4 ms·

I'll throw the British South Sea Trading Company into the ring for that title of most overvalued company ever. It had the king himself on the board. The compan

by duttish 10mo ago

I'll throw the British South Sea Trading Company into the ring for that title of most overvalued company ever. It had the king himself on the board. The company value represented a decent fraction of the national gdp at the time. All without actually never producing anything of actual value. It was just bribes and speculation all the way through. It's wild. https://en.wikipedia.org/wiki/South_Sea_Company https://en.wikipedia.org/wiki/South_Sea_Company Extra History did a more easily digestible series, which was how I learned about it in the first place. https://youtu.be/k1kndKWJKB8 https://youtu.be/k1kndKWJKB8

petesergeant 10mo ago
> The company value represented a decent fraction of the national gdp at the time. The company's market-cap was almost 3 times national GDP
- duttish 10mo ago
  Oh wow, thanks. I misremembered, thought it was like 1/3 and didn't have time to look it up again.
- maratc 10mo ago
  We should stop comparing incomparable things, like companies market cap (measured in dollars or pounds) to national GDPs (measured in dollars or pounds per year,) unless we want to reach outrageous but incorrect conclusions.
  - omnicognate 10mo ago
    It's a dubious comparison but not because of "per year". The comparison is implicitly to one year's worth of GDP, which is a currency amount. It's dubious because whereas a year's worth of GDP has some claim to actually being the value of something (with many caveats but it's engineered to behave like that as much as possible), market cap isn't. It's the amount all the shares would cost if someone bought them all in one go for the price some shares were most recently purchased for, which would never happen.
    - Nevermark 10mo ago
      Well, based on that last share purchase, we have incontrovertible proof that there was indeed one person in history who thought it was worth 3x GPD. And the fact that in the entire BSSTC shareholder universe, there wasn't any noticeable volume for a sell, or a registered sell limit, at a lower value leading up to the last peak. That must have been a rough trade, but someone got something out at the last moment.
      - mort96 10mo ago
        A couple of points: 1. No, we don't have proof that there was one person who thought it was worth 3x GDP. We have proof that there was one person who thought a 0.001% share of the company was worth 0.003% of GDP or whatever. They could think it was worth that much for plenty of reasons; maybe they thought the share price would grow for a bit more before collapsing so that they could make some profit, maybe they invested in order to just be an investor and have a say in investor meetings or however things worked back then. Maybe it was a status thing. 2. Why are we using the opinion of one random person to determine the value of a company
        nl 10mo ago
        To add to this, this type of thing happens all the time in crypto. A coin will release 1/1000000000th of it's eventual supply, have some trades at 10c and then claim the value of the entire supply as the headline value. It's obviously dumb.
        deleted 10mo ago
        [deleted]
        Nevermark 10mo ago
        > Why are we using the opinion of one random person to determine the value of a company Please don’t invent strawman positions and reflect them on me. I said nothing of the kind. Of course the company’s worth wasn’t what is implied by the peak trade. But that price wasn’t set just by the peak buyer. Out of all the other shareholders and shares, nobody was offering a sale on that venue at a lower price. Outside of all the idiosyncratic psychology of each individual, in aggregate, the market did “think” it wasn’t worth selling leading up to that point. Then confidence began breaking. Mania is mania. Bubbles are bubbles. They are not rational, but they are real, not the result of one person or two. Not the result of one peak trade. Large groups of people start thinking something can’t come down. For a moment in time, a lot of people thought it wouldn’t (at least “yet”). How far mania goes is what peak price reveals. That price is still a measure of the whole market at that moment.
  - antonvs 10mo ago
    What’s the issue? If a market cap is three times an annual GDP, it means it would take three years of that economy’s entire production to purchase the company. It’s obviously a very fuzzy measure for various reasons, but it can give some idea of the market value of a company.
  - graemep 10mo ago
    How do people value companies (i.e. decide what the market cap should be)? Most often by comparing it to a corresponding per year number or two.
  - falcor84 10mo ago
    > “I have found out what economics is; it is the science of confusing stocks with flows” - Michael Kalecki
  - Jeff_Brown 10mo ago
    Comparing stocks to Flo's is perfectly meaningful. It's often done when comparing, for instance, the price of a house to one's yearly salary.
    - testrun 10mo ago
      That makes no sense. House price/salary is used to compare payment periods or affordability. The context is important. Share value and GDP are totally different things and there is no direct relationship.
  - gilbetron 10mo ago
    What simple method would you use instead? It is effective to have such comparisons for quick communication of the relative size of things.
    - testrun 10mo ago
      It is effective but wrong. It is the same as to compare a river flow to dam volume. There is a relation, but does not mean anything. A better comparison is to compare somebody's net value to the total housing value of a city. For instance comparing Musk's net value to the total value of all the houses/apartments in New York. Or the the value of the gold in Fort Knox.
saagarjha 10mo ago
Unrelated question: did we have a good enough idea of the world map in 1711 for the coat of arms shown on Wikipedia to be accurate?
- aetherson 10mo ago
  No, and the article shows a not-even-attempting-accuracy period version of the coat of arms a little below: https://en.wikipedia.org/wiki/File:SouthSeaCompany_TradeLabel.png https://en.wikipedia.org/wiki/File:SouthSeaCompany_TradeLabe...
  - Der_Einzige 10mo ago
    Gell Mann amnesia effect!
  - Am4TIfIsER0ppos 10mo ago
    WTF is this? Another thing wikipedia invents out of thin air.
  - tacker2000 10mo ago
    The Wikipedia user based his drawing off of this sculpture from 1711, so it seems the american continent was actually already quite well mapped back then. https://www.rmg.co.uk/collections/objects/rmgc-object-36062 https://www.rmg.co.uk/collections/objects/rmgc-object-36062
    - sorokod 10mo ago
      The Armorials section in Wikipedia: The armorials of the South Sea Company, according to a grant of arms dated 31 October 1711, were: Azure, a globe whereon are represented the Straits of Magellan and Cape Horn all proper and in sinister chief point two herrings haurient in saltire argent crowned or, in a canton the united arms of Great Britain. Crest: A ship of three masts in full sail. Supporters, dexter: The emblematic figure of Britannia, with the shield, lance etc all proper; sinister: A fisherman completely clothed, with cap boots fishing net etc and in his hand a string of fish, all proper.[61]

by duttish 10mo ago

petesergeant 10mo ago

> The company value represented a decent fraction of the national gdp at the time. The company's market-cap was almost 3 times national GDP

duttish 10mo ago
Oh wow, thanks. I misremembered, thought it was like 1/3 and didn't have time to look it up again.
maratc 10mo ago
We should stop comparing incomparable things, like companies market cap (measured in dollars or pounds) to national GDPs (measured in dollars or pounds per year,) unless we want to reach outrageous but incorrect conclusions.
- omnicognate 10mo ago
  It's a dubious comparison but not because of "per year". The comparison is implicitly to one year's worth of GDP, which is a currency amount. It's dubious because whereas a year's worth of GDP has some claim to actually being the value of something (with many caveats but it's engineered to behave like that as much as possible), market cap isn't. It's the amount all the shares would cost if someone bought them all in one go for the price some shares were most recently purchased for, which would never happen.
  - Nevermark 10mo ago
    Well, based on that last share purchase, we have incontrovertible proof that there was indeed one person in history who thought it was worth 3x GPD. And the fact that in the entire BSSTC shareholder universe, there wasn't any noticeable volume for a sell, or a registered sell limit, at a lower value leading up to the last peak. That must have been a rough trade, but someone got something out at the last moment.
    - mort96 10mo ago
      A couple of points: 1. No, we don't have proof that there was one person who thought it was worth 3x GDP. We have proof that there was one person who thought a 0.001% share of the company was worth 0.003% of GDP or whatever. They could think it was worth that much for plenty of reasons; maybe they thought the share price would grow for a bit more before collapsing so that they could make some profit, maybe they invested in order to just be an investor and have a say in investor meetings or however things worked back then. Maybe it was a status thing. 2. Why are we using the opinion of one random person to determine the value of a company
      - nl 10mo ago
        To add to this, this type of thing happens all the time in crypto. A coin will release 1/1000000000th of it's eventual supply, have some trades at 10c and then claim the value of the entire supply as the headline value. It's obviously dumb.
        deleted 10mo ago
        [deleted]
      - Nevermark 10mo ago
        > Why are we using the opinion of one random person to determine the value of a company Please don’t invent strawman positions and reflect them on me. I said nothing of the kind. Of course the company’s worth wasn’t what is implied by the peak trade. But that price wasn’t set just by the peak buyer. Out of all the other shareholders and shares, nobody was offering a sale on that venue at a lower price. Outside of all the idiosyncratic psychology of each individual, in aggregate, the market did “think” it wasn’t worth selling leading up to that point. Then confidence began breaking. Mania is mania. Bubbles are bubbles. They are not rational, but they are real, not the result of one person or two. Not the result of one peak trade. Large groups of people start thinking something can’t come down. For a moment in time, a lot of people thought it wouldn’t (at least “yet”). How far mania goes is what peak price reveals. That price is still a measure of the whole market at that moment.
- antonvs 10mo ago
  What’s the issue? If a market cap is three times an annual GDP, it means it would take three years of that economy’s entire production to purchase the company. It’s obviously a very fuzzy measure for various reasons, but it can give some idea of the market value of a company.
- graemep 10mo ago
  How do people value companies (i.e. decide what the market cap should be)? Most often by comparing it to a corresponding per year number or two.
- falcor84 10mo ago
  > “I have found out what economics is; it is the science of confusing stocks with flows” - Michael Kalecki
- Jeff_Brown 10mo ago
  Comparing stocks to Flo's is perfectly meaningful. It's often done when comparing, for instance, the price of a house to one's yearly salary.
  - testrun 10mo ago
    That makes no sense. House price/salary is used to compare payment periods or affordability. The context is important. Share value and GDP are totally different things and there is no direct relationship.
- gilbetron 10mo ago
  What simple method would you use instead? It is effective to have such comparisons for quick communication of the relative size of things.
  - testrun 10mo ago
    It is effective but wrong. It is the same as to compare a river flow to dam volume. There is a relation, but does not mean anything. A better comparison is to compare somebody's net value to the total housing value of a city. For instance comparing Musk's net value to the total value of all the houses/apartments in New York. Or the the value of the gold in Fort Knox.

saagarjha 10mo ago

Unrelated question: did we have a good enough idea of the world map in 1711 for the coat of arms shown on Wikipedia to be accurate?

aetherson 10mo ago
No, and the article shows a not-even-attempting-accuracy period version of the coat of arms a little below: https://en.wikipedia.org/wiki/File:SouthSeaCompany_TradeLabel.png https://en.wikipedia.org/wiki/File:SouthSeaCompany_TradeLabe...
- Der_Einzige 10mo ago
  Gell Mann amnesia effect!
- Am4TIfIsER0ppos 10mo ago
  WTF is this? Another thing wikipedia invents out of thin air.
- tacker2000 10mo ago
  The Wikipedia user based his drawing off of this sculpture from 1711, so it seems the american continent was actually already quite well mapped back then. https://www.rmg.co.uk/collections/objects/rmgc-object-36062 https://www.rmg.co.uk/collections/objects/rmgc-object-36062
  - sorokod 10mo ago
    The Armorials section in Wikipedia: The armorials of the South Sea Company, according to a grant of arms dated 31 October 1711, were: Azure, a globe whereon are represented the Straits of Magellan and Cape Horn all proper and in sinister chief point two herrings haurient in saltire argent crowned or, in a canton the united arms of Great Britain. Crest: A ship of three masts in full sail. Supporters, dexter: The emblematic figure of Britannia, with the shield, lance etc all proper; sinister: A fisherman completely clothed, with cap boots fishing net etc and in his hand a string of fish, all proper.[61]