3 ms·

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 of

by 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.
        zie 3y ago
        When the asset changes hands, it is sold and the then current market price is known. For real estate, the market price is disclosed publicly. For other assets the price may or may not be disclosed, but it is known by both parties and probably by most people wanting to know that pay attention. This is what I meant by the truth will come out. Let's say your parents, with whom you have a great relationship, are selling their house to downsize and you want to buy it. How tempted are you to get an independent house inspector to audit the house and make sure it's still standing and that you can trust your parents that the house is as the say it is? Essentially zero percent. Meanwhile there is your druggie cousin's dealer who has a house they are wanting to sell and you want to buy it. How tempted are you to get an audit done on THAT house? basically 100%? We already DO implement the mechanism to avoid scamming people, TRUST. If you have it with someone, you are much more likely to not require an audit, the less you trust that person, the more likely you are to want an audit. > 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. No, I'm talking about the basics of economics in our system. If you invest in US treasuries, they are very boring, guaranteed by the biggest government on the planet and very very safe. They also pay next to nothing in real(inflation adjusted) terms. If you invest in companies(aka stocks), then there is real economic risk, but the returns are ridiculously more than the boring, safe US treasuries. Same with your employment. You can go get a boring govt or academic job and be very safe @ work or you can go choose a very risky, but lucrative job that pays a lot. Everyone is free to choose their risk adjusted returns as they personally see fit for their levels of risk tolerance. The more risky will try to make it big and be the next Musk, Bezos, Gates, etc. The less risky will work at the local DMV or school. > 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. I agree with this, but that's not related to this discussion at all. Personally I think companies should always have open books. That doesn't change that company X thinks the asset is worth $X and Company Y thinks the asset is worth $Y. They can either not do business or hire an independent auditor. Forcing an independent auditor into every asset valuation is just adding extra bureaucracy that isn't needed.

by yterdy 3y ago

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.
        zie 3y ago
        When the asset changes hands, it is sold and the then current market price is known. For real estate, the market price is disclosed publicly. For other assets the price may or may not be disclosed, but it is known by both parties and probably by most people wanting to know that pay attention. This is what I meant by the truth will come out. Let's say your parents, with whom you have a great relationship, are selling their house to downsize and you want to buy it. How tempted are you to get an independent house inspector to audit the house and make sure it's still standing and that you can trust your parents that the house is as the say it is? Essentially zero percent. Meanwhile there is your druggie cousin's dealer who has a house they are wanting to sell and you want to buy it. How tempted are you to get an audit done on THAT house? basically 100%? We already DO implement the mechanism to avoid scamming people, TRUST. If you have it with someone, you are much more likely to not require an audit, the less you trust that person, the more likely you are to want an audit. > 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. No, I'm talking about the basics of economics in our system. If you invest in US treasuries, they are very boring, guaranteed by the biggest government on the planet and very very safe. They also pay next to nothing in real(inflation adjusted) terms. If you invest in companies(aka stocks), then there is real economic risk, but the returns are ridiculously more than the boring, safe US treasuries. Same with your employment. You can go get a boring govt or academic job and be very safe @ work or you can go choose a very risky, but lucrative job that pays a lot. Everyone is free to choose their risk adjusted returns as they personally see fit for their levels of risk tolerance. The more risky will try to make it big and be the next Musk, Bezos, Gates, etc. The less risky will work at the local DMV or school. > 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. I agree with this, but that's not related to this discussion at all. Personally I think companies should always have open books. That doesn't change that company X thinks the asset is worth $X and Company Y thinks the asset is worth $Y. They can either not do business or hire an independent auditor. Forcing an independent auditor into every asset valuation is just adding extra bureaucracy that isn't needed.