However, unlike a dividend, that doesnвЂ™t get converted into cash. In theory (and usually in practice even more so), buying back the $1bln increases the value of ongoing remaining stock holdings by $1bln. Stock buybacks ARE more tax efficient than dividends, but also higher risk. In fact if they want maximum tax efficiency above cash flow (which such investor generally wants), and are comfortable with risk, they want to avoid dividends. However if an investor wants a maximally large portfolio at a indefinite future point, they generally donвЂ™t care about dividends. Enough to be worth using less tax efficient structures. If an investor wants reliable, regular income, stock buybacks arenвЂ™t helpful. IвЂ™m mentioning two factors:Дў) actual risk of losing money/extracting value from their holdings. I think several things are getting confused here. If company A distributes $1bn and company B doesn't would you still say that investing in company A the investros 'donвЂ™t get any future вЂgrowthвЂ™'? In that case your preference for 'growth' companies is not based on the fact that dividends are taxed at a much higher rate than long term capital gains. Whatever the relevance of 'they donвЂ™t get any future вЂgrowthвЂ™' argument it's unrelated to the difference in rates between income taxes and capital gain taxes.ДЇor the sake of the argument, let's say that both tax rates are equal. Selling the stock to the company is also cash in the bank - and it doesn't get taxed at a higher rate. But it gets taxed directly at a higher rate. Much lower (zero) ongoing risk of losing that payment. This seems more of a reason to avoid companies that do not distribute money (either in the form of dividends or buybacks), doesn't it? > And if the company/economy doesnвЂ™t do well next quarter, theyвЂ™re losing it in the form of decreased stock value, or even implosion/complete loss. The difference is that they pay less taxes. Just like when they get the dividend and they end up owning the same share of the same company. > And if they sell, they donвЂ™t get any future вЂgrowthвЂ™.

(Ignoring the second-order effects due to the uncertainty about the timing of the buybacks.) Individually, they can sell the proportional part. > If you spend $1bln buying back shares, that isnвЂ™t money in their pocket until they sell. I thought we agreed that the difference to investors is that selling shares back to the company is better from a tax perspective than receiving a dividend. Entropy can be used as a strategy for adaptation. But it would never have worked if they stuck with a rigid, Confucian strategy of keeping 'entropy' low at all times.Д®ntropy isn't necessarily fatal. The policy that worked in, say, Shaowu, would spread all across China. They experimented with various policies and if something accidentally turned out to work great, it became something of a 'nucleation site'. This is how China became an economic powerhouse under Deng Xioping, for instance. There must be opportunity for randomness, chance, chaos, noise all that jazz. Keeping our genetic entropy low isn't a viable option, because that means we'll get stuck and die out. The system crystallizes from some nucleation site. The analogy may sound a bit vapid, but noise is the crucial ingredient for the system to 'find' its lowest-energy state. If you give it a shake, it instantly freezes. It gets chilled below freezing temperature without freezing. Take a bottle of purified water and put it in the cooler.

There must be room to make the good kind of mistakes and happy little accidents (as Bob Ross would put it).Д«ecause the author chose an analogy rooted in statistical mechanics, here's another: supercooled water. Some degree of messiness is needed to remain flexible, strange as it may sound. This is a successful strategy only if the world always stays the same, but it notoriously does not. Keeping entropy low means continually correcting errors.

Think of it as a negative feedback system, like a thermostat. The mistake is thinking that lowering entropy, or getting rid of the mess, is a satisfactory strategy. It's fine to think of entropy as messiness that's the Boltzmann picture of statistical mechanics.

Entropy law of thermodynamics