13 ms·

...based on valuations determined by none other than Tiger Global. If you think those valuations are 100% objective, I have a bridge to sell you. No one wants

by cs702 3y ago

...based on valuations determined by none other than Tiger Global. If you think those valuations are 100% objective, I have a bridge to sell you. No one wants valuations to come down: * VC firms don't want to write down their portfolios aggressively, because doing so will make raising the next fund much more difficult. * Institutional LPs don't want VC firms to write down holdings either, because they themselves want to show good performance too. * Portfolio companies never want to raise money at lower valuations than the last round's, suffering dilution, unless they absolutely have no better choice.

yterdy 3y ago
I think most people would find it chilling to discover how many things are "valued" principally by the owners or potentially compromised appraisers - and how often these values are accepted by banks and the government for material decisions (e.g., how much margin to extend). It's going to get wild when someone has to sell and actual offers start rolling in.
- landedgentry 3y ago
  Reminds me of that scene in The Big Short where the price stayed constant and was not marked down, even though the world was collapsing around them. Heh.
- zie 3y ago
  This is normal, requiring an independent audit every time you want to do your books is just not practical. There is a certain amount of grift expected here, 10% or so either direction, it's not big deal. It is illegal though when you start reporting to the government on those valuations, and they get wind of you radically altering the valuations. Trump is in the middle of this fight right now, and he's not alone in getting in trouble for it.
  - yterdy 3y ago
    >requiring an independent audit every time you want to do your books is just not practical. Maybe they should take those exorbitant profits and do them anyway. "That would put a ceiling on wealth accrual," you say? Good.
    - zie 3y ago
      Let's say you are company A and you want to get a loan against your property from Bank B. You bought it last year for $500M. Today you tell the bank it's worth 900B. The bank has every right to say.. uh, we need an independent audit from one of these firms before we will accept that much price appreciation and do business at that valuation. All businesses can do that whenever they want. If they don't require an independent audit, they are taking on a bit more risk, because you are trusting the customer(company A here) to not lie to you. But it's mostly not practical because independent audits can take a lot of time, and there are only so many auditors out there. Sure if there was more demand prices would go up and more auditors would enter the business, eventually, but it takes time to onboard.
      - yterdy 3y ago
        You're not describing a problem, you're describing an opportunity to make the world a better place.
        zie 3y ago
        I guess we disagree on why in this instance it's not already a better place. I argue it's a great system right now. Companies can choose how much risk they want to take on based on how much trust and lies they are willing to try and sell or accept. At some point the truth will come out and you better hope you appropriately factored in your risk(s). Without risk, there is no chance of reward, it's just how the system is. Other systems that try to remove the risk from the environment haven't had a very good track record so far.
        yterdy 3y ago
        >At some point the truth will come out I don't agree. >Without risk, there is no chance of reward I also don't agree with this. What you're saying is that we have a mechanism to prevent people from scamming each other, but you'd rather not implement it because you see yourself as more capable of profiting off the scam arbitrage. I think that's kind of sick. Companies aren't people, there's no natural expectation of privacy rights. As with software, a society where the books are open is more secure and more able to capitalize on that security.

by cs702 3y ago

yterdy 3y ago

I think most people would find it chilling to discover how many things are "valued" principally by the owners or potentially compromised appraisers - and how often these values are accepted by banks and the government for material decisions (e.g., how much margin to extend). It's going to get wild when someone has to sell and actual offers start rolling in.

landedgentry 3y ago
Reminds me of that scene in The Big Short where the price stayed constant and was not marked down, even though the world was collapsing around them. Heh.
zie 3y ago
This is normal, requiring an independent audit every time you want to do your books is just not practical. There is a certain amount of grift expected here, 10% or so either direction, it's not big deal. It is illegal though when you start reporting to the government on those valuations, and they get wind of you radically altering the valuations. Trump is in the middle of this fight right now, and he's not alone in getting in trouble for it.
- yterdy 3y ago
  >requiring an independent audit every time you want to do your books is just not practical. Maybe they should take those exorbitant profits and do them anyway. "That would put a ceiling on wealth accrual," you say? Good.
  - zie 3y ago
    Let's say you are company A and you want to get a loan against your property from Bank B. You bought it last year for $500M. Today you tell the bank it's worth 900B. The bank has every right to say.. uh, we need an independent audit from one of these firms before we will accept that much price appreciation and do business at that valuation. All businesses can do that whenever they want. If they don't require an independent audit, they are taking on a bit more risk, because you are trusting the customer(company A here) to not lie to you. But it's mostly not practical because independent audits can take a lot of time, and there are only so many auditors out there. Sure if there was more demand prices would go up and more auditors would enter the business, eventually, but it takes time to onboard.
    - yterdy 3y ago
      You're not describing a problem, you're describing an opportunity to make the world a better place.
      - zie 3y ago
        I guess we disagree on why in this instance it's not already a better place. I argue it's a great system right now. Companies can choose how much risk they want to take on based on how much trust and lies they are willing to try and sell or accept. At some point the truth will come out and you better hope you appropriately factored in your risk(s). Without risk, there is no chance of reward, it's just how the system is. Other systems that try to remove the risk from the environment haven't had a very good track record so far.
        yterdy 3y ago
        >At some point the truth will come out I don't agree. >Without risk, there is no chance of reward I also don't agree with this. What you're saying is that we have a mechanism to prevent people from scamming each other, but you'd rather not implement it because you see yourself as more capable of profiting off the scam arbitrage. I think that's kind of sick. Companies aren't people, there's no natural expectation of privacy rights. As with software, a society where the books are open is more secure and more able to capitalize on that security.