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Demanding a standard way to determine valuation is in some ways like demanding a standard way of coming up with ideas. The reason prices are determined this sub
by netcan 12y ago
Demanding a standard way to determine valuation is in some ways like demanding a standard way of coming up with ideas. The reason prices are determined this subjectively is because information is incomplete. That means you need to use a lot more one off judgements that can't be fit into a standard.
If information was better then there would already be useful standards. There are pretty decent standards for companies that demonstrate a lot of consistency, like shipping companies. There are ways for valuing stock. On the other end of the spectrum, valuing a company that is still a work in progress is a different kind of problem. The upside is bigger and the downside more likely.
- AndrewKemendo 12y agoThe reason prices are determined this subjectively is because information is incomplete. That is every market ever. No entity makes decisions based on perfect information - but plenty have a process that is auditable and lays out the assumptions. If information was better then there would already be useful standards. I think whatever standard or process we did come up with would be more refined/accurate with more information - but I that doesn't preclude having something that can be audited. I'm not saying that the process would spit out the "right" valuation, because that is impossible to tell prior to a liquidation event. What I am saying is that the process for determining valuations needs to be 100% more transparent. Like it or not there is a process - maybe it's all in one principle's head, but it's there. We as founders need to know what that is.