I ran across this piece “Barnes & Noble Rages Against the Dying of the Light” on the internet the other day. It’s one of the strangest pieces of writing I’ve ever seen. It highlights why the Occupy Wall Street crowd exists, and why there are so many misunderstandings between us cold hard-hearted capitalists and the rest of the world.

It seems the author is totally mystified why Barnes & Noble would want to get into the ebook business and manufacture ereaders like the highly successful Nook. Here, let me share his words:

Why would an operator of bookstores would (sic) start manufacturing electronics?

There’s no real mystery about this. The physical book retailing industry is in structural decline driven by technological changes. Insofar as physical bookstore survive, they’ll survive because (some) people have warm/fuzzy/nostalgic feelings about bookstores. But that implies a future, if there is one, for the sort of neighborhood independent bookshops that people have warm/fuzzy/nostalgic feelings about, not soulless chains. Barnes & Noble the organism doesn’t want to die, so it makes a desperate effort to launch a new book-related businesses—the design and manufucter (sic) of e-readers—that it has no particular expertise in. All very understandable, but weirdly out of step with the ostensible idea of the for-profit business corporation. At the end of the day, there’s absolutely nothing wrong with investors capitalizing a new business venture, the venture making money for a while, then its profits declining and eventually the business shuts down. Nothing lasts forever, and a corporation doesn’t need to achieve immortality to have been a good business. But large firms essentially never behave like this. They never, that is, serenly (sic) accept the inevitable and just attempt to manage their existing operations as well as possible. Instead they want to live! They want to thrive! And this survival instinct is tied up in a weird way with the doctrine of shareholder value. In theory, the urge to live is value-destroying. But in practice for any executive team to straightforwardly admit that their business is in a dying market segment and they have no plan for changing that fact would lead to an immediate share price crash with deleterious consequences for the executives.

I’m sorry for all the “(sic)”s in this piece – I got tired of pointing out all the spelling and grammatical errors. I just read it out loud and I’m convinced it is one of the stupidest pieces of writing and economic stupidity I’ve ever read.

What? Corporations should serenely accept the inevitable end of their business and manage their existing operations as well as possible? How dare they want to live? How dare they want to thrive? If he acknowledges there is nothing wrong with making money for a while, why is it wrong for the company to seek to find new products and new markets when old markets change and new markets emerge? Barnes & Noble’s efforts to change with the times is a desperate effort? I know I’m not making a very coherent argument, but I just don’t know where to start in attacking this folly.

By this logic IBM should have died with the mainframe computer. Broadcasting companies should be going out of business as new media evolves rather than trying to
change with the times and technology. What about At&T – never get in the wireless business but die along with landline phones? Borders didn’t catch on to the Amazon threat while Barnes & Noble did – so it’s good they disappear, taking shareholder value with them? What about Blockbuster? If I was a Blockbuster shareholder, I should be grateful they were right for a time and not be frustrated that they didn’t realize how Netflix was changing the market? And how does his theory apply when it comes to shareholders who acquire their shares in the aftermarket as opposed to the initial offering? Are we to believe this is a weird application of the theory of shareholder value? I just don’t get it!

I think it’s great that companies grow, change and diversify to meet consumer demand. I have a Kindle, not a Nook, but I know that the existence of the Nook helps me by making Amazon innovate and hold prices down. Markets work, and in a market firms seek profits. That requires them to innovate, change with technology and consumer tastes, survive and even thrive. If they do, I think it’s great. If they can’t keep up, then let them fail. But to argue that they should not try to change and simply wither and die a whimpering, withering death is just dumb.

There, I needed to get that off my chest.

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