Counterfactual Theory of Value
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Counterfactual Theory of Value
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Re: Counterfactual Theory of Value
#2I can believe it's useful as an unscaled relative measure but I can't see it having absolute value. It's totally contextually defined. And in the case of McAfee had net negative value over time. Or perhaps Bernie Madoff is a better example.
Re: Counterfactual Theory of Value
#3This thinking is almost exactly how most pricing works in derivative markets and is the real breakthrough in the original Black/Scholes/Merton model[1] that has been reproduced many times since. They showed how you could replicate the payoff from a European-style option by hedging using the underlying and a risk-free instrument (under certain unrealistic assumptions, notably constant vol and the ability to trade in continuous time). Their argument was that since the payoff of the two things (holding the option and performing this hedging strategy) was the same, the price must be the same, and that produced the famous Black-Scholes formula, which is a closed form price for the hedge portfolio under those assumptions.
Since then, pricing using a replication portfolio in this way has been a cornerstone of financial maths - the price of a thing and a perfect hedge/replacement for the thing must be the same.
Re: Counterfactual Theory of Value
#4I can believe it's useful as an unscaled relative measure but I can't see it having absolute value. It's totally contextually defined. And in the case of McAfee had net negative value over time. Or perhaps Bernie Madoff is a better example.
Value changes over time, sometimes quickly, sometimes slowly, but the value of a thing or service is not constant.
Re: Counterfactual Theory of Value
#5> In startups, why do the founders receive such a disproportionate percentage of equity?
There is a really straightforward answer to this - equity isn't distributed according to a theory of value and nobody ever claimed it was. I own some equity in the Australian company CSL. It is unfair to claim I've ever added any value whatsoever to the company at any point, so obviously I don't get that equity because of a value theory. Even on the basis that people anticipated my buying of that equity - I bought in because I believed the value had already been created.
Who gets equity isn't based on value, it is based on power and who has it right now. Value is for working out whether you, the valuer, should make a trade or not.
Re: Counterfactual Theory of Value
#6TL;DR: when you want to know the real value of something, picture a world without it.
Re: Counterfactual Theory of Value
#7>Elon Musk provides another example. Today, Tesla is worth more than $1 trillion. Without his will and personality, Tesla probably wouldn’t exist.
Yes it would. Mark Tarpenning and Martin Eberhard founded Tesla. They were later forced out by Elon.
They were arguably quite poorly compensated for their part in starting this company.
This speaks to the fundamental problem with this theory - it's all very well saying that Elon is worth his money because Tesla would be nothing without him, but what if it actually would have been wildly successful without him and he mostly rode the wave with his $6 million series A investment?
Of course, you cant prove what "would" have happened, you only know what actually did, so your valur is measured by whomever tells the most compelling story.
Re: Counterfactual Theory of Value
#8Not really counterfactual theory, but opportunity cost. The cost of retaining the CEO to most of the shareholders (even a consensus of them) is high because they can’t realistically install a new one.
Opportunity cost gets conditioned on the investor. If you’re a maker, or a player with leverage on the board or something, your opportunity cost is different.
Re: Counterfactual Theory of Value
#9Otherwise known as the Shapley value [1], which also takes into account the interaction between participants.
> The Shapley value is the average marginal contribution of a feature value across all possible coalitions. [2]
EDIT: There are efforts to decompose that attribution of value into Synergy, Redundancy and Independence components [3], which I believe could also have meaning the context of business.
[1] https://en.wikipedia.org/wiki/Shapley_value
[2] https://christophm.github.io/interpretable-ml-book/shapley.h...
Re: Counterfactual Theory of Value
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