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The following video transcript is generated automatically by a computer algorithm that learns and gets better on a daily basis. Please accept our apologies if some content below doesn’t make sense:

So talking of the lean, start up for a bit of info for the day today, we’re recording this on the 10th of September 2020. Yesterday was the first day of trading for the long term stock exchange. The long term stock exchange is the brainchild of Erik Reece, who was the guy who wrote Lean Start-Up in combination with Steve Blank. And it’s something that he’s been working at for a long time. So after the publication of The Lean Start-Up and a lot of the stuff that he was doing there, I think he actually started this project in about 2012. So it’s taken a long time to come to fruition, which I suppose is unsurprising when it comes to something as regulatory, sort of complex as a stock exchange. So they probably shouldn’t be too surprised by that. But, yeah, it’s been something he’s been talking about for a while, and it’s something that I’ve been sort of pretty interested in and the background to all of this. So the underlying thesis, all of this is that he thinks and many other people think that the way that the modern sort of public markets work has a very short term focus. So once you become once you you only become a public company, then you there’s a whole bunch of actual regulations come on board. There’s a whole bunch of extras and reporting requirements, legal requirements, things like that. And one of those is the causally sort of returns or the quarterly reports of how the company is doing. And it and the argument is, is that basically it focuses public companies on on sort of short term quarterly performance figures rather than the sort of longer term success of the company. Now, obviously, no management group or anything like that or ownership group is going to be, you know, disinterested in the long term viability of their company. But when you hire CEOs and executives and things like that and you compensate them based upon the quarterly performance of a company, then you shouldn’t be surprised that certain decisions are taken to improve a given quarter’s results that may be detrimental to the sort of longer term performance of that company and that company’s stock price. And that there are whole classes of business where actually a longer term time horizon would be better for the company. And, you know, and the argument goes, is that the reason, you know, you can see that this is a problem or you can see that this is something which does affect the market because of the difference in the way that the markets or how or the trajectory of companies from sort of start to finish or turning public has occurred, like how it used to happen in the sort of 50, 60, 70. Isn’t that how it happens now? And so, for example, there’s been far, far less IPO shows than in previous years. And, you know, the original purpose of the market was a way for a company to raise money. Right. You know, they would they would go to the list on a stock exchange and they would raise money and they would use that money to help grow the company. And in return, you know, the public, in inverted commas, would get access to, you know, buy into that company and do the necessary and something which happened less and less. The valuations at which companies are IPO ing and adjoining these stock exchanges are getting higher and higher and higher. And so not that it’s a broken model, it’s just that the is becoming a narrower model. And there’s been another things like, for example, you know, a lot of companies so start outcomes, particularly Silicon Valley companies, are able to raise a lot of money and stay private for a very long period time because they can get high seed valuations, they can get very high. Valuations are higher. So serious ABC deals, et cetera, rounds and their exits aren’t necessarily to IPO. So in a lot of cases, exits are selling to extraordinarily large companies like Apple or Facebook or whoever it might be, and they don’t actually come to market. And so the that’s the the usual sort of retail investor doesn’t have access to the growth stage of a lot these companies, because by the time they hit the markets, they’re already sort of pretty mature. And so you’re left with people. You know, the only people who are able to sort of take monetary advantage of the growth of these companies are regulated investors because they’re particularly America. They’re the only people who are allowed to invest in that thing. You have to be a regulated investor. I’m not sure of the exact details of what that is, but I think you have to have a minimum amount of money. You have to have proven a whole bunch of stuff. And. So the subtlety here is this Long-Term Stock Exchange and the way it’s launched is that in order to list on the long term stock exchange, you have to have certain corporate governance things in place, which means that you sort of that your corporate governance of you as a company is more dialled into longer term performance than it is short term performance. And you can also actually do less so if you don’t have to list just on the long term. So stock exchange, you can select shares, you can listen the number of different stock exchanges and the long term stock exchange. But the minimal about the minimal barrier to entry is that you have to have these certain sort of corporate governance at governance things in place, as they say. What are your thoughts, Marcello, on this as a as a as an idea and also kind of like some of the implementation details?

I think it’s a very interesting idea. Clearly, this choppy contrarian and I read like I think we need more of those here. Yeah.

As much as possible in the wards, but also for entrepreneurs. So I discard this because a few these projects so that. Yeah. I think it’s even if it doesn’t scale, it provides options for companies, entrepreneurs. And you always need someone, you know, with capitalism which works or at least until now. So Cust brewing to work. But then if you take it too extreme, you know, it has some collateral damage or externalities. They call it in economics. So for instance, you are saying now is too much concentrated then investment capabilities into lie, big asset managers or whatever. Hedge funds are no institutional investors, private equity. But it shouldn’t be like that. But also, companies are trying to you are not thinking long term. Also, for instance, you have them climate change, for example. So debt date companies are not bother much with climate change because it’s a long term problem and they are driven, you know, the CEO of that company. He needs to make it work within the next year or two or five, not within the next 30 or 50 or a hundred years. So especially in the U.S. or Western countries, usually in China or eastern countries like Japan, they tend to think long term. And there are very few companies that think long term, maybe lie now. But you need those outliers or more like contrarian or entrepreneur. You are an. Yeah, Guy said that put this concept forward later on, can change things like Elon Musk with renewables, not only with Tesla for cars, but that can extend to any other form of transport. And there is long term and also it’s not even only for transport. If you are a former energy consumption point of view, if you think long term, then if you are going with solar and wind, which is the most likeable options that we have, then you will need storage. So thank you. Swing in the battery business as well. So because that will help, you know, the full transformation towards renewable energies. So that’s a long term case. That’s why also when Tesla shares grow, I mean, it’s very volatile and there’s a lot of hype. But the I think long term, maybe 30, 40 years, they’re building something, you know, Amazon and these guys have a long term view. Now, e-commerce is booming, but he was ahead like 20, 30 years, you know. And then with the rockets as well. I mean, space industry, that’s long term as well that this year.

So so it’s interesting specifically in the case, because he’s obviously got Tesla, which is a public company, and then he’s got Space X, which is a private company. And so he’s got two very different kind of demands on him as a CEO or M.D. of those of those two companies. And he’s got a very different way of operating. And he famously, you know, had his meltdown moment where he was smoking weight and saying that he wants to take a Chrysler private again. Four hundred and twenty dollars per share or whatever it is, which is a fraction of what he’s worth now.

Yeah, I think it is indeed a very good example and also he was under so much pressure with Tesla because of not delivering the quarterly results on profits and output of cars manufactured. So and it almost went broke. Does the bankrupt. So. Which is insane. That now is the like superstar. And that was all due to short sellers. Some pressure from Wall Street analysts saying, oh, no, you are not turning a profit down. You will not get here. There when he was more idealist, you know, looking towards make an impact long term on earnings are very resourceful guy. So if if I mean, he was challenging what he was trying to do. But if he goes through that, I’m not sure lots of people, he can go through that or are prepared or can even afford to go through that. Yeah. Kick out some options that other companies wouldn’t. That essentially that the short term, the mindset or rule based stock exchange is they they kill innovation. And actually many of these large public companies, they don’t know it at all. So even the tech companies, I’m very pretty, you know, on that day. Yeah. Apple, I don’t think it’s, you know, I.T. enough or has not been doing it after Steve Jobs. They’re just milking it. And then even Google is trying to do it that way. They have been trying a bit, but that’s because the founders were around until recently. So, yeah, usually very few entrepreneurs can keep the long term view. So if these new stock exchange, the long term, so the change can provide a framework for that. Like an option for entrepreneurs to, you know, try to think on radical solutions, which will take time. And as long as investors are language that if that gains direction, that will be amazing. So, yeah, kudos for him. Yeah. I will keep monitoring how he’s doing. Yeah. Looking forward to their success.

Well, I think we’re definitely in agreement there. Yeah, for sure. I’m I’m super interested in that kind of side of things. I’m in my opinion as well. I don’t I don’t think they went quite far enough, but I think that’s probably because of, you know, it’s taken them a very long time to go through like the regulators and things like that. So I think probably pushing too far, you know, risks not having it at all. So I think that this is a good first step. But I’m I’d be keen to see things like high frequency trading and things like that sort of mitigated in this kind of market, because I think there’s a bunch of problems which occur from that kind of thing as well. Mitigate in the sense that. There should be choice of market. Right. So you should be able to choose whether to invest in the market where that thing exists or where it doesn’t. You know, if there are certain biases in the market, then, you know, it should be your choice. At the moment, there is no choice, you know. If he is either invested in the stock market or down, you’re gonna be exposed to the you know, the the problems and the benefits that are brought by the high frequency trading. So note would definitely be very interested in seeing where the long term stock exchange goes. Thanks very much for listening. We’re back every Tuesday and Thursday. Please cheque out our YouTube channel where we post this podcast on our other videos. Search where net workers. That’s two words. Or you can find the links in the show notes for this podcast. If you’re interested in help, mentorship and courses for entrepreneurs and starting businesses, please cheque out our website, which is at networkers dot com. So on its own by.

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