[context: a friend shared an infographic about how companies lose good talent, my response ballooned into a massive essay/rant. Enjoy]
I've been studying this a bunch to try and understand why business are ran so weird compared to like 30-50 years ago. It's become "more profitable" to have higher turn-over, higher burnout, more bullshit jobs, incompeteance rewarded and promoted. There's a bunch of factors at play here.
There's no slack at work anymore. Demands on a business are variable; seasonal sales, new competitors, regulation changes. Short-term Resources available to a business are variable; goods shortages, sick workers, environmental issues (pandemic), onbarding new workers, training.
So you have these two flucating variables. When supply is greater than demand it creates a surplus of potential output, when demand is greater, a shortage of potential output. Both cases are bad for businesses, so the goal is to minimize the total delta. However since you can't control these changes, which side of the equation do you select for? Histroically this has been the surplus. This is good because it makes your business more resilient to sudden spikes in the market. This is especially great for goods and services that people rely on (maybe not critically such as food and water, but you get the idea).
However there's been a shift away from preferring the surplus and instead preferring the shortages, aka "running lean". This has taken decades, and has started earlier in different industries, but it's creeping all the same. There are many reasons behind this, including globalization which leads to fierce and continous market competition, where businesses can't "relax", aka prefer-the-surplus or they'll die off (this is perpetuated by us having no regulations against monopolies). But I want to touch on an idea behind the motivation of this fierce competition, why it's expanding to all industries, and how this affects the stock and housing market is bizzare ways.
I believe the core issue is the investment focus on RoE (Return on Equity) when determining a company's value. RoE is essentially "What is the estimated value of a stock when I liquidate it". Not it's dividends, not the business's stability, not it's profitability. It's basically structured gambling and speculation. It focuses on a businesses ability to convince others of extreme growth, but not actually obtaining it. Two key factors here at maximizing your businesses RoE is minimizing on-going overhead/assets, and minimizing surplus, even at the cost of potential shortages (shortages just demostrate the potential for future growth afterall! aka "pitch-deck wisdom").
Surplus means wasted capital (either in human labor or assets). This looks bad for potential investors, which is exactly the people we want to attract, so I can sell them my shares and make a profit. So we want the fewest assets possible, generating as much as possible, as consistently as possible, just to meet the minimum demand. What does this mean to the workers? The human workers with lives, dreams, families, and friends? We want them outputting at their near maximum at all times, otherwise they are contributing to our surplus. Each worker represents a static overhead cost to us, so we want as few workers as possible. Paradoxically, we also want our workers to be as low-skilled as possible to do the job, higher skilled workers cost more, so we need to minimize that.
What does this mean for our creative and/or variable skilled workers? Workers that need breaks sometimes, workers that have health issues (mental or physical), workers that want to start families. They do not fit this template of the ideal worker we need to maximize our RoE. Even if they are profitable, even if they are part of our community, they don't hit this goal. We don't really want to enrich them, or to provide a good working envrionment for these types of workers if we can replace them with lower skilled, but more consistent and thus cheaper, workers.
Since we are minimizing workers now we also need to minimize their time away from work, so we'll be careful to not give time off, we'll make sure they are thinking about work all the time. It does not matter if we burn them out, it does not matter if they quit, we don't care if we actually produce less, our actual goal as a share-holder company is to minimize surplus to maximize the speculative value of the share-holder's equity. This is why so much corporate behaviour does not make sense, because we think they are playing a different game of actually trying to make goods and services people want, but they aren't (it's that egg-carrying analogy all over again).
Now everything I have said that been true since the dawn of capitalism, however there has been external forces pressuring companies to not go full on dystopia, however those have been carefully and slowly removed: Anti-union legislation, massive bail-outs for companies doing riskier speculation, massive public tax injections to the stock market to maintain it's value, etc. It's all speculation, and the speculation has been reinforced by our tax dollars. Prior to this careful deconstruction, company's needed to provide actual goods and services purchased by actual people to generate wealth and stay afloat, this is no longer the case. Making speculation plays like this used to have substainal risk, and thus people did them rarely. But more and more these riskier behaviours are backed and ensured using public wealth (both taxes and extracted labour value), thus making them more lucractive. Priviately pocket the profits, publicly subsidize the losses.
A great example of this disconnect is the current valuation of Telsa. It's stock is currently valued higher than the entiity of the VW group combined (Audi, Bently, Bugatti, Ducati, Porsche, etc.) even though it has produced less than 1% of the cars they did last year, and has something like 0.01% of the profit. Telsa's stock valuation is completely and utterly divorced from reality and we the people are paying the cost for this shell game.
How does this all relate to the housing crisis? Well its tempting to look to local/national laws and practices at the root of the issue, eg. unregulated foreign investment, lack of rent control, etc. but the housing crisis is happening all around the world at the same time regardless of the differences in these policies. So what gives?
The push towards leaner companies, less surplus, and "just-in-time" supply chains has been happening for decades. It produces incredibly fragile, but share-holder-profitable markets. So what happens when a diaster hits? Something that tests how resilent our systems are? Something maybe like a global pandemic?
A rapid cascade failure of our supply chains across all industries created shortages that investors could not ignore. From Feb to March 2020 the stock market crashed a whooping 30%. Then the Feds stepped in and literally injected trillions of dollars into the market to maintain these ridiculous speculative prices. This injection overwhelmingly benefited the massive companies: Nike, boeing, etc. But what about the smaller to mid-size companies and investors? They are motivated to move their capital away from the fragile stock market since they don't get the security of federal injections. And whats a stable investment, with consistent returns, that doesn't rely heavily on other industries or a supply chain? Motherfucking Housing.
So you have this big migration of small to medium capital and it's investors moving from the stock market and investments in anything related to fragile supply chains, to housing. So you see these individual and companies, like Blackrock, buying up excessive real estate, often over asking. But why over asking? They are speculating that the stock market (and possibly banking in general) will either deflate or crash and them want their capital to be in an asset that is resitant to that crash. Houses, literally human shelters for survival, is just an investment vechile for them as a way to protect their capital.
This is why solutions to the housing crsis, like just make more houses! Or Providing a small monetary bonus to people buying won't solve this problem. It doesn't even begin to scratch the root cause of it!