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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Michael Bakunin who wrote (66951)	8/29/1999 12:39:00 AM
From: Don Lloyd	Respond to of 132070

mb - (I think your statement about productivity (no relationship to performance) is spot on; productivity gains may flow to the shareholders, customers, or employees, or be shared. I try to think about the division of the spoils, and the chances things may change...) Good point. Things will always change and any snapshot of an economy that doesn't account for the hidden plans and expectations that actors have for dealing with and bringing about that change is necessarily incomplete. (...I don't think ROI necessarily goes to the risk-free rate, but under effective competition it should be driven down to a fair rate compensating enterprises for their business risks. In circumstances with imperfect competition, say oligopoly, I can see an elevated ROI even with competent rivals.) 'Risk-free rate' is here a poor shorthand for choosing among various alternatives by the comparison of perceived risk-adjusted rates. The few sellers present in an oligopoly should tend to drive ROI down to the smaller of the following - 1. The profit that can be maximized from the market formed by the existing sellers and the customer demand characteristics, subject to any special market imperfections. 2. The risk-adjusted ROI perceived by the most advantaged non-seller as he evaluates the barriers to entry and the future competitive situation. DRAM note - When MU increases its productivity by internal operational improvements that are superior to (or earlier than) those of its rivals, it can reasonably expect improvements in the bottom line, subject to the absence of rivals in the process of a form of liquidation. OTOH, when the productivity improvements are the result of the external development of more efficient capital equipment that is generally available to all simultaneously, the result will be a race to the bottom of a sea of red ink benefiting only its customers. Thanks, Don