[extropy-chat] You're Fired

[Robin Hanson]

At 06:32 PM 10/17/2006, BillK wrote:
> > Again, the question is how much information the prices contain, 
> relative to the
> > other methods one could use to fire CEOs.   You have not addressed
> > that issue.  If the prices are more informed, then they will make better
> > choices and should be preferred.
>
>I thought I had addressed that issue.
>"Market movements are unpredictable, meaningless and random".
>Unpredictable, random price movements cannot be used to validate a
>CEO's performance, except in a few outstanding examples, e.g. where
>they turn round a failing company. But profits are probably a better
>measure in that case, rather than share price level.

First, it seems you did not actually read my proposal, as I did not 
suggest using
share price levels.   Second, while before you granted that stock 
prices contained
some info, now you seem to claim they have no info, that stock prices are
completely unrelated to profit, and that price changes have no 
relation to changes
in expected profit.

> > Since you can see that the current prices are all wrong
> > and you can tell in which direction they are wrong, you
> > can make lots of money by buying low and selling high.
>
>What part of "Market movements are unpredictable, meaningless and
>random" don't you understand? I can't predict stock prices. Nobody
>can. That's the point.

If there is no relation between stock price and profit, then you must 
think that
if you take your web business public you have just as good a chance of
getting Google level prices as Google did, without having to go through
all the work that Google did of actually being useful to customers.   Buy low
(any cheap web business), sell high (Google prices).


Robin Hanson  rhanson at gmu.edu  http://hanson.gmu.edu
Associate Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326  FAX: 703-993-2323