But that's just market cap, which isn't comparable in any way to GDP.
Both are measures of very different things, and both are very different to actual money.
Both are measures of very different things, and both are very different to actual money.
I don't really agree with you.
GDP measures the value of goods and services produced by a country over a specific timeframe.
Market cap (in this context) measures the value of all companies listed in the stock exchange.
Both are ways to measure an economy, and both are measured in units of money. What's the difference between money and "actual money"?
If I buy something from you for $10, and sell it to someone for $10 the GDP goes up by $20.
If on the other hand you sell it to someone for $10 the GDP goes up by $10 instead.
The value of money + value of tangible goods is the same in both cases, but the GDP is not.
They measure different things.
Tourist walks through some distant mountain village and meets the villager shouting "My dog is for sale". So the tourist asks
"How much for your dog?" "$1 million", villager replies.
Tourist just sighs and continues his walk. Later the same day tourist is coming back. He meets the same villager, so he asks:
"Did you sell your dog?" "Yes,to my neighbor, for $1 million" "Really? And he paid in cash?" "No, he gave me two cats, but they are $500.000 each"
The market cap valuation works in exactly the same way.
Or am I wrong?
Market caps for eg public companies are generally given legitimacy through trading, routine liquidity, auditing of financials, and dozens of other processes and regulations that companies must conform to. You can sell your Microsoft stock for a very well known amount of dollars, under very well known terms, essentially any time you want during market hours; you can never sell those cats for $500,000.
The difference between me claiming my right shoe is worth $50 billion, and owning all of Uber's stock and having that be worth $50 billion? People with a lot of money, and a lot of reputation, deciding that Uber is worth $50 billion, after typically having put their money where their mouth is and investing. To say nothing of Uber having a real business (meaning they can raise debt, have credit ratings, sales, cash flow, operating projections, et al), having a value that the IRS or an auditing firm or investors can actually assess, and so on. One is verifiable to some large degree, the other can never be anything more than an absurdity - I can very likely sell my Uber stock for a lot of value, even if I take a big discount; I can never sell my right shoe at even a 99.99% discount to the $50 billion.
If Bill Gates wanted to liquidate his Microsoft stock, though, it's unlikely that his sale price would match the exchange. Once you get into trades of a significant portion of the company, there's not enough guaranteed to be enough liquidity at price listed on the exchanges.
No it doesn't, not in a functioning public market.
Just because the guy claims the cats are $500,000 each, doesn't actually make it so. The sole thing occurring there, is a person is claiming something (that is obviously false). No taxing authority on the planet would assess those cats at $500,000; no professional auditing firm would either. The entire bogus premise collapses instantly upon scrutiny.
In almost any market, a claim is worthless unless you can eventually cash it in for a large portion of that sum, typically in a currency that possesses real value. In your example, your cats can never be cashed in for a meaningful fraction of their proclaimed value under any scenario. I can sell my Tesla stock however, there is an extremely well established and accepted value placed on it. I can still pretend, and make an outrageous claim on what my Tesla stock is worth ($1 trillion!), however it is nothing more than a bogus claim and has no actual bearing on reality.
Suppose the government made a law saying that you cannot never sell KO (Coca-Cola stock). Today KO is selling for $41.62/sh. Tomorrow, is it worthless? No. It pays a 3.05% dividend, which it typically increases 10% a year. It is worth at least $1.27 (the first year's dividend).
Now to the question about cats selling for $500k. Would a sensible taxing authority or professional auditing firm assess a flower at $500k - $1 million? In 1637 a single Viceroy tulip bulb sold for 3000 - 4500 florins; a skilled craftsman made 300 florins/yr [1]. Assuming that a skilled craftsman would make at least $50k/yr (probably more, given that $50k is near the median US income), one tulip bulb cost $500k - $1 million. Not so different from selling cats for $500k, so you cannot attack the example for unreasonable prices (s/(dog|cat)/tulip bulb/). Now, was it worth that price? No, hence why it fell back to a much more reasonable level shortly afterwards. But during the mania, selling one tulip in exchange for two lesser-valued tulips would be quite valid.
You missed the point of the illustration, which was that price (market cap) has no relationship with value. Admittedly, the illustration was rather opaque.
That said, I do agree that GDP and market cap can't be compared in a meaningful way.
It's like saying that the ISS is about the size of a football field. Does this comparison help you to visualize the size of the ISS? Sure. Does this comparison help you to understand anything else about the ISS or football fields? No.
If the units are correct and the same, then the comparison makes itself. The distance between two cities and how far an electric car can go on one charge are vastly different things, but since both can be measured in the same units, the comparison makes itself.
A dollar of market cap is very different from a dollar of GDP, like a cubic meter of lead is different from a cubic meter of air.
What we're talking about is the value (or weight); the denomination (or volume) is irrelevant.
The value of a dollar GDP is considerably more tangible than a dollar market cap.