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Comment by mcoliver

8 hours ago

Help me understand what you are saying here. For those that don't know this one is "a measure becomes a target, it ceases to be a good measure".

I'm not advocating for a single metric that can be gamed. A business is fundamentally about dollars in and dollars out. Maybe add receivables in there and a few other metrics from the P&L. I'm not trying to be prescriptive here on purely cash in and out.

I do think there is a low friction way that companies could report daily certain metrics that over time would give their shareholders a sense of the company's health and trajectory.

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mcoliver

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ang_cire  8 hours ago

Dollars/receivables in and dollars/deliverables out is just a question of rate, unless I'm missing something.

If a 10 billion dollar company has a per-second dollar out/in rate of $1,000,000 due to actual organic business, a company with $2,000,000 can set up an LLC it buys and sells from, and legally 'swap' $1,000,000 a second back and forth in services "bought and sold" to mimic the appearance of the $10B company, to generate business interest/confidence/investment.

That's an extreme example, but the point is that real-time money flow has nothing to do with the actual 'health' of a company.

  • PowerElectronix  4 hours ago

    Extreme? Almost every AI related stock is investing in companies that then buy their product, efectively just giving stuff for free in exchange for better quarterly numbers.

  • fc417fc802  7 hours ago

    I'm fairly certain you're describing fraud.

    • ang_cire  5 hours ago

      It's not actually fraud if there is some ostensible service they're performing. Business units within businesses 'pay' each other for 'services' all the time. Ditto for subsidiaries. Whether something is fraud might come down to intent alone.

      The line between legal and illegal business transactions can be murky as hell.

      4 replies →

    • wbl  6 hours ago

      That's what all these accounting rules exist to stop. No, you can't pretend that equipment breaking doesn't happen. No, you need to account for fixing the roof etc.

    • jongjong  6 hours ago

      I'm fairly certain he's describing the economy.

      There are so many companies like this which are just moving money around rapidly in and out with little to no actual profit. Finance sector is easily gamed.

      For example, anyone can become a billionaire; just start a company, issue 1 billion shares at slightly above $1 each, keep most of them for yourself; release just 10K shares to the market and then let traders trade those same shares back and forth among themselves at high frequency... With just over $10k each, they can keep moving 10k shares back and forth 10k times per day... They call it "High frequency trading."

      There you have it; now you have a billion dollar company with a healthy trade volume of $100 million per day... Your stock is in-demand! And you just needed to find two traders with just $10k in the bank and a trading platform with low fees... Becoming a billionaire is not that difficult.

      You can apply the same principle to revenue... Just increase the velocity of money in and out of your company and you can hit any financial target you want.

      Doesn't mean it's a solid scheme but everyone likes the numbers they're seeing. Nobody is paying attention to actual buying power.

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