4 ms·
The timing (1972) of the invention of EBITDA is interesting. It would seem EBITDA was not used for thousands of years and was not useful until the end of the go
by hammock 4y ago
The timing (1972) of the invention of EBITDA is interesting. It would seem EBITDA was not used for thousands of years and was not useful until the end of the gold standard in 1971 and the beginning of a new era of central bank currency manipulation
Edit: bring on the downvotes without context. Or, engage meaningfully: what conditions existed that enabled EBITDA to emerge as an invention and gain traction?
- cuteboy19 4y agoI choose to believe EBITDA exists because of Bangladesh, which also came into existence in 1971. In fact if you track the prominence of EBITDA and the GDP of Bangladesh, the correlation is crystal clear In any case crypto is far more manipulated than any normal currency thanks to BitfinexTether.
- deleted 4y ago[deleted]
- AlexandrB 4y agoCan you elaborate? How are these things connected? Why wouldn't EBITDA be a useful financial framing for "growth" companies while the country was on the gold standard? Just because it happened around the same time, doesn't mean there's any causal relationship here.
- hammock 4y agoWall Street newly accepting EBITDA (cash flows) over DTI or net income, as told in the link above about the cable utility, is logical in an environment of a rapidly expanding money supply driven by unencumbered Federal Reserve. In the loose/free money era, financing cash flows with more and more debt is incentivized and in some respects the default mode of operation. Growth over value. Alternately, when the credit environment tightens, you see moves back to value and away from growth
- clairity 4y agonote that EBITDA isn't directly equivalent to cash flows, and can be wildly different depending on how creative the accounting is. EBIT/EBITDA can be useful is some comparative valuation exercises as an idealized cash flow substitute (especially when comparing companies or time periods under differing tax regimes), but it's not actual cash in minus cash out, as the term "cash flow" implies.
- seoaeu 4y agoHow do you know that Dwayne Johnson didn’t cause EBITDA? He was born in 1972 so the timing fits even better than the ending of the gold standard
- vintermann 4y agoIt's annoying how "everything bad happens because we abandoned the gold standard" is being pushed hard. A lot of other things happened around 1970, you know? It's a lot more plausible to me that "the rise of international finance", from immensely improved communication, caused both the abandoment of the gold standard and novel ways to estimate future profit.