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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

#121

Post by robbiep »

WalterBright wrote: post #102
robbiep wrote: post #96

Earlier quoted context omitted.

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 i…

As I said, it is not a rule or universal but it is a distinct feature that has multitude of examples, even within a firm, where different business units may be fighting aggressively to hit their numbers for a quarter even at the cost of longer term growth

Re: The Long-Term Stock Exchange Comes to Life

#122

Post by returnInfinity »

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…

From my personal experience I have seen that middle and senior managers make short-term decisions that favor bonuses, rapid growth in their careers that may or may not benefit the company in the long term. As an example the directors and product managers while trying to optimize costs to maximize profits completely lost track of the customer expectations over a decade and the products the company made got disrupted.

Re: The Long-Term Stock Exchange Comes to Life

#123

Post by toast0 »

chii wrote: post #112
toast0 wrote: post #51

Earlier quoted context omitted.

There is a market for this, the OTC or pink sheets. At initial listing and if the company itself or its insiders or affiliates are selling, there are required financial disclosures. I think there's resistance to public trading however because it generally requires more structured accounting (GAAP vs cash accounting), and invites external scrutiny and pressure.

> requires more structured accounting (GAAP vs cash accounting), and invites external scrutiny and pressure. aren't all these good things? Prevents both scamming, as well as ensuring that the founders take a careful look at their business, and that it isn't purely fueled by stock/investment, but is generating profit?

If I'm an investor, I want comparable accounting which means GAAP; if I'm a founder, maybe I just want to know what's in the bank account and don't want to deal with deferring recognition of income for long term contracts.

External scrutiny and pressure is a mixed bag. It probably reduces the chances of doing something stupid that destroys the company, but it also reduces the chances of doing something stupid that changes the world.

Re: The Long-Term Stock Exchange Comes to Life

#124

Post by gaadd33 »

clairity wrote: post #98
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…

> Another thought I keep coming back to is dividends. A proper investment gives returns without having to sell your stake. Lets provide incentives for companies to share profit rather than pump stock prices, then everyone can get excited about the right things. the psychology behind dividends is not on your side here. dividends are viewed by knowledgeable investors as a company admitting they have run out of good ide…

How many companies keep striving at things outside their actual core competency rather than issue dividends? For example, Facebook could have issued dividends rather than purchase Oculus Rift and I'm not sure that the company or the shareholders would have been worse off.

Re: The Long-Term Stock Exchange Comes to Life

#125

Post by ewjordan »

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…

Sure, that might be true.

Or, as is more common, the people working on a game have way more of a perfectionist streak than is worthwhile given the audiences.

What I always say in these situations: if two weeks worth of work would be the difference between a smash hit and a bomb, then who the fuck screwed up so bad to prioritize those work items to the last two weeks before launch?

If someone really messed up that badly, they should be called out. More often, those last few features really don't matter, and shipping is better than waiting. My experience is all with games that have digital updates, to be fair, shrink wrapped stuff may have different constraints (but similar questions about prioritization).

Re: The Long-Term Stock Exchange Comes to Life

#126

Post by sytelus »

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…

This is not popular opinion, it's exactly the truth. There is enormous pressure on CEOs to meet analyst expectations of growth each quater and not meeting them would immediately mean punishment in terms of sell out. This usually translates to continuously cutting costs and eliminating investments on long term bets. Most boards are heavily populated with representatives of investors and fund managers. They make sure that CEO gets enormously rewarded if growth expectations are met or otherwise gets booted out. They also direct hiring of top execs like COOs, CFOs and prefer the ones who are huge cost cutters - specifically the ones who will go with a stick and shutdown any project which didn't had direct impact on business in near term. They are not fools, they are greedy. None of these "activist" investors are long term people. They specialize in forcing buybacks, unnecessary acquisitions, massive layoffs and other "cost cutting" that will result in stock pop so they can cash out and move on to next vulnerable cow. There is reason lots of companies are sitting on massive cash hoards and unable to utilize it because that would translate to increased capex and tank their quarters. Amazon and Oracle are two companies which have battled through this and have huge scars to prove it. There had been a decade when no one was interested in Amazon stock because it used to take deep dives almost every other quarters. Bezo didn't cared much about his massively fluctuating net worth and kept majority votes but other CEOs are not that gutsy.

Re: The Long-Term Stock Exchange Comes to Life

#127

Post by BurningFrog »

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…

This sounds more like a story about management trying to keep their jobs rather than about the stock market.

Re: The Long-Term Stock Exchange Comes to Life

#128

Post by danieltillett »

gaadd33 wrote: post #124
clairity wrote: post #98

Earlier quoted context omitted.

> Another thought I keep coming back to is dividends. A proper investment gives returns without having to sell your stake. Lets provide incentives for companies to share profit rather than pump stock prices, then everyone can get excited about the right things. the psychology behind dividends is not on your side here. dividends are viewed by knowledgeable investors as a company admitting they have run out of good ide…

How many companies keep striving at things outside their actual core competency rather than issue dividends? For example, Facebook could have issued dividends rather than purchase Oculus Rift and I'm not sure that the company or the shareholders would have been worse off.

Facebook is in the business of eyeball monopolization. Any company at any chance of getting hold of a serious number of eyeballs is a threat if not purchased.

Re: The Long-Term Stock Exchange Comes to Life

#129

Post by hago1234 »

The "blind" focus on quarterly reports is real.

It had me wonder what the opposite would be...

Imagine we forged a formula for 1000+ year projects. They would require more money periodically and the availability of new funds would have a strong influance on the value of previous cash injections. One could buy the "failing" project cheap then simply do the new cash injection yourself OR in case of success one could obtain the shares for less than their value.

We have so many papper driven games like this already. I see no reason why this one wouldnt work.

The fun questuon to ask...

What could we build that would take 1000 years?

Re: The Long-Term Stock Exchange Comes to Life

#130

Post by vadimberman »

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…

> 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.

Not necessarily "fools". "Not experts" and "easy to influence" would be like it. Very much the trouble with the modern democracy: incompetents elect those who scream the loudest and say what they want to hear.

Like many others here, I experienced the short-term thinking firsthand. Reckless and pointless acquisitions and hiring spree to prop up the KPIs and scream to the entire world, "look how great we're doing!!!" is just one example.

> The trouble is, once the short term gain is there, who are the short termers going to sell to? A bunch of suckers?

Absolutely. The greater fool, sadly, is the foundation of much of the modern global economy.

Look at any bubble over the last 50 years.

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