growth = transfer in + positive unrealized output + plowback — decapitalization. (6.14a)
(6.14a) can also be expressed as
growth = transfer in + unrealized output + plowback — recovered decapitalization. (6.14b)
For convenience, define gross transfer in = transfer in + plowback, So that (6.14) through (6.14b) can be put more compactly as
growth = gross transfer in + positive proprietary output — decapitalizaiton = transfer in + unrealized output - recovered decapitalization. (6.14c)
Any of these versions of (6.14) can be called the growth truism. The new term gross transfer in will help shorten equations for human capital.
Management as a Quasi-Owner
Owners (shareholders) typically allow management wide latitude to cope with needs. It stands in place of owners. Accounting tradition, and this book too, reasons out the steps from revenue to dividend yield as if management itself were the owner. Otherwise there would be little to say. From the shareholder viewpoint, revenue is
simply dividend yield.
But the bottom line is the same. The maximand is output, or growth plus cash flow. Positive cash flow, in the sense net of plowback, is dividend yield on both the firm’s books and the shareholder’s. Negative cash flow on the books of shareholders individually is purchase of any shares in the same firm. On the books of shareholders collectively, where sales and purchases of existing shares offset, it simplifies to purchase of new stock issues alone. This too is just as on the books of
the firm.
Chapter 6: Parallels with the Firm 2/4/16 8
HOUSE_OVERSIGHT_011042