Let’s talk about a new kind of stock market, dubbed the Silicon Valley exchange – and it aims to disrupt the old way of doing things and help out companies over the long term.
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This is a project of Eric Ries, you may have heard of him as the author of the Lean Startup, that’s certainly how I recognized the name.
He’s about lean and failing rapidly, but there was nothing rapid here, the Long Term Stock Exchange officially started in 2015 according to Wikipedia (one article even states he was talking about it as early as 2011). Maybe his next book will be called the slow startup, let things percolate…?
It can’t be easy starting a legit exchange. we’re not talking of starting it in Malta or in the Caymans, but in the US where there are so much regulation and rules to protect the little investors – people like you and me and big thanks for that!. So it was approved by the U.S. Securities and Exchange Commission on May 10th!
And there had to be a lot of powerful lobby push back from the likes of the NYSE and Nasdaq that don’t want their big fat clients poached away. but am jumping the gun here
let’s talk about the most important part of this, Nah, maybe not most important but definitely a very cool aspect of it as he spent a few hours on a Hacker News forums – the place I spend way too much time to stay up-to-date and get show ideas – serious cred boost from the community –
Wow, good for him, for transparency and for the respect of the tech community.
He didn’t have to! He got the sec’s approval, he’s got funding from Marc Andreessen – investor and author of mosaic and co-founder of Netscape
This is a clear show of respect for the tech community! So huge props, Eric! So let’s talk about this project, why its different, and why I think it’s great!
Let’s break it down:
The over-arching idea is to create an exchange that encourages long-term investing. as public companies that have to focus on short-term results tend to not take risks or attempt long-term projects.
Reies quotes “A 2017 study by public policy think tank Third Way showed that going public was accompanied by a 40 percent decline in patients within five years after listing, the result of pressure to satisfy analysts’ short-term expectations.”
So they would enforce this new attitude with some rules – these are still in the air:
Scaled voting power where the longer an investor holds a stake in a company, the more voting they would get.
And enforcing a ban on tying executive pay to the company’s short-term financial performance.
This is to allow comapnies with longer cycles of innovation athe ability to operate safely and get funding.
Here are some personal takes from my corner, this is good for everybody – execs and founders wanting to make quick cash, look for the fist exit aren’t good for anybody but themselves, it isn’t good for the customer and especially not the employee! If the numbers drop due to the temporary frailties of the markets, you know who gets laid off!
But will also allow us, the employees, the ability to think more and spend more time on cooler, better projects – no more churn. This could be a differentiator when a job prospect could choose one co over the other.
But it isn’t all rosy, there some worries about this approach:
Should regular people be allowed to invest in potentially riskier long-term bets?
Well, time will tell, either way, it is an interesting idea that goes against the typical evolution of our auction markets where liquidity is increased versus decreased, the ability to get in and out improved versus limited. but if it helps innovation and allows techies like us the ability to work on cooler projects, am all for it!!