Comment by bko | Hacker News Reader

Comment by bko | Hacker News Reader

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Amazon is a corporation, essentially a legal structure meant to encompass a group of investors. Investors range from its founder Jeff Bezos to small investors holding Amazon shares in pension funds and 401ks. You too can buy one share of Amazon for ~$2000 or invest in a low cost ETF that would own Amazon. The value of the stock is driven partly by expectation of future earnings. If Amazon were to lose future earnings relative to what investors believe they will receive, the stock price will likely go down.

On the extreme lets say that Amazon stock goes to $0, it would reduce the wealth of the world by about $1 trillion in stock valuation. That means that $1 trillion disappears from people's accounts (with ~$100 billion disappearing from Bezos' account). This would be wealth destruction no different from simultaneously reaching into every person's wallet and removing some amount of cash and burning it.

The whole "[corp] is not a person so [immoral act] is okay" is not productive.

>This would be wealth destruction no different from simultaneously reaching into every person's wallet and removing some amount of cash and burning it.

Unrealised profits are very much different than physical cash.

I own the stock and can sell it for $2000. If the value of the stock drops to $0 and I can no longer get $2000 for the stock, it would be no different than me losing $2000 cash

If I have $0.50 cash and someone reaches into my wallet and takes it, is that any different to if I've got a lottery ticket with an expected value of $0.50, and the draw occurs and its value drops to $0 when it doesn't win?

Some would say that in the first case it's morally wrong to steal my cash, whereas in the latter case I consented to the risk of my ticket losing when I purchased it; and therefore performing a lottery draw is not an immoral act.

Yes, if the Amazon model doesn't work out and you lose value, that's not immoral. It just happened like your lottery. If the value decreases from people stealing from Amazon then it is the same as going in your wallet and taking the cash.

How is this "stealing", if Amazon advertised the price they sold the product at?

Except you did't have $2000 cash because you invested it in Amazon, whose value dropped to $0.

Cash is simply the physical form that the government has deemed legal tender that must be accepted for payment. In the case of countries like 1920s Weimar Republic, that cash can lose value due to hyperinflation in currency trading markets.

/r/iamverysmart

You'd still own the stock even if it was valued at $0. You didn't lose anything.

If Amazon stock goes to $0, all that says is that literally nobody wants to buy Amazon stock.

You still own your shares. You were not robbed, your gamble did not pay off.

Also, for this to happen, Amazon would have to be very very very bad at doing its job, which is to sell products for a profit. A company that is that bad at doing its one job has no god-given right to remain liquid.

I don't think Amazon's stock going to $0 would necessarily entail wealth destruction. The money doesn't just disappear, people who have sold at the high have profited. Wealth destruction only happens when credit is involved.

If you're confused by the downvotes, it's because the stock market is not a zero-sum game. This is a common misconception about equities. The stock market can both create and destroy wealth because it is not a zero-sum game.

I'm not an expert and I would love for someone to tell me I'm wrong. Having said that I think what I wrote in the previous post is wrong, Amazon going to $0 would clearly entail some wealth destruction, namely at least the amount that was raised in the IPO and any further issuing of stock (options not included since they only dilute). But besides that any temporary increase in the stock's value, is not equivalent to each stockholder getting an equivalent amount of cash (which was what the OP claimed and what I assumed he meant with wealth creation/destruction) just as a decrease in the stock price is not the same as an overall decrease in money in the population. Some people sell at a high or at any price above the price of the IPO/ price at which money was raised, which captures some of the temporary increase, any loss that includes the money that was actually raised by Amazon would be actual wealth destruction (cash losses), but I don't see how the rest of those losses would also correspond to actual cash losses.

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