* it, and that makes the pile of available spending money a whole hell of a lot smaller.

  14. Apple’s position does point out the problem of “where to invest?”.

    Where could Apple put that money? Start by considering where that money should not go, by country. Most of the world is eliminated as so many countries are corrupt, dishonest, kleptocracies. This is especially bad for a hi-tech operator like Apple, from whom all kinds of proprietary information could be stolen.

    And who in his right mind would invest in the UK or the EU? High tax, stultifying regulations, a serious risk of nationalization.

    The USA? Crazy corporate tax rates, too many lefty eruptions.

    The middle east, Russia, Africa? Ha, ha, ha.

    And then the question of what to do? I cannot think of a single more high tech item I would want. I just bought a FitBit, now what? Is Apple going to do real estate development? Doubt it, they’ll stick to their core expertise.

  15. Fred Z

    And for the UK the spectre of the likes of Murphy and his cronies getting their hands on your money is doubly incentive not to invest, especially when you see apparently ‘serious’ newspapers advocating that countries renege on their obligations to bond holders…..

  16. Well unless they’ve baked the cash in to pies or holding it in a vault it is part of the fractional reserve banking system and so being loaned out somewhere.

    His complaint isn’t that something isn’t being done with the money, but that his courageous friends don’t have it to spend.

  17. Oh darn.

    My latest incarnation has been blocked on Murphy’s site.

    What a pity. Now I’ll have to invent another.

  18. @Fred Z: “Apple’s position does point out the problem of “where to invest?”.

    Where could Apple put that money? Start by considering where that money should not go, by country.”

    Where could Apple put that money? To make money for Apple share holders of course.

    The hundred billion dollars of company money that Apple won’t bring back to the USA might actually grow. Apple design things, sell things and make a profit. Profit in Europe and UK is taxed according to the rules. And Apple USA makes a profit.

    Apple makes stuff in China. I believe that my Apple Mac was made in somewhere, err Czech.

  19. Van_Patten: ” I have gone through three policy areas ‘Peace and Defence’, ‘Natural Resources and Waste Management’ and ‘Transport’ and the critique I had just in terms of notes hits 50 pages plus…”

    What you have to bear in mind is that to engage with reality is bourgeois, patriarchal and hegemonic.

    Have I won the argument?

  20. Hey, why doesn’t Richard, as a shareholder of Apple, organise other shareholders who are in agreement with him to get the company to do something else with their money.

    Oh, is he not a shareholder? Then his opinion of what to do with someone else’s money is irrelevant!

  21. CJ Nerd

    A:/ fantastic name

    B:/ you have indeed ‘won’ the argument (at least in Green terms) by ‘shifting the goalposts’ (I think it was Abacab or Bloke in CR who pointed out Ritchie is useful as a primer for philosophy undergraduates as he employs every type of logical fallacy on a regular basis)

    C:/ moreover you haven’t then criticised someone as ‘the voice of the elite’ for employing bold assertion with no backing evidence whilst simultaneously indulging in exactly the same condescension to your critics…

  22. Martin Davies

    You forget he represents ‘civil society’ which overrides considerations of property ownership and individual liberty….

  23. Martin Davies: “Then his opinion of what to do with someone else’s money is irrelevant!”

    Richard Murphy is entitled to an opinion. You may or you may not wish to subscribe to his views.

    Voltaire and Milton might be horrified by the group think prevalent in modern liberal debate.

  24. Charlieman

    I doubt Murphy would know who they are – you are right he is entitled to his opinion. It’s not a right he extends to people who he deems to be ‘outside the politicAl mainstream’ and he also believes his entirely self-assessed expertise gives his opinion greater credibility than many other peoples when a fair barometer of an idea’s merit is if it fundamentally opposes his philosophy….

  25. Bloke no Longer in Austria

    To be fair to Ritchie, he does kind of have a point.

    Many corporations become run by accountants and MBA graduates, which means that the company “forgets” why it exists. It becomes obsessed with the bottom line for that year and so makes decision that reduce the cost base and give a better result for the year, but causes long-term problems with customers ans staff. The obvious example is sacking all your home technical staff, outsourcing to BongoBonoLand and then wondering why all your customers hate you and your computer systems don’t work.

    I used to work for a company that had a huge cash mountain. In fact at one point in the early 90s, 60% of its profits came from interest. “Making stuff” was a hobby, almost. It went through many interations and splits before it settled back to its core business.
    Cash is good, but it won’t necessarily save the company, if all one is doing is sending designs to China to have them knocked up. If/when Apple stops writing its own software, then that’s the time to bail out.

  26. Carl Icahn is on top of Apple as one of its biggest investors. He is pushing for stock buybacks with a bunch of the excess cash and additional R&D. Icahn & other “takeover” artists are part of what keeps CEO’s in line, cuz when they get too far afield the companies are taken over, the mgt fired (usually) and the stockholders gain value. Apple knows how to make money. Icahn will push them into using it correctly.

  27. I am thinking of setting up a petition on the No 10 website, calling on Downham Market to be renamed as Downham Workers’ Cooperative in honour of the principles espoused by its Greatest Living Resident and foremost Quaker, Mr Richard J “Valiant for Truth” Murphy.

  28. So Much for Subtlety

    tex – “Carl Icahn is on top of Apple as one of its biggest investors. …. Apple knows how to make money. Icahn will push them into using it correctly.”

    I think that Carl Icahn is a boil on the backside of society. Generally speaking. If he owns a large chunk of Apple, I think that is bad news for Apple.

    After all, what is his record? He started out with a hostile take over of TWA in 1985. It took him seven years to transfer reasonable amount of assets to himself (one of the first things he did was move operations to buildings he owned) and run the airline into bankruptcy. He tried to take over US Steel – negotiating with the Unions to keep their strike going which kept the price low. He did buy Imclone only to sell it two years later after he had run that into the ground. He was the CEO of Blockbuster. He ran that into the ground too.

    In a decent society, he would be, at worst, shunned.

    XO Holding in 2005 announced to sell the wired part of its business for $700 million to its majority shareholder and chairman Icahn himself to pay back its debts and buy back its preferred stock for about $600 million – all owned by Icahn himself. He would end up owning XO’s traditional wired phone business outright, and still own his 60 percent stake in what would be left of XO. In the SEC filings, XO explained that a special committee of its board of directors weighed Icahn’s bid and declared it to be in the best interest of shareholders.

  29. @ tex

    Big takeovers have a habit of destroying shareholder value and fattening the pockets of management (both the ones that stay and the ones that don’t).

    No fear though. Because who the fuck takes over the most valuable company in the world?

  30. Charlieman, if you don’t have any shares in the company why should the company listen to what you want?
    Yet RM is quite happy to tell companies he probably does not own exactly what they should be doing. When he has nothing to lose.

  31. @SMFS

    I do not concur at all. Though XO Holdings small shareholders may (& I’m not arguing that they did not) have lost money, overall, throughout the history of Icahn takeovers he has boosted the stock value for all stock holders. ImClone, which you say he ran into the ground, was in fact a very, very big win for stockholders. He does gamble and can & will lose doing so, and can & will make mistakes doing so. TWA had never made money and had union labor costs far exceeding that of competitors. They could not survive. He admitted he may have made a mistake with Blockbuster, replacing Antioco (CEO) who would not reduce his very high compensation agreement. Antioco was trying to turn Blockbuster into an on-line business as NetFlix & RedBox was killing ’em. Icahn thought his package was way too high while Antioco said CEO’s deserved to make multimillions just as much as raiders like Icahn. Icahn later said the Antioco conflict may have been a mistake. He made a fortune on Texaco which had judgements against it far exceeding it’s ability to pay – Texaco was absolutely doomed. Icahn gambled that he could make them an offer. The creditors had ALL the power, but they accepted Icahn’s offer of what he (Texaco) could pay.

    Icahn’s NET, NET is for shareholders.

    I have directly observed in small scale the rough business would. A millionaire self-employed man helped several companies start up, some suceeded, some failed. He loved to do business with a sign on his desk, “Make me an offer I can’t refuse.” He sent at least one non-relative to college. I provided services for one that failed. My understanding was that it was building up with a successful product but the millionaire, too soon, took too much cash out of the company. He must have hoped mgt could keep it growing, but he needed the cash as the IRS demanded some ~$4M from him, immediately! He & his accountants (big firm) said he was right but IRS called “this” a “that” and demanded payment. I don’t know how he turned out, but the start-up was too short of cash and folded. He was a good guy in spite of that failure. He net, net helped a lot of people.

  32. @The Thought Gang

    Icahn has a habit & history of big takeovers boosting shareholder value and throwing out “fat” management & replacing them with those more directed to shareholder value.

  33. So Much for Subtlety

    tex – “Icahn has a habit & history of big takeovers boosting shareholder value and throwing out “fat” management & replacing them with those more directed to shareholder value.”

    I think he has a history and habit of pumping and dumping. He takes over, generating a lot of press coverage, so people rush to buy, thinking that cuts means the companies will become profitable, Icahn then strips assets with the nicer ones somehow ending up in his private companies, and walks away. The company then folds under an unsustainable debt burden.

    Pumps and dumps work for the early shareholders too. Just not with the people left holding the can.

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