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Let me try to summarize everyone’s same question: - The idea of a stock exchange that allows companies and investors to focus on 5, 10, 25 year horizons sounds

Let me try to summarize everyone’s same question: - The idea of a stock exchange that allows companies and investors to focus on 5, 10, 25 year horizons sounds great! - However companies on normal stock exchanges now already try to do this, but it’s hard because of quarterly earnings, pressure for quarterly growth, etc - How is LTSE different? Seems like: Companies and investors “promise” to have a longer term focus via planning - seems like that wouldn’t be enough and the same financial pressures would result in the same focus - We were expecting something like: “investors must hold positions for 10 years”, or, “earnings only reported every 2 years”, etc etc. but there’s nothing like that. - So, what is the big idea, the teeth, the new rule, that makes long term focus enforceable?

AmericanChopper 6y ago
> The idea of a stock exchange that allows companies and investors to focus on 5, 10, 25 year horizons sounds great! But this already exists. It's just the regular stock exchange. It's also worth noting that a majority of the capital in the market is already focused on very long term horizons. Most of it is sitting in boring mutual funds, who's investors are looking towards retirement as their horizon. If you're looking for a market that is so focused on long term horizons that they don't even care whether you have enough revenue to remain solvent, and won't have enough revenue to remain solvent at any time in the foreseeable future, then that market already exists too. You can call it Private Equity, or Venture Capital, and HN often likes to discuss how it's trying to reinvent the 2000s tech bubble. It's also led to some incredible scams, and isn't really something you want consumer investors betting their retirements on. > something like: “investors must hold positions for 10 years”, or, “earnings only reported every 2 years” These wouldn't be good rules even if you were focused exclusively on long term results. Your longterm outlook can change from one day to the next.
- unityByFreedom 6y ago
  If you want long term focus, invest in an index. No single company can weather every storm. Sometimes they need short term focus to survive in the long term.
  - r3un1 6y ago
    I think the idea is that a lot of the perceived instability in the economy is _caused_ or at least much amplified by the nature of stock markets. Changing how one thinks about stocks and what the ideal of a "healthy" company looks like might alleviate some of these problems.
    - unityByFreedom 6y ago
      > a lot of the perceived instability in the economy is _caused_ or at least much amplified by the nature of stock markets. Where did you get this idea? I don't see anyone saying it. Consider what might happen if you freeze the ability for people to borrow money. The stock market allows capital to move around more freely. I notice this is your first comment in a year and a half. Welcome back.
lostcolony 6y ago
'- How is LTSE different? Seems like: Companies and investors “promise” to have a longer term focus via planning' I don't think "promise" is the word. The fact the exchange says it's focused on long term, would incline companies that wanted to focus on long term to list themselves there. Likewise, it would incline customers to list themselves there. But what incentive is there for short term traders? Right now, on the normal exchanges, you have both types. And the loudest voices in the room are the short term types. They're the ones paying the closest attention, attending the shareholder meetings, etc. The long term holders are far less engaged. What does this have for those short term traders? Nothing. There's no reason to pile into this when all the incentives of the companies listing, and existing holders, are aligned to long term. If you're looking short term, why would you want this, knowing all the other players will be aligned to take hits in the short term, if it pays off long term? Not saying that this will be successful, but I can see it working because of that. Not because it's more attractive to long term holders, but because it's less attractive to short term. That said, agreed that some ways to enforce it would be nice. But those have some noticeable downsides too (i.e., if a company makes decisions you don't agree with, but you're locked into a hold position...). That said, as was mentioned elsewhere, it sounds like voting power is tied to how long you've held, as well as number of shares. So that certainly helps silent the churn and burn voices.
- laughinghan 6y ago
  all the incentives of the companies listing, and existing holders, are aligned to long term Are they? In what way? The only difference from a normal exchange appears to be that companies are "required to publish a series of policies". Why wouldn't that incentivize saying "the right things" in those policies but then otherwise behaving exactly the same as companies listed on a normal exchange? it sounds like voting power is tied to how long you've held This is not actually a requirement for companies listed on the LTSE, but even if every company implemented it, in practice surely shareholder voting power has negligible influence on company management compared to share price incentives?
  - lostcolony 6y ago
    "This stock exchange is intended for long term" I am a business that wishes to focus on the short term; why would I list there? I am a customer that wishes to focus on the short term; why would I buy there? It's not a requirement. It likely doesn't need to be a requirement. The point is, investors and companies both have options; why would they pick the one that is misaligned with them, even if it's just in intention? Starting out there's no reason to (no critical mass to make it worth investing in), and if it picks up traction there'd be no reason to either, because now the incumbent companies, and their stockholders, are already aligned to long term thinking due to their being the only ones inclined to invest initially.
cmroanirgo 6y ago
I used to be part of the system that built machines that auto traded on arbitrage opportunities due to millsec/nanosec differences in reported prices in different exchanges. Although probably not popular I would suggest that long term stocks needs to incorporate features that actively block certain trading patterns: limit price changes, limit buy/ sell frequency, & disallow shorting. I have been heavily involved in the gamification of the stock market and the above are used to maximise immediate returns to day traders and auto-trading machines. By fixing a price for the day, then there is less incentive to 'rush' to get to the price. Also, limit how quickly someone can buy and then sell a trade, rather than milliseconds (or smaller). I would strongly urge disallowing the buying of a stock by the same person, if they'd sold in the previous week. Shorting is never a long-term game and should be banned, as it never does the company any favours. But what I see on this LTSE is nothing of what would actually constitute long term ownership of stocks. What I actually see with this LTSE.com is the opposite of value for a stock, as it is only driving increased gamification of the metrics mentioned above. That is, if I were an automated machine trader, I would add LTSE and their slow price changes and compare them to NYSE and make zillions. I don't see how this encourages any kind of long term investment, nor stability for a stock.
- megameter 6y ago
  I'm curious re the issue of shorting and fixing about your thoughts with respect to liquidity being a good. The derivatives tend to be justified as market liquidity boosters. But if we are intentionally aiming to move out the time horizon of trades, is there then a way to distinguish those techniques as "unhealthy liquidity"?
- joshu 6y ago
  continuous trading isn't really necessary... could do a once a week or once a day crossing. i feel like "more votes the longer you hold the stock" is also a mistake - it should be, your votes are higher weighted if you agree to a longer lockup. 10 year lockup, lots of votes. no lockup, very little...
  - laughinghan 6y ago
laughinghan 6y ago
This reminds me of an article on HN from earlier this year by a reviewer of grant proposals, about how often they receive applications that clearly describe the problem the applicant wants to solve, but don't describe an idea with which to solve it: https://billwadge.wordpress.com/2020/02/10/im-good-enough-im-smart-enough-and-dog-gone-it-people-like-me-writing-grant-applications/ https://billwadge.wordpress.com/2020/02/10/im-good-enough-im...
swyx 6y ago
just want to float an idea that occurred to me that might explain the disappointment/confusion from HN: the LTSE in its current form is a Minimal Viable Product. It is maximally compatible with existing exchanges in order to encourage trading, listing and adoption from day 1. Eric picked the governance angle to start with, but it's probably not the final vision. He believes it is high leverage; reasonable people might disagree. but it is perfectly explainable to have v1 of the LTSE be a little disappointing, given that this is the same guy that coined the MVP.

AmericanChopper 6y ago

> The idea of a stock exchange that allows companies and investors to focus on 5, 10, 25 year horizons sounds great! But this already exists. It's just the regular stock exchange. It's also worth noting that a majority of the capital in the market is already focused on very long term horizons. Most of it is sitting in boring mutual funds, who's investors are looking towards retirement as their horizon. If you're looking for a market that is so focused on long term horizons that they don't even care whether you have enough revenue to remain solvent, and won't have enough revenue to remain solvent at any time in the foreseeable future, then that market already exists too. You can call it Private Equity, or Venture Capital, and HN often likes to discuss how it's trying to reinvent the 2000s tech bubble. It's also led to some incredible scams, and isn't really something you want consumer investors betting their retirements on. > something like: “investors must hold positions for 10 years”, or, “earnings only reported every 2 years” These wouldn't be good rules even if you were focused exclusively on long term results. Your longterm outlook can change from one day to the next.

unityByFreedom 6y ago
If you want long term focus, invest in an index. No single company can weather every storm. Sometimes they need short term focus to survive in the long term.
- r3un1 6y ago
  I think the idea is that a lot of the perceived instability in the economy is _caused_ or at least much amplified by the nature of stock markets. Changing how one thinks about stocks and what the ideal of a "healthy" company looks like might alleviate some of these problems.
  - unityByFreedom 6y ago
    > a lot of the perceived instability in the economy is _caused_ or at least much amplified by the nature of stock markets. Where did you get this idea? I don't see anyone saying it. Consider what might happen if you freeze the ability for people to borrow money. The stock market allows capital to move around more freely. I notice this is your first comment in a year and a half. Welcome back.

lostcolony 6y ago

'- How is LTSE different? Seems like: Companies and investors “promise” to have a longer term focus via planning' I don't think "promise" is the word. The fact the exchange says it's focused on long term, would incline companies that wanted to focus on long term to list themselves there. Likewise, it would incline customers to list themselves there. But what incentive is there for short term traders? Right now, on the normal exchanges, you have both types. And the loudest voices in the room are the short term types. They're the ones paying the closest attention, attending the shareholder meetings, etc. The long term holders are far less engaged. What does this have for those short term traders? Nothing. There's no reason to pile into this when all the incentives of the companies listing, and existing holders, are aligned to long term. If you're looking short term, why would you want this, knowing all the other players will be aligned to take hits in the short term, if it pays off long term? Not saying that this will be successful, but I can see it working because of that. Not because it's more attractive to long term holders, but because it's less attractive to short term. That said, agreed that some ways to enforce it would be nice. But those have some noticeable downsides too (i.e., if a company makes decisions you don't agree with, but you're locked into a hold position...). That said, as was mentioned elsewhere, it sounds like voting power is tied to how long you've held, as well as number of shares. So that certainly helps silent the churn and burn voices.

laughinghan 6y ago
all the incentives of the companies listing, and existing holders, are aligned to long term Are they? In what way? The only difference from a normal exchange appears to be that companies are "required to publish a series of policies". Why wouldn't that incentivize saying "the right things" in those policies but then otherwise behaving exactly the same as companies listed on a normal exchange? it sounds like voting power is tied to how long you've held This is not actually a requirement for companies listed on the LTSE, but even if every company implemented it, in practice surely shareholder voting power has negligible influence on company management compared to share price incentives?
- lostcolony 6y ago
  "This stock exchange is intended for long term" I am a business that wishes to focus on the short term; why would I list there? I am a customer that wishes to focus on the short term; why would I buy there? It's not a requirement. It likely doesn't need to be a requirement. The point is, investors and companies both have options; why would they pick the one that is misaligned with them, even if it's just in intention? Starting out there's no reason to (no critical mass to make it worth investing in), and if it picks up traction there'd be no reason to either, because now the incumbent companies, and their stockholders, are already aligned to long term thinking due to their being the only ones inclined to invest initially.

cmroanirgo 6y ago

I used to be part of the system that built machines that auto traded on arbitrage opportunities due to millsec/nanosec differences in reported prices in different exchanges. Although probably not popular I would suggest that long term stocks needs to incorporate features that actively block certain trading patterns: limit price changes, limit buy/ sell frequency, & disallow shorting. I have been heavily involved in the gamification of the stock market and the above are used to maximise immediate returns to day traders and auto-trading machines. By fixing a price for the day, then there is less incentive to 'rush' to get to the price. Also, limit how quickly someone can buy and then sell a trade, rather than milliseconds (or smaller). I would strongly urge disallowing the buying of a stock by the same person, if they'd sold in the previous week. Shorting is never a long-term game and should be banned, as it never does the company any favours. But what I see on this LTSE is nothing of what would actually constitute long term ownership of stocks. What I actually see with this LTSE.com is the opposite of value for a stock, as it is only driving increased gamification of the metrics mentioned above. That is, if I were an automated machine trader, I would add LTSE and their slow price changes and compare them to NYSE and make zillions. I don't see how this encourages any kind of long term investment, nor stability for a stock.

megameter 6y ago
I'm curious re the issue of shorting and fixing about your thoughts with respect to liquidity being a good. The derivatives tend to be justified as market liquidity boosters. But if we are intentionally aiming to move out the time horizon of trades, is there then a way to distinguish those techniques as "unhealthy liquidity"?
joshu 6y ago
continuous trading isn't really necessary... could do a once a week or once a day crossing. i feel like "more votes the longer you hold the stock" is also a mistake - it should be, your votes are higher weighted if you agree to a longer lockup. 10 year lockup, lots of votes. no lockup, very little...
- laughinghan 6y ago

laughinghan 6y ago

This reminds me of an article on HN from earlier this year by a reviewer of grant proposals, about how often they receive applications that clearly describe the problem the applicant wants to solve, but don't describe an idea with which to solve it: https://billwadge.wordpress.com/2020/02/10/im-good-enough-im-smart-enough-and-dog-gone-it-people-like-me-writing-grant-applications/ https://billwadge.wordpress.com/2020/02/10/im-good-enough-im...

swyx 6y ago

just want to float an idea that occurred to me that might explain the disappointment/confusion from HN: the LTSE in its current form is a Minimal Viable Product. It is maximally compatible with existing exchanges in order to encourage trading, listing and adoption from day 1. Eric picked the governance angle to start with, but it's probably not the final vision. He believes it is high leverage; reasonable people might disagree. but it is perfectly explainable to have v1 of the LTSE be a little disappointing, given that this is the same guy that coined the MVP.