Of course I am ignoring the efficient markets hypothesis, because that hypothesis is absolute and complete bullshit.
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That link didnât work either. Seems like no matter how you slice it they want you to login. Either by creating an account there, or using social media.
Fuck that noise.
Thatâs because itâs not a hypothesis, itâs a religion.
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Turtles all the way downâŚ
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I donât see the unrealism? What you describe is more or less how the market works. Weâve seen that happen time and time again. The tech crash, the GFC, the Asian crisis, etc,.
Just that he seems to be saying there would be a âbottomâ to any crash his company would experience, and that bottom would depend on the actual value/revenue his company produces - that the stock would only fall until the rising revenues of Slack would âcatch up with it.â
That seems to sweep under the rug a bit the idea that the stock can damn well keep falling for a LONG time after it sinks below the level of the companyâs actual value - just as they may over-value him today by a bunch of 0âs they can under-value him tomorrow by a bunch of 0âs.
âŚand if your board of directors is made up of folks who depend on that stock price for their fancy pantsâŚthey wonât take this under-valuing lightly.
The efficient market hypothesis requires rational human beings to work. Those seem to be in very short supply. Just look at the last 10 years of economic history. While it has some utility, as far as determining how the market will work in all but the longest term, is quite useless.
A more useful observation is the classic, âthe market can remain irrational longer than you can remain solventâ. This is for taking a position that will make money if the market changes in the way you think it will. In the run up to the 2007 crash, there were some very nervous people burning money betting it was going to happen, and hopping it happened before they ran out of money, or chickened out. And probably people we havenât heard about, who tried to do that, but gave up before the crash, and thus lost money, despite being mostly right.
Actually, the irrational market is the wrong phrase. The market is entirely rational - it just works cleverly to cheat you out of a dime.
The irrational bit belongs stuck to the backs of economists who think they can declare what the âproblemsâ with the market are, and find that their 80 year old, simple (very - very - very) simple theory is not working (again, and again, and again).
Take very greedy people, take the market, put them in it, and they will entirely rationally poke and prod until they find a sure way to get rich. Flowers, stocks, ice cubes - donât matter.
Itâs all entirely rational. The bit missing? Ignorance. Knowledge of the players. Foresight as to just how far they will go to make the dime (there is no limit).
Thatâs vastly overstating it.
The efficient market hypothesis doesnât completely explain stock prices, but it does a very good job and itâs not clear how to correct the shortcomings.
So what do you think Slackâs proper valuation is? Whatâs your evidence for that belief? Everyone who invested in that stock bet money that itâs at or close to the proper value.
Looking at the market as a whole I think the EMH short comings are more serious. Particularly since the downside of betting against the market by shorting stocks can be extremely costly.
But if youâre looking at a single stock within the market I think you need to do a ton of homework before you can say stock X or Y is over/under valued and stand a chance of being right.
I canât believe nobody has brought up the plot of this seasonâs Silicon Valley yet. Spoiler:
They are offered ridiculous amounts of money for their company, way more than the company is worth, and instead of taking it they ask for less money, to get a more realistic valuation and avoid having a disappointing second round of funding
That sounds really smart. Has anyone actually done that?
No idea, but I agree. More spoilerth:
One of the other minor characters from last season, a friend who got a ridiculous valuation on his startup, is now in ruins because he had a down round, and was forced out of his company when they were forced to accept an acquisition (I think?). When Richard asks him âHey, so what if I ask for less money?â the guy basically has a huge epiphany, shouting âWhy didnât anybody fucking tell me I could ask for less money?â
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Heh, yeah. I think Cory wrote a short story along those lines called âOther Peopleâs Moneyâ
Or at least itâs sort of a vignette displaying the post-scarcity results of our kind of start-up backed economy. All our growth being the product of someone elseâs money, all the consequences not befalling the original investors, or even the startups, but on the people lower down on the food-chain who staked their careers on the startups, and the economy as a whole. Iâm pretty sure the moral of the story was something bog-standard like, âif you do what makes you happy, 20 billion dollars is worthless, if youâll have to do something else.â
Artist Creates INVISIBLE âArtâ and Collectors are Paying Millions
Meanwhile, anyone want some vacuum cleaners for about 12 million?
Iâd be surprised, but my shock-gland appears to be juiced out today.
Suffice it to say that itâs amusing that someone took The Emperorâs New Clothes as a how-to guide rather than the fable it was intended to be.
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