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That’s comparing stocks to flows. Argentina’s GDP measures income not wealth.
by 1980phipsi 3y ago
That’s comparing stocks to flows. Argentina’s GDP measures income not wealth.
- gizmo 3y agoThe comparison is fine. It's a comparison between the labor of a country of 45 million people working for a full year vs the value created by a company with 25 thousand employees working for a few months. It's not a perfect analogy (what analogy is?) but it is the kind of thing that should make you go "hmm".
- jsnell 3y agoIt's pretty obvious that Nvidia didn't create $500 billion in value in a few months. Either the vast majority of that value was created over the last decade or so, and is now being harvested with a delay, or it's a speculative bubble rather than value creation.
- DanielHB 3y agoI don't get why people keep measuring companies valuations against countries GDP, GDP is per year, valuation is total value. Meaning those are completely unrelated metrics. What makes more sense is to compare the company revenues or profits against a country GDP.
- gizmo 3y agoAbsolutely not. For a country most labor doesn't compound in value. When a farmer produces wheat the value created is equal to the value of the wheat. When a barber cuts somebodies hair the value created is again more or less equal to the price charged. A barber shop doesn't make anything that accumulates in value. This is true for most the economy. It trades at about 1x revenue. Tech is different. Write software once, sell it many times. Design a chip once, sell millions of copies. Tech companies are the outliers. The rest of the world doesn't work like this.
- rich_sasha 3y agoI don't think this analogy works. What the farmer would sell his farm for ("market cap") is much more than an annual harvest value ("revenue"). Also tech is not that special. You could say the same about a factory, which you build once and it churns out cars, or a mine which churns out minerals. And to the extent this is not true, for example factories needing upgrades and labour, the same is true of tech. Software gets old, needs support, and the labour of well paid technologists.
- spurgu 3y agoDoesn't GDP measure transactions rather than income? I.e. if everyone just bought stuff back and forth from each other constantly (assuming no taxes on the transactions) the GDP would shoot up.
- 1980phipsi 3y agoGDP measures final demand of goods and services. It doesn't double-count the intermediate value added.
- spurgu 3y agoHow does "it" perform that magic? Edit: I.e. how does "it" know if people just bought a ton of used cars, or if people were simply selling them back and forth to each other constantly? (and if sales between private persons wouldn't register, imagine dealers being in between every transaction)
- 1980phipsi 3y agoFor used cars, they just don’t incorporate them. They can ask the dealer whether the car sales are for new or used cars. They might incorporate the profit from the transaction (to the extent there is profit) or fees associated with the transaction. But not the value of a used car itself.