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Comment by holydude | Hacker News Reader

103BN is more than a GDP of entire countries. This is just mind blowing.

You're confusing a stock and a flow. GDP is a measure of value-added per period. That's a flow. The value of a company is a stock. More comparable to the wealth of a country than its GDP.

First, that's not necessarily the case (that they're confused), the parent may simply be referring to that number for scale purposes.

Second, what they said is correct on an annual basis. The value of that merger, at $103 billion, exceeds the annual GDP of numerous nations.

Before you make an absolute statement about their confusion, perhaps you should ask for clarification first. What they said was not strictly wrong.

The economic output of an entire nation can be useful for such comparisons when you're attempting to relate to very large financial figures.

Sheesh.. pedantry on HN can be harsh. I remember sparking about 15 cranky comments for calling Milton Friedman “on the Austrian side of economics.”

But, can’t beat em, join em.

Qualcomm is basically Estonia. Qualcomm’s revenue multiple is about 4.25X. Using that multiple, Estonia should have a similar valuation.

Qualcomm has the higher growth rate, but Estonia has been a country for a while with a loyal customer base. Qualcomm’s customers will probably use whatever chips come wired into their phone. Estonia’s are likely to stay Estonian unless a disruptive innovator comes along with a 10X improvement. 10X, not 10%. Think big Putin. If we weigh these against each other, it’s about even.

So… Estonia’s National valuation is about $103.4, based on $24bn in gross stuff (yuck).

Just kidding!. That’s preposterous of course. Qualcomm is investor backed, Like Tesla. Estonia is debt backed, like a country. You can’t compare those either, and you’d know this if you read all the cranky HN pedantry from before! Someone tried to compare Tesla to GM, the fool!

What we need is Estonia’s enterprise value…. Now, that’s apple’s to apple’s. Also, Russia, NATO and stuff.

You simply said something that was flat out wrong, that does not people were 'cranky'.

That was a different individual than was replied to up thread.

I think parent meant this:

> calling Milton Friedman “on the Austrian side of economics.”

Which is pretty laughably wrong for someone at least a bit educated in the area.

You consider him more of a Menshevik?

I did not know that economics was all about Austrian vs Menshiviks.

That part is straightforward. Traditionally, economic dialectics has two shivics at a time.

But, since you've conceded the point on pedantry, I'll give you a 3rd shivic. Which would you prefer, chicagoshivic?

"The economic output of an entire nation can be useful for such comparisons when you're attempting to relate to very large financial figures."

I repeat: It's comparing a stock and a flow. You cannot compare a stock and a flow because they are different units. 103bn per year vs. 103bn as a volume of wealth. You could compare 103bn to the wealth of a country. Or you could say that it is equal to N empire state buildings, or a number of dollars that goes around the world X times. But if you compare it to GDP, then you're not comparing apples to apples.

The problem is that flows like GDP count the "same dollar" multiple times. When the dollar moves from one place to another, it's counted. (To preempt the pedants: Yes, there are exceptions as to exactly where these counters are. Not every movement is counted.)

That's drastically different from having to have a large pile of "different dollars" to make a large purchase like this.

GDP is a measure of value-added. That's why they net out things like net trade.

What is mind blowing is that even $103bn is not a lot of money in the grand scheme of things. $100m isn't even a rounding error in the global economy. AB Inbev, a beer company, also recently paid $100bn to acquire their main competitor.

That puts into perspective how reasonable it is to expect to be able to make $10-20-50m building and running a business.

AB InBev growth and mergers is astounding. The number of companies that form the [original base] of the company is insane.

To be fair to AB InBev, they had to give up substantial portiona of SABMiller to get the merger through which as you said was a $100B+ [cash] deal. Combined company revenue is supposed to rise by around $11B this year. While SABMiller did $19B in revenue alone before the merger. SABMiller sold off at least $25B of the company before or during the merger. Not always for the best price either as all sides knew the sales had to happen.

Honestly, I think Inbev is one of the most interesting cases when it comes to wealth building. Interbrew was a merger of small(er) Belgian breweries, run mainly by old money aristocratic families. And they basically levered and merged their way up, into a global player worth hundreds of billions in market cap.

Definitely. It's like a handful of Belgian families and the Brazilians at 3G owning a majority of the company still after all this time. Amazing.

I don’t see at all how it makes it reasonable that a person should earn that much running a business at all. Maybe it’s reasonable to the board of that company but I don’t consider it reasonable.

I think you interpreted the comment wrong. Of course it's not reasonable for them to expect that money to just show up. But it's perfectly reasonable for them to expect that they could capture that much business. Because there's a lot of money flowing all the time, and 50 million is really a very small portion of it.

GDP is a measure of everything produced in a country per year. It makes no sense to compare the value of a company with growth per year.

Of course you can compare a rate with a quantity. GP is saying that whole countries take more than a year to create one (proposed) Qualcomm’s worth of value.

Have you never compared your car’s gallon-per-mile rate of fuel consumption with its gas tank’s size in gallons?

I haven't. The operation I suspect you're thinking of is division, not comparison. Division of capacity by consumption gives range, whilst a comparison leaves me scratching my head for a meaningful interpretation. I'm afraid this analogy appears to reinforce the point rather than challenge it.

But by that logic, it makes no sense to compare the cost of a new computer to the cost of rent, because they're different things. GDP is a measure in units of money, and so is stock value, so you can compare them just fine even though they're not related to each other.

That doesn't follow at all... A cost is always an outflow of money. As I mentioned in another thread, GDP counts the "same dollar" being spent multiple times. Even if there was only one dollar in the economy, you could generate millions in GDP by spending that one dollar millions of times in a year. However, you sure as hell aren't going to be making a $10 acquisition proposal with only $1 in the economy.

You're missing the point here, no one is comparing the two as if a country's GDP represents something equivalent to the value of a company. They're just saying something along the lines of "Wow! 3,000,000 gallons of water?!? That's more than the amount of water that flows past my house on the river in a year!" (Obviously made up numbers)

Well if you're going to try to be technical about it, GDP does not represent growth per year. GDP also does not specify that it must refer to a year of time, you have to qualify that. GDP is also frequently measured quarterly.

It makes sense to relate to GDP if what you're looking for is a well understood scale to use as a reference for very large financial numbers.

Since the GP did not mention a time frame I assumed yearly (otherwise it would be most countries instead of some). And when you compare GDP with a the value of a company it sounds like “company X is more valuable than country Y” to most people. I was just trying to mention that this is not the case.

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