Michael Hiltzik has a fantastic column on Boeing’s outsourcing disasters in the LA Times; it’s well worth reading the whole thing, complete with a link to a prescient 2001 paper by Boeing technical fellow LJ Hart-Smith.
At the end of 1993, Cisco Systems had a market capitalization of $8 billion. At the end of 2010, it was worth $112 billion. It hasn’t paid dividends, which makes things easy: if you want to calculate the amount of shareholder value that Cisco created between 1993 and 2010, you just subtract the former figure from the latter and get an impressive $104 billion. Right? Wrong. In fact, if you go through the history of Cisco’s stock actions year by year, it turns out that the company has managed to destroy $105 billion over the past 18 years. Microsoft and Intel have both destroyed $72 billion, Time Warner managed to destroy $130 billion, and Pfizer destroyed a whopping $188 billion. Four of the top five value destroyers, however, were financial: AIG, GE, BofA and Citigroup between them destroyed a mind-boggling $739 billion between 1993 and 2010, most of it in 2008.
It wasn’t much of a debate, sadly, when I talked the decline of the public markets with Andrew Ross Sorkin: he told me that he pretty much agrees with me. He did manage to drag an actual policy prescription out of me, though — the idea that some kind of Tobin tax might alleviate the problem a little. But truth be told, I’m still not sure just how big the problem is. Has anybody ever tried to quantify the societal benefit of public stock markets, or the social harm that might be done if Facebook just stays private? Where would you even begin?
It’s rare that prepared official testimony moves markets. But that’s what happened when MBIA CEO Jay Brown appeared in front of the New York State Assembly Standing Committee on Insurance yesterday — a body which, it’s fair to say, rarely appears in the news.