I don't think investors are fools. The alleged short term focus of investors and companies requires them to be fools (as a group). Also, the continued growth for decades of corporations simply doesn't fit with being short term focused.
Boeing.
And Boeing isn't high-risk. It's high-cost low-risk. Aircraft are very expensive but also well understood.
> The alleged short term focus of investors and companies requires them to be fools (as a group).
The consequence is a result of structural failure, not individual failure. We put abstraction layers between investors and their investments. John has a 401K, he invests it in a mutual fund, the fund invests it in corporations, the corporations invest it in business units, the business units invest it in research. At every layer of abstraction, the level above doesn't want to spend resources understanding the details of the bottom tier, they just want to see numbers that are higher this quarter than last quarter. Because John doesn't have time for that and if he is only looking at quarterly results then the mutual fund manager's incentive is to produce quarterly results, which flows all the way down to the bottom.
The only solution is for investors to know what they're investing in, which requires more smaller corporations and fewer layers of abstraction.
In a sense it's basically the case that wide diversification is free-riding on the analysis done by the other investors in the same stocks, but the more people who do it the less efficient the market becomes because there is less thought going into where money is invested.
The history of the airframe industry is filled with huge bankruptcies. It's a very volatile, high risk business.
> they're just reinvesting it
And that's exactly what the proponents of the short-term profit theory complain that businesses are not doing.
Not at the scale of Boeing. They can survive a failed project, and a failed project is very expensive but most Boeing projects don't fail.
The hard part about long-term research is that most foundational research projects do fail to commercialize and you have to stick it out until you get the one success that makes up for all the failures.
> And that's exactly what the proponents of the short-term profit theory complain that businesses are not doing.
They complain that businesses are not investing enough in long-term research, which is what they are not doing.
Yes, at the scale of Boeing. I am familiar with the industry, and it is anything but "safe". Boeing took an incredible risk with the 747. And if Boeing screws up today, Airbus will have them for breakfast.
They could do it because they had the resources thanks to their core business and, more importantly, they could retain the engineering talent in a world where rockstars couldn't just quit and raise VC megabucks to pursue "Uber for Cats" or some adtech play.
So it has turned out that AMZN is an anomaly, judged by its P/E ratio as you point out, in that investors will let it bleed for a long time and still value it highly.
There are a few companies like that, that can afford to fail and that the market will have patience on a fairly long time horizon. In those places you can get a little taste of what it was like to work at a government-funded blue-sky research lab with no pressure to productize in a commercial timeframe.
If you've got a convincing case, investors are happy to invest in long term projects.