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The Long-Term Stock Exchange Comes to Life

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Re: The Long-Term Stock Exchange Comes to Life

#101

Post by WalterBright »

SomeCallMeTim wrote: post #100
WalterBright wrote: post #93

"short-term pressures were driving their decision-making, often at the sacrifice of the long-term potential of the business." This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. The trouble is, once the short term gain is there, who are the short termers going to…

I have experienced short-term thinking, driven by stock market expectations, very directly. Working on a game, we had a build ready two weeks before the end of a quarter, but we weren't quite done. We had just a few minor tweaks that needed just two more weeks to complete, and we in fact delivered a complete game two weeks later...that was ignored, because it was more important to make their quarterly goal than to re…

> We put in a ton of extra work to make it perfect and they didn't care.

The question is whether the game would have made more money for the company if it was perfect and shipped later. It is not necessarily true that making a product better and delaying shipping is long term better for the company.

Re: The Long-Term Stock Exchange Comes to Life

#102

Post by WalterBright »

robbiep wrote: post #96
WalterBright wrote: post #93

"short-term pressures were driving their decision-making, often at the sacrifice of the long-term potential of the business." This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. The trouble is, once the short term gain is there, who are the short termers going to…

There is absolutely no doubt that short term thinking is critical in the modern public company, and certainly examples of detrimental effects of it: at a simplistic level, when executive remuneration and bonuses depend on share prices with quarterly reviews, executive teams can (not do, this is not an absolutist position) focus on short term measures to boost their numbers - maybe they invest less in R&D, maybe they…

> focus on short term measures to boost their numbers

Again, this relies on fooling the investors who bid up the stock price based on that. How long can a company continue to fool the investors?

I had a CEO once tell me how he had manipulated the accounts for short term gains "because that's what Wall Street wants." But the stock tanked. The only one fooled was the CEO. The company has since disappeared.

The S&P500 is made up of companies that have been around for a while. How long do you think a company is going to last, if quarter after quarter they eat their seed corn? How do you explain the growth of the S&P500, decade after decade after decade, if the stock market is plagued with short term-itis?

Re: The Long-Term Stock Exchange Comes to Life

#103

Post by eries »

derriz wrote: post #77
eries wrote: post #29

Hey everyone, Eric Ries here. I’m the founder and CEO of the LTSE (and also the Lean Startup guy). Happy to see the discussion here and will try and answer a few questions. Unfortunately, a lot of the details of how the LTSE works are subject to regulatory approval, so I can’t share too much while we are working out the details with them. Still, I’ll do my best to answer. Thanks for the comments and happy new year

Most of the value of the US equity market is held indirectly - through ETFs, mutual funds, pension funds, etc. This suggests that direct ownership is not particularly valued among the vast majority of investors. Have you calculated the size of the market for direct investors who value voting rights? And their patterns of trading?

Our rules are not limited to direct owners, as your question assumes. Many institutional investors are fans too

Re: The Long-Term Stock Exchange Comes to Life

#104

Post by eries »

syedkarim wrote: post #80
eries wrote: post #29

Hey everyone, Eric Ries here. I’m the founder and CEO of the LTSE (and also the Lean Startup guy). Happy to see the discussion here and will try and answer a few questions. Unfortunately, a lot of the details of how the LTSE works are subject to regulatory approval, so I can’t share too much while we are working out the details with them. Still, I’ll do my best to answer. Thanks for the comments and happy new year

Is LTSE designed to allow companies go public more quickly/earlier stage, so that retail investors can invest at A/B-round valuations?

We hope in time that better rules will help alleviate the liquidity crisis that is freezing up SV. That said, I don’t think A/B round companies should generally be public

Re: The Long-Term Stock Exchange Comes to Life

#106

Post by WalterBright »

robbiep wrote: post #96
WalterBright wrote: post #93

"short-term pressures were driving their decision-making, often at the sacrifice of the long-term potential of the business." This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. The trouble is, once the short term gain is there, who are the short termers going to…

There is absolutely no doubt that short term thinking is critical in the modern public company, and certainly examples of detrimental effects of it: at a simplistic level, when executive remuneration and bonuses depend on share prices with quarterly reviews, executive teams can (not do, this is not an absolutist position) focus on short term measures to boost their numbers - maybe they invest less in R&D, maybe they…

By the way, if you know of specific companies that are sacrificing long term for short term stock prices, you can make a ton of money by shorting their stock.

Re: The Long-Term Stock Exchange Comes to Life

#108

Post by chii »

WalterBright wrote: post #101
SomeCallMeTim wrote: post #100

Earlier quoted context omitted.

I have experienced short-term thinking, driven by stock market expectations, very directly. Working on a game, we had a build ready two weeks before the end of a quarter, but we weren't quite done. We had just a few minor tweaks that needed just two more weeks to complete, and we in fact delivered a complete game two weeks later...that was ignored, because it was more important to make their quarterly goal than to re…

> We put in a ton of extra work to make it perfect and they didn't care. The question is whether the game would have made more money for the company if it was perfect and shipped later. It is not necessarily true that making a product better and delaying shipping is long term better for the company.

> It is not necessarily true that making a product better and delaying shipping is long term better for the company.

a perfect game released later may either become a classic that has huge long tail potential. A early-to-market game may produce a short hit/fad that passes.

It's almost random which will happen - as those doing these sorts of judgements prior to actually releasing have their own personal biases which can cloud their judgement one way or another.

Re: The Long-Term Stock Exchange Comes to Life

#109

Post by WalterBright »

chii wrote: post #108
WalterBright wrote: post #101

Earlier quoted context omitted.

> We put in a ton of extra work to make it perfect and they didn't care. The question is whether the game would have made more money for the company if it was perfect and shipped later. It is not necessarily true that making a product better and delaying shipping is long term better for the company.

> It is not necessarily true that making a product better and delaying shipping is long term better for the company. a perfect game released later may either become a classic that has huge long tail potential. A early-to-market game may produce a short hit/fad that passes. It's almost random which will happen - as those doing these sorts of judgements prior to actually releasing have their own personal biases which c…

Of course people can misjudge the details. But that doesn't mean they are deliberately sacrificing the long term for the short term. It just means they are mistaken.

Re: The Long-Term Stock Exchange Comes to Life

#110

Post by chii »

roenxi wrote: post #90
phkahler wrote: post #50

Earlier quoted context omitted.

Your concern is only the tip of the iceberg. Any set of rules will be gamed. The only way I can think of (and it can probably be gamed) that would really put the long term into the executives mind is to have most of their compensation based on the value of the company a few years after they're done. But given the existence of options and shorting stocks and any number of ways to mitigate risk or make money that don't…

> In some cases I think the answer is to strip investors of control. They are the ones allegedly pushing short term profits at the expense of the long term. Hopefully this was a very fleeting thought; when it comes to ideas about changing corporate structure you couldn't really come up with a worse one. It is a complete violation of the skin-in-the-game principle that has so successfully propelled capitalist society…

But when does 'short-term' become 'long-term'?

If i make good (short-term) decisions each quarter, then won't that just add up to be a good decision after 4 quarters? If it turns out that the 'good' decision last quarter turned out to be bad _this_ quarter, then you'd make a change to fix it for _this_ quarter_.

Rather than plan out a 10 year plan, which you can't possibly predict in advance what may happen.

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