Share Buybacks Are Indirect Investments
To me, share buybacks1 Share buybacks are when a company buys a significant chunk of the shares it’s issued and then sits on them, so as to reduce supply and thus increase price. sound like a stupid way to spend company money to make the rich more wealthy, instead of investing in technology and research and improvement.
About half a year ago The Economist pointed something out to me that I had not considered before: share buybacks are also an indirect investment. By putting more money in investor’s hands, a share buyback likely increases investment. Not in the same company, specifically, but likely in businesses that build the ecosystem that company operates in. Share buybacks could be thought of as infrastructure spending..2 This is probably corporate economy 101 and not news to most people, but I like reading things that contradict my opinions!