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Comment by hn_throwaway_99 | Hacker News Reader

I think that's silly. A sizable portion of my net worth is my home equity, and thus I could say "Because at the end of the day, it’s a theoretical number that has no relevance. It’s not as if we have a bank account full with all that money and liquidity. I’m sorry, it’s not cash. It’s assets that are necessary so that I can live somewhere."

While I guess that's somewhat true, it's not a "theoretical number", and there is a very straightforward way to turn that into cash if I want (of course, I'd have to find somewhere else to live). The same is true of this billionaire's net worth.

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The same is true of this billionaire's net worth.

No, because while you own your house, the billionaire owns every house on the block. What happens when all of those houses get liquidated at once? First, local market is flooded, they no longer hold their original value. More importantly, and the part of the quote you left out, is that in this analogy, the houses can no longer be rented and a revenue stream dries up.

So no, it’s nothing at all like your home equity.

his net worth is calculated by taking his share of the FMV of the assets he owns. presumably, he could sell his share of the company to a buyer and he would then become liquid.

> he could sell his share of the company to a buyer and he would then become liquid.

What buyer? At the time of the article, he's #79 on Forbes, so there's only 78 potential individual buyers here and they're probably all in the same pickle so far as getting liquidity.

Maybe you're thinking of a merger with some other company. How many companies had 7 billion dollars in liquid assets in 2007 and also thought owning FEV would be the best use of that money? I'm thinking not many, but I really don't have any idea.

He doesn't have to sell to an individual. I'm sure there are a lot more funds, banks and companies with more then that amount of money around. Also he doesn't have to sell to a single entity, but can sell shares to the public market. That said, it still wouldn't be easy and probably tank the market value of his companies.

> That said, it still wouldn't be easy and probably tank the market value of his companies.

Right, my read is that this is what makes the number theoretical

I mean, you could say the same thing about the assets of a hedge fund. But it turns out that if you want to, you can convert most assets to cash. Of course, the more quickly you want to convert, the more money you lose.

His company has value. As long as he didn’t dump all the shares at once he could surely unwind his stake to the market. We’re not talking about bitcoin or beanie babies here. There’s an underlying asset.

Sure there’s no doubt about that, but the context is that this dude doesn’t spend a lot of time thinking about his net worth and folks here are somehow judgemental of that

Same problem: none of those funds have several billion sitting around they can access. It would crash the market for all other stocks if he offered everything for 3 billion : At half price there are funds with enough assets to liquidate their other holdings and buy. It would send the market down significantly. There just isn't enough free cash in the world to actually buy him out. (free cash meaning money not already allocated to food and other requirements of daily living)

He could sell to Berkshire Hathaway, easily.

An investment bank could easily find multiple cash buyers for companies of that size who would be willing to pay a premium. They’re like real estate brokers for companies.

As an example, IBM paid $34 billion in cash to buy Red Hat last October, which it paid to Red Hats shareholders. Red Hat was worth $21 billion at the time.

In practice many cash purchases of businesses are funded in part by debt. Companies or investors can borrow money from banks, issue bonds to receive cash, and contribute some of their own cash to out find a cash offer for a company.

Sure, there's a discount factor. But the discounte value isn't <1%, not even close.

It is somewhat theoretical, as all heavily asset tied wealth is, because if you were to sell all your shares/assets at once, it would devalue it, how much wouldn't be known until you tried to fire sale your assets and learn what the market will bear.

It’s not like he’d log into his etrade account and sell 7853256788943 shares or start selling his physical assets. This is M&A, it’s negotiated and he’d likely get a premium as the buyer would have some strategic interest

but you're saying it would be negotiated, which would mean it's theoretical until those are complete. therefore we can not take todays stock price and multiply it by share count to arrive at net worth.

If you own your house outright, you can put it up as collateral on a loan. As long as your luck holds you can make money off of that asset without selling it.

(However houses, as assets, leak a lot of worth in the form of upkeep and property taxes. Most times it’s better than rent, but not in all scenarios. And getting a cheaper house and investing the rest often gets better returns, once all costs and inflation are accounted for.)

The key is ones value system. Do you see yourself as a steward to the business, or do you see the business as your possession.

(Contemporary) American culture tends to lean towards the latter while the old world (and particularly Germany) seems to lean towards the former.

While it may be true that the assets could be liquidated via M&A, oftentimes those st the helm genuinely believe that it is their duty to serve the company and its stakeholders and employees rather than use it/them to the owner’s maximum benefit.

Both views are valid in different circumstances.

If your business is a well automated machine where technology acts as a force multiplier for some level of human input that is approaching 0 over time, then it becomes a possession. Most tech people aspire to have this kind of business. It is easier to do with it whatever you please, including taking it in a risky new direction or even shutting it down completely. The only person you hurt is yourself.

If however your business is driven mostly by raw human labor and more and more families are depending on the jobs you create as you grow, then you are mostly in the stewarding category. You will lie awake at night knowing that many people are counting on you to make the right decisions and to be merciful to them.

I agree. Try buying another house in the same area without that capital and see how theoretical it is.

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