If a company's core business is in an area of high ongoing volatility that cannot be effectively diversified - it is far better off as a privately held firm, with a close group of investors who understand the risks and can adjust their expected returns accordingly.

For a public company faced with high volatility, the pressure to cook the books to smooth earnings is very high, as we've seen with even quasi-governmental agencies such as Fannie Mae.

Smooth earnings are what the market wants, but is that reasonable? Is the natural profile of corporate performance a steady march to the upper right? If we were in a world where there was no economic cost involved in dissolving companies when their profit trend blipped, perhaps these expectations would be valid.

However, there is significant cost to the company, both in terms of capital availability and employee incentives, when the share price takes a beating. While that threat does provide a powerful motivation for companies to stay on top of their markets, and to deliver the performance necessary to fulfill expectations, the 'no excuses' mentality of the market easily leads to destructive short-term practices. Managers have powerful incentives to hit the numbers no matter the cost, whether it's through layoffs or questionable accounting.

The point is that the focus shifts from the customer-facing side to the accounting side. Investment in and support of new and existing products suffer as all stops are pulled out to make past investments pay off. Between merciless pressure from markets and increased overhead from compliance with Sarbanes-Oxley, many companies are rethinking the value created from being publicly-traded.

There's a good case to be made for public markets taking the focus off of customers in favor of shareholders. After all, customers are easier to