Nvidia Corp.’s plunge, fueled by investor concern about Chinese artificial-intelligence startup DeepSeek, erased a record amount of stock-market value from the world’s largest company.
Generally this is because of the logic of capitalism. Optimizing is far less important than Adam Smith believed it would be. More important is market capture. If I get to 2% market share with 50% margins and you get 30% market share with 10% margins, you are considered the winner. Bigger absolute numbers win with investors. This is partly because of the theory that if an investor is going to spend money they want it spent on the thing that will produce the most money, and optimizing small things is worse than growing big things. The theory continues that optimization is the job of specialists who take the big thing and optimize it incrementally after it’s established market dominance, but establishing market dominance is the first job. The theory finishes with the idea that by the time optimization becomes a viable option for making ROI, there’s probably another new growth project that presents greater upside potential. So, we end up with a ton of companies that focus entirely on growth until they can’t anymore and then they get abandoned for the next big thing, picked up by vultures, torn apart and reorganized into oblivion, and everyone makes money except the workers.
Generally this is because of the logic of capitalism. Optimizing is far less important than Adam Smith believed it would be. More important is market capture. If I get to 2% market share with 50% margins and you get 30% market share with 10% margins, you are considered the winner. Bigger absolute numbers win with investors. This is partly because of the theory that if an investor is going to spend money they want it spent on the thing that will produce the most money, and optimizing small things is worse than growing big things. The theory continues that optimization is the job of specialists who take the big thing and optimize it incrementally after it’s established market dominance, but establishing market dominance is the first job. The theory finishes with the idea that by the time optimization becomes a viable option for making ROI, there’s probably another new growth project that presents greater upside potential. So, we end up with a ton of companies that focus entirely on growth until they can’t anymore and then they get abandoned for the next big thing, picked up by vultures, torn apart and reorganized into oblivion, and everyone makes money except the workers.