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The Long-Term Stock Exchange Comes to Life

blog.ltse.com

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Re: The Long-Term Stock Exchange Comes to Life

#141

Post by grondilu »

This was discussed on HN already and I'm sad to see this showing up again.

If you artificially create obstacles to market liquidity, you create incentives for bypassing those obstacles[1]. If a stock can't be sold on an official market, then it will be sold on a officious one, with various possible mechanism, the most obvious one being a front company holding the stock officially while secretly keeping a book of its "real" holders.

There are, maybe, some inconveniences and possibly economic inefficiencies in the trend that can be observed for investors preferring investing in the short term rather than the long term, but it is very narrow-minded to react to this by suggesting to limit market liquidity. IMHO this attitude shows a deep mistrust in the free market and a step away from capitalism towards socialism (since in socialism, stocks are not liquid at all).

1. "Money, capital, has a life of its own. It's a force of nature. Like gravity. Like the oceans : it flows where it wants to flow."

https://youtu.be/BAhhqqX1XEU?t=154

Re: The Long-Term Stock Exchange Comes to Life

#142

Post by yellow_postit »

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…

"no one will remember if the game is late, only if it's great" (seen this attributed to a few different folks)

But that also ignores the realities of deadlines, contracts, and that sometimes "done" is more important than "perfect"

I'm just not totally bought into the idea that at large analysts and large investors can't recognize a short term for long term tradeoff.

Re: The Long-Term Stock Exchange Comes to Life

#143

Post by grondilu »

phkahler wrote: post #50
whack wrote: post #16

"Tenured shareholder voting power, meaning that a shareholder’s votes would be proportionately weighted by the length of time the shares have been held" I wonder if we're going to see the rise of holding companies just to get around this rule. "Our holding company owns shares in XYZ, and will never sell those shares ever. Instead of buying/selling XYZ directly, you can instead buy/sell shares in our holding company.…

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…

> Lets provide incentives for companies to share profit rather than pump stock prices, then everyone can get excited about the right things.

We could start by not taxing dividends, but I guess I'm just dreaming.

Re: The Long-Term Stock Exchange Comes to Life

#144

Post by yellow_postit »

bsaul wrote: post #62
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

I had a similar idea (x) a few years ago, but leading this kind of project is way beyond my capabilities. I'm thrilled to see people try to accomplish this, and you seem to have a fantastic team, congrats. (x) My first idea was to create a market where you couldn't resell a stock until some (long) time has passed. Pretty much the exact opposite of algorithmic trading trying to pass orders at light speed. Another was…

Shorting a stock still does show interest though. That you believe the stock is over valued.

Re: The Long-Term Stock Exchange Comes to Life

#145

Post by cf »

chii wrote: post #110
roenxi wrote: post #90

Earlier quoted context omitted.

> 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.

Buying lots of nice things on a credit card and racking up debt is a wonderful short-term strategy. At some point the mistakes you make in the short-term cripple you in the long-term. That's what all these efforts are trying to address. How do we make things that are costly long-term costly in the short-term as well?

Re: The Long-Term Stock Exchange Comes to Life

#146

Post by derriz »

eries wrote: post #103
derriz wrote: post #77

Earlier quoted context omitted.

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

Hi Eric.

My question doesn't make that assumption. It questions the size of your target market. You are proposing to "reward" certain investor behaviors but I am suggesting that the numbers indicate that the vast majority place NO value on the reward you are offering.

It seems clear to me that the vast majority of people who have an interest in having exposure to the equity markets do NOT value voting rights.

If more people valued voting rights, then more would hold the stock directly or would only invest through intermediaries who advertise that they behave as shareholder activists. But, comparatively speaking, not many investors do.

Re: The Long-Term Stock Exchange Comes to Life

#147

Post by deepGem »

I was initially very skeptical of this idea and I still am. Like many threads have pointed below, long term strategy is super easy to game. Oh 'we haven't made any money this quarter because we are debating and finalizing our long term goals'. This could become the anathema of rapid iteration.

NVidia and FB are perfect examples of consistent performance Q over Q. That doesn't mean they don't have a long term vision. I'm sure there are many such companies that I haven't heard of.

Companies not going public has little or nothing to do with the focus on short term earnings. Companies are not going public because 1. There are alternative sources of cheap cash PE funds etc. 2. The cost of doing an IPO is incredibly high (in terms of time). 3. Associated processes Sarbanes-Ox etc are a pain to manage.

CEOs are willing to sacrifice some equity to avoid all these hassles and remain private.

Re: The Long-Term Stock Exchange Comes to Life

#148

Post by maaaats »

runeks wrote: post #39
jerf wrote: post #23

Earlier quoted context omitted.

It seems like sufficiently clever lawyering ought to be able to prevent this, by tying the voting power to the entity that has the right to obtain the benefits of the stock price going up. At the very least this prevents the LLC hack.

> […] by tying the voting power to the entity that has the right to obtain the benefits of the stock price going up. If I own shares in a holding company, which owns shares in an LTSE-company, don’t I have this right? If not me, who else?

That's the point. And as a new investor, your power would be less than that of the holding company.

Re: The Long-Term Stock Exchange Comes to Life

#149

Post by qubex »

jacques_chester wrote: post #117
qubex wrote: post #70

Earlier quoted context omitted.

Does that mean that you do not speak of ownership in terms of a weighted graph of nodes, or that indeed your rules do break down when there is a possibility of circular references?

I imagine all such graphs in the USA will have humans as root nodes, since the 14th amendment makes it a bit tricky to create ownership edges into humans.

That is very true, I’m a fool for not having thought that ultimately it all has to culminate with humans that cannot be ’owned’.

Re: The Long-Term Stock Exchange Comes to Life

#150

Post by arekkas »

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

How will you add liquidity to LTSE, as (from the little details given) it seems like the market will be moving very sluggish because trading volume is "conceptually" limited.
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