And by punish you mean fairly value?
But that would be a massacre of shareholder value. One more quarter of a ridonculous valuation is worth more than having a product that will keep Tesla viable as a car company. The idea that Grok could become a first tier AI product is more valuable than a mass market SUV, because that untested idea keeps the share price up.
Until it doesn't. If you can predict the day that happens, I want to subscribe to your newsletter.
[0] https://www.itamarnovick.com/intro-to-startup-anti-pattern-s...
I'm arguing that the fair value of boring companies making reliable things should be much higher. We don't do that, you have to promise hot air based growth to prevent your valuation from crashing.
The behavior we incentivize is the one we'll get.
In theory (occasionally in practice) when you purchase a stock you are purchasing a piece of the future cash flow of that company. For a company which operates in a known environment and we can roughly predict how their revenue will grow (i.e. boring companies), the correct fair value of the stock can be easily computed.
So, no, those predictable companies should not be valued much higher, they are already valued correctly because the are no big surprises in their future, the profits and revenue are predictable.
This logic breaks down with companies where the growth can't be predicted to any reasonable accuracy. So in those you're just buying the hype, which sometimes turns out to be real, sometimes not.
Unfortunately this also incentivizes some companies to pump themselves purely on hype so they never get valued on actual revenue and profit. Tesla is a prime example of this. If you value them as a car company we can easily compute a fair value, but that number is very low. So, instead, robots! AI! self-driving! Space! That keeps the fair value an unknown, so it can ride the wave of hype for a long time.
If the world's wealth was equally distributed, it would be pretty punishing for everyone who is commenting on this platform.
Very few people would choose the one where there's a slight chance they're in the wealth classes currently.
Not moving towards equality is just a selfish choicel.
It is. People are selfish.
Companies even more so.