andEs Corner: shares, the root of all evil

The more I think about what is wrong with the old system (and believe me this thinking has been going for a decade – just maybe restarted a thread due to the recent occurrences) the more I think that the root of all this evil is shares. Ok, well the real root cause is as we know greed but the instrument maybe most misused is shares. I am not so sure we can cure greed but we can start to take away it’s heroin.

I am much more a fan of loans, or in financial market terms bonds. Why is this?

Let me look at an extreme example to explain this: assume I worked for the supplier of network equipment for mobile operators (which coincidentally I do) and a friend of mine was a very successful hairdresser who had some money to spare (which coincidentally I don’t). He decided to invest his money in shares in our company. In the current world he would then have some power over decisions made at the company despite, as a hairdresser, not knowing ANYTHING about what we are doing. And also not really wanting to. It would make much more sense for him to invest in bonds. Here he would have fixed return rate and it wouldn’t matter for him how our company managed it. He also wouldn’t have to check daily the share value. It also allows our company to focus on mid and long term goals instead of always having to think in evil quarter of year segments. And it allows our company to actually deal with decision making ALONE allowing our CEO to focus on the REALLY important things in running a company (i.e. based on technical strategy and not totally misleading KPIs – actually maybe KPIs deserve their own flaming blog – they are almost as bad as shares as they are always defined so badly as to be evil) …

And yes I do think the people managing an equity fund have about as much knowledge about how a supplier for mobile operators works as a hairdresser…

Disclaimer: I have nothing against hairdressers – the same would apply if the example were reversed – what does a mobile network supplier now about hair extensions? I hope nothing…)

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4 thoughts on “andEs Corner: shares, the root of all evil

  1. Frank Mattheus

    But aren’t loans (mortgages) what got us in to this mess in the first place?

  2. Not directly – it was the possibility to be able to pass on such subprime loans to unsuspecting third parties. BUT the important thing is to understand that the reason banks did this was to push up their own share price. i.e. root cause: shares. 😉

  3. found this some time ago:

    http://www.crisisofcredit.com/

    It explains quit nicely, all the current situation.

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