Comment by crazygringo | Hacker News Reader

Comment by crazygringo | Hacker News Reader

> ...why did we allow so many unprofitable companies IPO? When did losing money become acceptable and the new normal for publicly traded companies?

Huh?

In a market nobody's "allowing" things or not, people simply choose to purchase/invest or not. Losing money has always been acceptable in every business ever because businesses require investment and investment takes time (months, years, decades) to pay off.

Why shouldn't you allow an unprofitable company to IPO? He's arguing that I should be prevented from buying shares in Uber or Yelp no matter how badly I want to? That's incredibly presumptuous of him to think he knows better how I ought to invest my money than I do.

> Here’s to a new generation of entrepreneurs who prioritize building sustainable businesses.

Nobody would be investing money in these companies if they didn't think there was a good chance of them becoming sustainable long term. Obviously, the board of Uber is doing their best to make it a sustainable business. (You may disagree that it's sustainable, but that's business -- you can disagree about everything.)

Essentially, the author appears to be anti-investment, which is basically anti-economic growth broadly.

Bizarre.

It is a well established phenomenon of our time that the financial system has deviated very far from real measurements of value, like GDP.

> Nobody would be investing money in these companies if they didn't think there was a good chance of them becoming sustainable long term.

This is an idealistic view of the stock market.

People invest in companies because they hope to make a return on those investments. They believe that the stock will do well, not necessarily that the company will become sustainable long term.

It is believed that those two things should be linked, but this article and the commenter are making the assertion that that fundamental link (between real value and stock market value) has been broken.

That stock price is no longer indicative of a company's long term sustainability.

You've constructed a straw man regarding policy "why shouldn't you allow an unprofitable company" and are arguing against no one.

We aren't talking about policy or regulation at this point, we are simply laying out the context of reality. We are simply getting our facts straight.

The fact in discussion is simple: is the stock market still linked to economic sustainability? Or has it's fundamental vision and purpose been distorted over the past few decades?

> It is a well established phenomenon of our time that the financial system has deviated very far from real measurements of value, like GDP.

That sentence doesn't even make sense. How are you defining "financial system"? What makes GDP more "real" than other metrics? How are you defining a deviation between the two?

> This is an idealistic view of the stock market.

Of course it's not, it's literally the definition of how stocks are valued. Of course different people come to different conclusions about a stock's value, and supply and demand sets the final price. If you want to prove that day traders are massively distorting prices over the long term, the burden of proof is on you, friend.

> That stock price is no longer indicative of a company's long term sustainability.

You're the one constructing a straw man, a stock price isn't supposed to indicate sustainability, it indicates the summed probabilities of net present value of future profits.

What has the stock market got to do with sustainability? And why do you think the stock market had some "fundamental vision and purpose" of sustainability?

The whole premise of a vibrant economy is that investors take risks, that companies try for success, and many (most) fail along the way. But that the successes more than make up for it in the end. If every company had to prove (to who?) that it was perfectly "sustainable" economic improvement would slow to a crawl, since business it about risks.

> You've constructed a straw man regarding policy "why shouldn't you allow an unprofitable company" and are arguing against no one.

The article explicitly said "we did we allow". I'm not arguing against a strawman. I'm arguing against an actual sentence from the article.

There are all these people who claim (without any evidence whatsoever) that stocks are untethered to reality, that it's all a pyramid scheme, that valuations are obviously wrong. Well, go ahead, put your money where your mouth is and short it all. See if you know better than banks with entire teams of financial researchers and analysts.

Well, zero interest rates from federal reserve definitely allow such businesses to flourish. Where you try to corner a market with infinite money for a monopolistic position.

Startups don't get 0% loans from the federal reserve. Banks "do", but interest rates for unsecured, high-risk startups is well above 0%.

Startups get investments from investors, but investors have an opportunity cost. A lower bound on opportunity cost is market index growth, around 7% per year.

That's, like, the whole point of near-zero or zero interest rates, though. It's to encourage exactly this.

These aren’t the businesses that have access to 0% interest. Look at Uber bond yields.

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