A Plan for a Long-Term Stock Exchange
bloomberg.com
bloomberg.com
Like, why not just publish a version of the famous Joel Test (http://www.joelonsoftware.com/articles/fog0000000043.html), but for management incentives compatible with long-term thinking? Then companies can submit to voluntary review (maybe with a nominal fee) by your Long-Term Business Bureau, and you can issue certifications for ones that meet certain standards. Your go-to-market strategy is the same - you can target mid-sized startups that are looking to differentiate themselves and hoping one or two of them grow into norm-setting behemoths, but you don't have to ask those companies to jeopardize their (and their investors') liquidation strategies.
Even if people set up the inevitable backchannels or side markets, the fact that shares can only change hands once per day may still have a significant impact on the shape of the market, even if it isn't perfect.
I can't find slides for the talk (just [2]), but there's also some really interesting publications reviewing outcomes when auctions like this were used to deal out resources to big companies who really had an incentive to do their math: http://ftp.cramton.umd.edu/papers2000-2004/cramton-schwartz-...
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I would think that a long-term-focused market could also attempt to control and slow down things like earnings reporting periods and expected investor dividend earnings pay out timings.
I thought no one went public because going public requires you to divulge revenues.
Anyone in the know could possibly argue that the CEO is also a control freak, but she's used that control to keep the company focused on a high-quality/safe user experience for patients, which isn't a bad thing IMO.
To your point, why, specifically, is it so difficult to interface with these systems? Could it be by design?
You still didn't elaborate on why you said Epic has no HL7 integration.
I was promised employee stock at hiring. The company shortly thereafter reneged and substituted a "shadow stock" plan. The rationale I was given explicitly mentioned that having too many private stockholders would trigger mandatory financial reporting, and that the company would rather give me the finger than its balance sheet.
It was just one of the many reasons why I left. The company was fueled entirely by the inherent brokenness of the US health care complex. It seemed to be metaphorically powered by shoveling fat stacks of $100 bills directly into the fireboxes of pre-Watt Newcomen steam engines. They didn't even bother with the seemingly simple expedient of converting the $100 bills into $1 bills to increase the available fuel supply.
The end product that was visible to the customer was good, but it almost certainly cost several orders of magnitude more to produce it than was strictly necessary.
This would be news to my wife (a surgeon), or any one of her coworkers. The software is universally viewed as terrible by everyone I've talked to. It actively results in worse records because (at least as configured) it's so cumbersome to use that many notes are frequently kept out of the system. A management plan that takes seconds to explain verbally requires minutes of data entry.
You either love it or you hate it, and the physicians who hate it typically hate it because of what you said - they're suddenly having to type their own notes into a computer rather than dictate it to someone else.
Personally I'm of the opinion that doctors doing their own data entry is better for liability and malpractice reasons, but I empathize with your wife and people who hate doing it.
The idea is great, but it just runs into an absolute brick wall of realities of the health care system and human behavior.
Instead, the EPIC complaints are about the UI and workflow, which was modeled after the typical paper H&P (history & physical) forms clinicians would traditionally fill out. It comes down to the same UX lessons we've learned about most offline-to-online form transitions: directly porting a form is rarely the answer.
The anti-note sentiment has to do with the fact that they're copying-and-pasting from previous notes (often the vast majority of a note's content is pasted in), they're using MS Word to draft the notes because of a buggy editor UI, and then when they're in a situation they actually have to read the note, they're sifting through a pile of duplicated, pasted content.
There's a ton of opportunity for change here. There's an equal amount of risk involved, and selling these types of products into healthcare is about as fun as removing your fingernails. That's the piece EPIC does well, and why they're still a behemoth, even if their product is a five out of ten.
The problems with EMRs are really just a symptom of a real problem in medicine which that every department head wants to do things their own way. And there isn't really a good way of selecting which is best amongst the various processes/methods. The more prestigious the institution the larger this problem typically is.
First, he'll spin away from you on his stool. Then touch a keyboard with his boogerhooks to re-log-in. (A shared KEYBOARD in a room of transient often-sick people ... did you ever do the biology experiment in high school where you swab surfaces and inoculate a petri dish? The keyboards came out worse than the toilet seats.) Then he'll mouse around on a bunch of screens showing inconsistent or at the least confusingly presented data (listing, for example, all medications you've ever been prescribed with no obvious way to highlight which ones are current). Finally he'll find the right text box for the notes.
As your doctor types in this text box, various auto-completes will come through. Your doctor will then choose from these auto-complete options, which generally make a mockery of the English language and basic grammatical agreement (gender pronouns, etc.).
The idea that Epic has empowered, or even in any benign way nudged, doctors to begin doing as good a job of data entry as they once did of dictation and charting is just complete hooey.
I have also personally had a physician using Epic Hyperspace enter an incorrect immunization for my then months-old child. This doctor in fact had the correct immunization schedule for children memorized and could have written it out longhand perfectly. But it wasn't until the next visit that they detected the out-of-order sequencing of the immunization series. This was perhaps not the fault of Epic, exactly, but was certainly mediated through Epic Hyperspace and it did absolutely nothing to prevent, flag, or otherwise mitigate this completely detectable, violation-of-deterministic-formula situation. (Everyone was fine and no harm ... this time.)
Way off the original topic, here, but let's just say regarding Epic -- whatever it is that's driving adoption of that system is not naively comprehensible to those of us coming from tech/software. It's not quality, cost, UI/UX, safety/accuracy, interoperability, standards, network effect, viral effect, or the rest.
Yet, whatever Epic is doing (or whatever esoteric motive their buyers have), it seems to be turning out well for Epic.
So attempting a tie-back to the OP -- it's not clear that long-termism of a business necessarily has any salutary effects on the rest of the world.
And I used "good" to damn with faint praise. It generally meets customer requirements, and probably doesn't cause as much iatrogenic harm as whatever systems it replaces. For what it costs, I would personally expect quite a lot more out of it than it delivers.
But there's only so much you can do with a perpetual parade of recent college graduates that generally turn over after about 2 years.
I only recommend working there to people if they're right out of college and not in an engineer role, since their MUMPs/Cache stack is pretty dated.
I very distinctly remember it seeming a bit like a cult with the overbearing CEO that answers to no one creating a sprawling campus out in rural Wisconson that's so comfortable and with so many amenities you'd never want to leave!
Sounds like I made the right choice to decline, even though I'm currently working for a private company with the same type of CEO, only with revenues at half of one percent of Epic. But hey, I read a couple of weeks ago that they were hiring a sushi chef, and I do love sushi!
The Epic campus is very close to the epicenter of the best place for a typical HN reader in Wisconsin. Since the UW-Madison campus is on the west side of town, the geometry of the lakes almost assures that people who work in high tech businesses or academia commute in from the southwest quadrant, if they don't live in the city proper: Cross Plains, Middleton, Verona, Fitchburg, Oregon.
I loved living in/near Madison for the 6 months of the year that it wasn't either winter or unsubtly hinting that Mr. Winter had only just stepped out for a moment, and would likely be back any minute now to finish hitting my other kneecap with a lead-free pipe and then drag me around on a chain behind his Prius for a bit.
The immediate environs are great. But I had to leave for financial reasons.
If you have the opportunity to take a job in Madison, Wisconsin, that is not with Epic, do consider it.
Shameless plug! https://forteresearch.com/
But summers were idyllic.
For entry-level business roles they tend to be better suited, especially those looking to go the consulting route.
In my experience, If there is consensus around something, it's often a great idea to do the opposite.
I decided to take my company public last year and it has been exactly the right thing for us. As far as I can see it, there is absolutely no reason to wait if your company and your team is ready.
And what does that look like?
Running a Public company looks like a daunting task before you are ready, and it doesn't look like a big deal after you are ready. Building a company is a journey of personal growth, at some point your personal growth as a leader takes you past the point where a IPO looks daunting. Then you make your move.
We actually put together a mini documentary about Shopify for our IPO Roadshow: https://www.youtube.com/watch?v=QYl8iwD-6tk It's worth the watch if you are into this kind of thing. We decided to do this because Shopify grew out outside of the Silicon Valley sphere and wasn't that well known before our IPO. That has clearly changed since.
I refer a whole bunch of stuff towards shopify since I get inquiries about building e-commerce stuff all the time where they have some money but not enough to make it worth doing a bespoke solution and frankly unless they want to drop serious money your platform is always going to be better.
I'm over in the UK and I saw a talk a while back by one of the shopify guys (Keir Whitaker iirc, it was a couple of years ago) that was superbly well done which made me look at the platform.
That sounds like a reasonable idea, but I think it fails to see how capital markets work.
The thing is, voting rights can be sold. If you create different voting rights with weights, you will just create different prices for different voting rights. It will make things unnecessarily complicated, and if you try to prohibit some kinds of voting rights to be sold, you will likely just fuel a black market.
Can a 10-year voting right be sold? In theory you can't, since as soon as the share changes hands, it would become a 0-year voting right. Except the voter can sell his right in a different way, that is by just agreeing to vote on command in exchange for money.
By making every such conceivable transaction transparent and controlled by Law, the market is supposed to avoid these kinds of shady practices.
I see massive instability. Say everyone votes on some matter on day one. If that same vote occurs later in time the results may shift, even if nobody sells any shares. So any decision taken by shareholders is time-specific. That doesn't promote long-term thinking. Rather, it promotes gamesmanship and trickery to ensure that votes happen when most advantageous to whomever is in control of the schedule.
Markets are not some invention that can be re-invented overnight. They are the result of a thousand years of contract law, codified recently but based on long-standing principals. Altering those principals to suit the desires of founders cannot happen overnight. Don't like it? Don't take the windfall. Don't go public.
This is favoring insiders
v2 = a * v1
> How is a lender to grant credit based on such collateral?
v2 = a^2 * v1
The first where a share is bought to be held for voting rights or long term investment and the second where a share is bought to be sold. Where "a" is the value retained.
It would be priced in like any other commission, fee or tax.
I don't think that it would sow chaos -- financial institutions and investors are pretty good at estimating value.
> Options would be massively difficult, leading to a secondary market for shell contracts in order that shares need not officially change hands.
Like derivatives? How about we just regulate those across the board.
Except when they're really, really not.
See: mortgage tranches in 2006.
It also raises the question of how in the world they'd expect to prevent working around it by using something similar to the Depository Trust Company so that the actual shares don't change ownership.
Given that large markets already have mechanisms in place where nominees/trusts/proxies are used to work around other inefficiencies in the current systems, it seems a bit naive to think this wouldn't be worked around too.
You'd buy huge tranches of companies and swap out synthetic exposure to secondary investors who want just temporary directional risk in these companies. Modeling the relative value of the true shares and synthetic shares would be interesting/fun.
It can certainly be pushed onto the runway. Whether it flies or not depends on whether anyone wants to buy it, and that depends on whether what's behind it is worth buying. All markets do is find a price for you based on supply vs demand (with some complexity due to monetary distribution behind the scenes.)
There is nothing stopping startups coming up with their own forms of share holding (cf facebook for example). In general the ones that will be able to pull it off will be the ones everybody wants to own a piece of.
All contracts are after all is an agreement between two parties - in this case, copied and pasted from extremely hazardous shipping agreements used in 18th century when the chances of a ship coming back at all weren't that good, press gangs were being used to crew naval shipping, and the entire clearing system for the London Banks was being run by their clerks in a backroom bar in a pub on Lombard st. Times change. It took them fifty years, but eventually the bank managers noticed.
I like this philosophy. It prevents the Carl Icahn's of the world to stop breaking up companies.
What's disappointing is that people see it that way, even though it worked exactly as designed. The whole point was to find a fair opening value that made a level playing field for all investors. By opening at a stable value, it did exactly that.
The experiment hasn't been repeated because the people making decisions prefer a model that gives them short-term profit, at the expense of the general public.
With a few minor Congressional fixes to current laws (including one being voted on soon), we expect this to be workable in 2017.
As an entrepreneur, I'm proud of Reese for trying to tackle a big political problem with a startup, rather than through the political process. I can't help but think a lot of big problems that interested parties try to solve with lobbying, campaigning, and legislation could instead be solved with a market-based solution that doesn't necessitate government coercion.
Is this really true? Quite many public companies seem to innovate in long-term. In fact, to me it feels that private companies are often more short-term, because they don't have access to the liquidity the stock market provides, and therefore they have to generate more revenues short-term.
1) Accounting: Accounting, today, is mostly the same as it was a century ago. Namely, from an engineer's perspective, it does not contain the notion of error, which is obviously essential. If you go look at, say, Coca-Cola's financial statements, you'll find a value for their brand defined to the second decimal point. I know one thing about that value: it is wrong. It should be X(+/- error at 99% confidence).
2) Governance: Communication between management and stockholders is limited to the annual meeting, complemented by the board of directors. This model is flawed, the board of directors band-aid is ineffective, and there's room for much much fine grained communication and hence better governance.
Since stock exchanges mandate over these aspects of listed organizations, there is space for innovation, hopefully attracting investors and guaranteeing the spread of the next generation of business governance.
But as to your Coca-Cola example, internally generated brands are not included on the balance sheet as assets. "Coca-Cola" isn't considered an asset to the company because of how difficult it is to value it.
The firms specialising in asset valuations the firms use as independent justification for their accounting values are usually more than happy to provide confidence intervals or upper and lower bounds[1], and equity analysts are more than happy to note that a large portion of a company's valuation comprises assets sitting on their balance sheet that might be vulnerable to a sharp drop in valuation in a downturn. There's a sizeable haircut (essentially the lower bound of the lenders' accepted confidence interval) applied on any assets a firm tries to use as collateral too.
Just because the retail investor isn't presented with a nice little table of upper and lower bound measurements on a firm's balance sheet doesn't mean it isn't taken into account in a publicly listed firm's price. And ultimately, if a firm is more vulnerable to uncertainty about values of its assets than uncertainty about how big its future revenues might be, it as bigger issues than the clarity of its accounts.
>A company that wants to list its stock on Ries’s exchange will have to choose from a menu of LTSE-approved compensation plans designed to make sure executive pay is not tied to short-term stock performance.
If a company wants to buck the trend of short-term thinking, it doesn't need a new Ries exchange to do it. Jeff Bezos's Amazon is listed on NASDAQ and he continually reported 0 profits quarter after quarter. He avoided earnings manipulation for short term gains and yet, the stock price went up anyway. Likewise, if a company wants to provide a minimum wage of $70k to all employees including the janitor, they can do so while listing on NASDAQ or NYSE. The company doesn't require a hypothetical MLWSE (Minimum Living Wage Stock Exchange.)
I can't think of any example in a hundred years of corporate history where a new company can attract a significant (and profitable!) customer base based just on "aspirations". No, you must offer concrete benefits with obvious connections to the bottom line.
As an analogy, it's like proposing a new shipping company (Patriotic Shippers Inc) as an alternative FedEx/UPS. As a rule, they won't allow you to be a customer unless you pledge that anything you ship is made in the USA instead of cheap labor in China. Why would companies care about that aspiration? Either you can ship packages for half the price of FedEx, or you can ship them faster for the same price. The aspiration is just the cherry on top and not the primary motivator.
Or you propose to create a new airline hub in Iowa. You only allow airlines that provide adequate leg room and do not charge fees for checked baggage. Why would airlines move their fleet from Chicago O'Hare to Iowa based on those rules? No, the hub in the cornfield needs better enticements than that. Maybe if your Iowa hub has new patented deep learning neural nets that predict weather patterns better than the meteorologists in Chicago, and/or your scheduling algorithm for runways can handle 3x the traffic... then maybe the airlines will look at the new location. Also, if your new Iowa airport can play the politics game and convince Iowa state legislature to provide basic income to every resident and thereby cause a massive population exodus from Chicago to Des Moines, that would be another carrot to get airlines' attention.
Ries LTSE platform must offer profitable benefits such as technology advantages, or rebates to brokers, etc.
If enough funds believe that shorter term traders are undervaluing a particular NASDAQ stock because they've become so caught up in profit warnings they've missed the long term potential of its R&D, they pile in and pump the price back up again. If there aren't enough investors that believe a particular firm's long term strategy more than justifies conservative short term forecasts and a profit warning due to unanticipated increases in the research budget on NASDAQ, they won't be found on a LTSE either. It's not like the public markets are niche arenas that contrarian investors don't get involved with
[1]There's one possible non-economic reason. If existing exchanges' [but not SEC] rules prevent firms from issuing extra information pertaining to their long term research and development or restrict executive bonuses, then there is a point to doing this; afaik they don't.
The whole point of a stock exchange is to allow the market to provide nearly instant feedback on a company's reported operational/financial performance and the decisions of its leadership. I agree that there is moral hazard in companies giving executives pay packages in which most of the upside is tied to short-term market performance. It's important to note that a large portion of the professional investor community feels the same way, and a lot of short positions are born of the observation, "looks like the CEO is just trying to fluff numbers for his bonus". This is where a strong board makes a huge difference. "Corporate governance" is not just wanker-jargon, it's a real thing.
As far as public markets limiting R&D....that's a weak argument. Five of the ten biggest companies in the world by market cap are tech companies that spend billions of dollars a year on R&D, most of which has no clear path to GAAP profitability [1].
To borrow from Churchill, liquid securities markets constitute the worst system of company ownership with the exception of all the other systems available.
[0]: https://en.wikipedia.org/wiki/Benefit_corporation
[1]: Apple, Alphabet, Microsoft, Amazon, Facebook
I'm all for innovation but I can see the various levels of bureaucrats sharpening their pencils with a 'tsk tsk' noise.
Perhaps the energy could be well spent getting the wider public to accept investing and risk taking in a way that it used to. That would at least prepare the ground for tech companies to get listed again.
Maybe all the people who got burnt in 2000 have finally retired now.
In a related story, the number of shareholders per company has been plummenting too. Part of this is that money funds like ETFs only count as one shareholder, but have many owners. The other is the trend towatd just one or few private equity holders.
The list of requirements could simply be a set of rules, and a company's auditors (and CEO) could sign off that the company is in compliance. I don't see what the LTSE offers that goes beyond that.
This is believed by most everyone I know. It makes sense to me. However, is there any hard data to support this?
No, so you should drop whatever you're doing and get right on that.
Oh ... so you were expecting somebody else to service you for free?
Maybe someone would've done that study for the PhD.
Hey, you sound touchy. I guess you're letting your biases show. I think the notion is correct, but I understand the "evidence based life." To be sincere about rigorousness, you need to check the the ideas you like as much as the ideas you don't like. But anyhow thanks for letting your biases show for free.
:P
By the time they launch, the notion of a centralised stock exchange may well be outdated.
[0] https://www.sec.gov/divisions/marketreg/mrexchanges.shtml [1] https://en.m.wikipedia.org/wiki/Regulation_NMS
Better would be something like the following holding periods and tax rates (obviously a mere sketch subject to tuning):
<1 minute = 95% cap gains tax rate
<1 hour = 80%
<1 day = 70%
<1 week = 60%
<1 mth = 50%
<1 qtr = 40%
<1 year = 30%
<2 yrs = 20%
<5 yrs = 10%
<10 yrs = 5%
>10yrs = 0
The short end would eliminate the volatility, unfairness and flash-crashes created by submillisecond trading. The encouragement to the longer end would get everyone to think longer-term. The 0% for decade+ holdings would prevent a lot of silliness around inheritance (e.g., you inherit a few shares from your grandfather, and have no records or reasonable way to figure the cost basis, but are required to assert one).
Of course, I doubt it would happen because it isn't in the short-term interest of the bankers.
That kind of trading is not primarily providing liquidity, its primarily skimming and front-running. IMO, it should probably be banned.
However, I think that providing a 95% tax rate is a lighter touch, and allows people to do it if they can find sufficient profit.
I also mentioned being open to tuning the amounts. What rate would you think would be good for such short term trading?
Since BTC etc, the fed seems more interested in interfering with financial disruption...
They're everywhere!