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1. Thanks for the word correction, updated. 2. Publicly traded companies have instant liquidity on many more shares, which makes using "last share sold" an mea

by dhh 16y ago

1. Thanks for the word correction, updated. 2. Publicly traded companies have instant liquidity on many more shares, which makes using "last share sold" an meaningful metric. 3. When only 3% of the money a company is supposedly worth has been moved around, it's a poor indicator of what the other 97% would go for. 4. They haven't figured out how to make much profit yet. And it's still questionable whether they will. MySpace supposedly also just needed to turn on the faucet, but apparently the water ran out before they got to it. 5. Oh, and New York smells. (take that!)

danielnicollet 16y ago
it's "a meanningful metric" not "an meaningful metric". Please spell people. This is not SMS!
- dansingerman 16y ago
  I think it is always wrong to point out spelling mistakes, except in posts about spelling mistakes.
  - cromulent 16y ago
    Especially as many spelling mistakes are actually typos. Also, "meanningful" is an excellent example of Muphry's Law. http://en.wikipedia.org/wiki/Muphry%27s_law http://en.wikipedia.org/wiki/Muphry%27s_law
spolsky 16y ago
2. That's just not correct. Spend twenty minutes talking to anyone who trades in bonds or equity before you make assumptions about what liquidity you need to get a good price... it's not much. Facebook trades all the time on sharespost, certainly enough to be liquid and to reach a market price. Google itself only has a tiny fraction of the shares available to the public (10% if I remember correctly) and far less than 1% of the outstanding shares trade every day. That doesn't mean that the market doesn't find a market price. 3. Also not correct. When entire companies are bought and sold that had a previous market in the shares, the price for the entire company is usually a PREMIUM ON the the market valuation. "PREMIUM ON" means MORE THAN. Somewhere in Chicago, I understand that there is one market of some sort, I think they trade corn and pig bellies, surely SOMEONE there can explain it to you... 4. Also, just not true. They are very profitable and their profit is almost certainly growing at a rate that will make their valuation reasonable.
- GavinB 16y ago
  http://www.sharespost.com/companies/facebook http://www.sharespost.com/companies/facebook I think the simple summary of your point is this: Things are worth what people are willing to pay for them, not what other people think they should be willing to pay for them. Facebook is worth $26 billion. That doesn't mean that buying it at a valuation of $26 billion is a good investment. Worth and my estimation of what it will be worth in the future two are different things.
  - charlief 16y ago
    That is sharespost's estimate of Facebook's worth, not what Facebook is actually worth. Hopefully if this thread was a little less heated, at the basics this is a discussion on estimating the present worth of Facebook. A decent estimate would include the expected future worth, whether it is based on expert analysis or a market's expectations. I don't think any estimate here could be categorized as what "it will be worth in the future".
  - joshuacc 16y ago
    "Things are worth what people are willing to pay for them, not what other people think they should be willing to pay for them." I agree with this, but there is a difference between the market being willing to pay $26 billion for a company, and minority investors being willing to pay $26 billion/0.03. Only the former establishes the actual* value.
    - 2arrs2ells 16y ago
      Now, now. Let's be reasonable. No one is valuing Facebook at $866.67 billion. /pedantry
  - protez 16y ago
    Estimation beats market cap when it comes to the sustainable value, which only comes from hard-earned cash, not crazy bomb-passing games you can observe in every bubble scene. I do think that FB can be traded around $50 billion and may be $500 billion (Who cares? Most of investors-speculators don't care about its paper worth on the market.) if another dot-com bubble forms. However, what would be its sustainable value? How will it generate its profit to justify its valuation? Until it's on its verified earnings statement, it's just another bomb-passing game. Who really care whether it's $5 billion, or $500 billion, if one believes he can pass his bomb to the enthusiastic guy beside him?
angilly 16y ago
I was impressed (surprised?) at how civil this response was. Probably because it was a response to Joel and not randomHNuser9 :) I was also surprised that it didn't really address the question of whether or not you (37S, dhh) are "stewing in their own witty ideas, listening only to the adoring comments they get from the groupies" Do you have any thoughts on the "bubble-ness" of Chicago. Think it's a totally invalid point?
- jemmons 16y ago
  Given employees of small service companies sometimes deal with clients more often than they deal with their own families, it's not unreasonable to posit these clients act as a "bubble" that insulates the company from the world at large. What's laughable is Joel's implicit assumption that the majority of 37s clients are, apparently, Chicagoans. How charmingly pre-internet of him.
dhyasama 16y ago
I can verify point five. New York does indeed smell.
- angilly 16y ago
  only when you're outside. :)
  - slantyyz 16y ago
    Or not on the subway.
- jbail 16y ago
  Everyone thinks their sh*t don't stink. Honestly, Chicago smells too.
  - gensym 16y ago
    Yes, like chocolate!
edw519 16y ago
It's weird, it's like in Chicago they don't have multiplication or something. Oh, and New York smells. (take that!) Two of my heroes dragging discourse on hacker news into the toilet. What's the world coming to?
- sspencer 16y ago
  Agreed, kind of depressing that neither appears to have anything better to do.
  - commanda 16y ago
    Not really. They are both professional writers of online publications. This forum is the perfect place for them to stir up controversy to entertain their target audience. I'm entertained, at least.
- irahul 16y ago
  Both of them have some insights worth pondering, but the attacks are kinda negatively overshadowing the discussion. Joel really shouldn't have started the Chicago hyperbole. Do they have some history or it's just impulsive?
  - nadam 16y ago
    They are competitors.
    - irahul 16y ago
      That alone shouldn't be reason enough and I would say both of them behaved very unreasonably if being competitors is all there is to it. I was asking more along the lines of previous altercations or confrontations. I do remember some post from 37 signals commenting about Joel's taking investment; not sure if it was David or someone else though. A very thin line divides frank and honest speech and rude and arrogant statements. Most of the internet celebs sit on the fence and cross it every now and then - Linus Torvalds (Open BSD devs are a bunch of masturbating monkeys), Zed Shaw(Rails is a ghetto) etc etc. That being said, there always is a take-away as these people are one of the most hardworking and talented people in the industry but the sad thing is it makes it difficult for people not familiar with their style to neglect the firework and just consume the good parts(not that it would matter to any of them).
joelhaus 16y ago
Such arguments should be left to professors of financial theory. Here's a balanced analysis: In the real world, markets cannot be absolutely efficient or wholly inefficient. It might be reasonable to see markets as essentially a mixture of both, wherein daily decisions and events cannot always be reflected immediately into a market. If all participants were to believe that the market is efficient, no one would seek extraordinary profits, which is the force that keeps the wheels of the market turning. In the age of information technology (IT), however, markets all over the world are gaining greater efficiency. IT allows for a more effective, faster means to disseminate information, and electronic trading allows for prices to adjust more quickly to news entering the market. However, while the pace at which we receive information and make transactions quickens, IT also restricts the time it takes to verify the information used to make a trade. Thus, IT may inadvertently result in less efficiency if the quality of the information we use no longer allows us to make profit-generating decisions. Source: http://www.investopedia.com/articles/02/101502.asp http://www.investopedia.com/articles/02/101502.asp
points 16y ago
I'd bet they make a lot more profit than 37signals.
grandalf 16y ago
If you take #3 to its logical conclusion, any company's shares, if sold all sold at once, would be worth far less than the price at the nexus of supply and demand (the market price). Price is simply a function of supply and demand. It's not customary to use a fire sale price as the sole basis of a company's valuation. http://en.wikipedia.org/wiki/Valuation_(finance) http://en.wikipedia.org/wiki/Valuation_(finance)
carlton 16y ago
David's point 2 is a good one. It is the reason why bourses insist that a large percentage (IIRC >25% for the LSE) of share capital is in public hands at all times. (Where "public" means people or organisations not associated with the directors or major shareholder.) Nonetheless, Joel's post is quite funny.

by dhh 16y ago

danielnicollet 16y ago

it's "a meanningful metric" not "an meaningful metric". Please spell people. This is not SMS!

dansingerman 16y ago
I think it is always wrong to point out spelling mistakes, except in posts about spelling mistakes.
- cromulent 16y ago
  Especially as many spelling mistakes are actually typos. Also, "meanningful" is an excellent example of Muphry's Law. http://en.wikipedia.org/wiki/Muphry%27s_law http://en.wikipedia.org/wiki/Muphry%27s_law

spolsky 16y ago

2. That's just not correct. Spend twenty minutes talking to anyone who trades in bonds or equity before you make assumptions about what liquidity you need to get a good price... it's not much. Facebook trades all the time on sharespost, certainly enough to be liquid and to reach a market price. Google itself only has a tiny fraction of the shares available to the public (10% if I remember correctly) and far less than 1% of the outstanding shares trade every day. That doesn't mean that the market doesn't find a market price. 3. Also not correct. When entire companies are bought and sold that had a previous market in the shares, the price for the entire company is usually a PREMIUM ON the the market valuation. "PREMIUM ON" means MORE THAN. Somewhere in Chicago, I understand that there is one market of some sort, I think they trade corn and pig bellies, surely SOMEONE there can explain it to you... 4. Also, just not true. They are very profitable and their profit is almost certainly growing at a rate that will make their valuation reasonable.

GavinB 16y ago
http://www.sharespost.com/companies/facebook http://www.sharespost.com/companies/facebook I think the simple summary of your point is this: Things are worth what people are willing to pay for them, not what other people think they should be willing to pay for them. Facebook is worth $26 billion. That doesn't mean that buying it at a valuation of $26 billion is a good investment. Worth and my estimation of what it will be worth in the future two are different things.
- charlief 16y ago
  That is sharespost's estimate of Facebook's worth, not what Facebook is actually worth. Hopefully if this thread was a little less heated, at the basics this is a discussion on estimating the present worth of Facebook. A decent estimate would include the expected future worth, whether it is based on expert analysis or a market's expectations. I don't think any estimate here could be categorized as what "it will be worth in the future".
- joshuacc 16y ago
  "Things are worth what people are willing to pay for them, not what other people think they should be willing to pay for them." I agree with this, but there is a difference between the market being willing to pay $26 billion for a company, and minority investors being willing to pay $26 billion/0.03. Only the former establishes the actual* value.
  - 2arrs2ells 16y ago
    Now, now. Let's be reasonable. No one is valuing Facebook at $866.67 billion. /pedantry
- protez 16y ago
  Estimation beats market cap when it comes to the sustainable value, which only comes from hard-earned cash, not crazy bomb-passing games you can observe in every bubble scene. I do think that FB can be traded around $50 billion and may be $500 billion (Who cares? Most of investors-speculators don't care about its paper worth on the market.) if another dot-com bubble forms. However, what would be its sustainable value? How will it generate its profit to justify its valuation? Until it's on its verified earnings statement, it's just another bomb-passing game. Who really care whether it's $5 billion, or $500 billion, if one believes he can pass his bomb to the enthusiastic guy beside him?

angilly 16y ago

I was impressed (surprised?) at how civil this response was. Probably because it was a response to Joel and not randomHNuser9 :) I was also surprised that it didn't really address the question of whether or not you (37S, dhh) are "stewing in their own witty ideas, listening only to the adoring comments they get from the groupies" Do you have any thoughts on the "bubble-ness" of Chicago. Think it's a totally invalid point?

jemmons 16y ago
Given employees of small service companies sometimes deal with clients more often than they deal with their own families, it's not unreasonable to posit these clients act as a "bubble" that insulates the company from the world at large. What's laughable is Joel's implicit assumption that the majority of 37s clients are, apparently, Chicagoans. How charmingly pre-internet of him.

dhyasama 16y ago

I can verify point five. New York does indeed smell.

angilly 16y ago
only when you're outside. :)
- slantyyz 16y ago
  Or not on the subway.
jbail 16y ago
Everyone thinks their sh*t don't stink. Honestly, Chicago smells too.
- gensym 16y ago
  Yes, like chocolate!

edw519 16y ago

It's weird, it's like in Chicago they don't have multiplication or something. Oh, and New York smells. (take that!) Two of my heroes dragging discourse on hacker news into the toilet. What's the world coming to?

sspencer 16y ago
Agreed, kind of depressing that neither appears to have anything better to do.
- commanda 16y ago
  Not really. They are both professional writers of online publications. This forum is the perfect place for them to stir up controversy to entertain their target audience. I'm entertained, at least.
irahul 16y ago
Both of them have some insights worth pondering, but the attacks are kinda negatively overshadowing the discussion. Joel really shouldn't have started the Chicago hyperbole. Do they have some history or it's just impulsive?
- nadam 16y ago
  They are competitors.
  - irahul 16y ago
    That alone shouldn't be reason enough and I would say both of them behaved very unreasonably if being competitors is all there is to it. I was asking more along the lines of previous altercations or confrontations. I do remember some post from 37 signals commenting about Joel's taking investment; not sure if it was David or someone else though. A very thin line divides frank and honest speech and rude and arrogant statements. Most of the internet celebs sit on the fence and cross it every now and then - Linus Torvalds (Open BSD devs are a bunch of masturbating monkeys), Zed Shaw(Rails is a ghetto) etc etc. That being said, there always is a take-away as these people are one of the most hardworking and talented people in the industry but the sad thing is it makes it difficult for people not familiar with their style to neglect the firework and just consume the good parts(not that it would matter to any of them).

joelhaus 16y ago

Such arguments should be left to professors of financial theory. Here's a balanced analysis: In the real world, markets cannot be absolutely efficient or wholly inefficient. It might be reasonable to see markets as essentially a mixture of both, wherein daily decisions and events cannot always be reflected immediately into a market. If all participants were to believe that the market is efficient, no one would seek extraordinary profits, which is the force that keeps the wheels of the market turning. In the age of information technology (IT), however, markets all over the world are gaining greater efficiency. IT allows for a more effective, faster means to disseminate information, and electronic trading allows for prices to adjust more quickly to news entering the market. However, while the pace at which we receive information and make transactions quickens, IT also restricts the time it takes to verify the information used to make a trade. Thus, IT may inadvertently result in less efficiency if the quality of the information we use no longer allows us to make profit-generating decisions. Source: http://www.investopedia.com/articles/02/101502.asp http://www.investopedia.com/articles/02/101502.asp

points 16y ago

I'd bet they make a lot more profit than 37signals.

grandalf 16y ago

If you take #3 to its logical conclusion, any company's shares, if sold all sold at once, would be worth far less than the price at the nexus of supply and demand (the market price). Price is simply a function of supply and demand. It's not customary to use a fire sale price as the sole basis of a company's valuation. http://en.wikipedia.org/wiki/Valuation_(finance) http://en.wikipedia.org/wiki/Valuation_(finance)

carlton 16y ago

David's point 2 is a good one. It is the reason why bourses insist that a large percentage (IIRC >25% for the LSE) of share capital is in public hands at all times. (Where "public" means people or organisations not associated with the directors or major shareholder.) Nonetheless, Joel's post is quite funny.