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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 Mar 23
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      Buying a stock in the public markets is not a lifelong commitment. You can get off the bus at any moment when you don’t like the ride, generally very cheaply. The people on the bus at any moment are, by and large, the folks in society who most wanted to be there.

      5 replies 8 retweets 109 likes
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    2. Patrick McKenzie‏ @patio11 Mar 23
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      A stock buyback says “Are you sure you still want to be here? We like where this bus is going. Plausibly you don’t. Want out?” People leaving the bus increases the returns, and the risk, to those who said “Oh no, give up this seat for that money? Hard pass.”

      6 replies 0 retweets 37 likes
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    3. Patrick McKenzie‏ @patio11 Mar 23
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      This has a sort of homespun aww shucks feel to it, but it is descriptively accurate and aimed at the homespun aww shucks notion that you’d really want to buy stocks for nice consistent dividends, like a bond with a little bit of upside, but not too much, not enough to ever sell.

      1 reply 0 retweets 16 likes
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    4. Patrick McKenzie‏ @patio11 Mar 23
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      Speaking of aww shucks logic: yes, moving cash reserves off the balance sheet to shareholders does magnify exposure of remaining shareholders to the business’ future prospects, including in bad times. That was a major point of the exercise.

      3 replies 4 retweets 39 likes
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      Patrick McKenzie‏ @patio11 Mar 23
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      (Do people not have an intuitive sense of this math? Consider a software company with enterprise value of $200 and $100 of cash on balance sheet. It has $100 of “business” in it. If business gets 20% better, company gets only 10% more valuable, because the cash drags on it.)

      12:43 PM - 23 Mar 2020
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      • DoNotWantTwitAcc Bemmu Sepponen dust Daniela John Lee Tristan Hume Sandro
      5 replies 0 retweets 24 likes
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        2. Conrad Bastable‏ @ConradBastable Mar 23
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          Replying to @patio11

          I think people get that. What they don't get is when they opted out of FooCorp and then FooCorp requires an institutional intervention to save itself, which they then pay for (directly or indirectly). Moral Hazard upsets people. Cash is a drag because security has a price.

          1 reply 0 retweets 4 likes
        3. If you meet 60+-year-olds, quarantine like one‏ @poiThePoi Mar 23
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          Replying to @ConradBastable @patio11

          It is, but the last 10 years of American Airlines stock buybacks would cover 4 months of operations. Do they absolutely moral hazard themselves? Yes. Are they a national security requirement? Might be a bit strong, but yes. /Among other things, bankruptcy removes pensions

          1 reply 0 retweets 0 likes
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        2. Colin Percival‏ @cperciva Mar 23
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          Replying to @patio11

          The thing which I find most absurd about this is that many of the same people who complain about stock buybacks *also* complain that corporations are hoarding cash and not paying out enough of it as dividends.

          2 replies 0 retweets 6 likes
        3. cheesecake‏ @tweetellington Mar 23
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          Replying to @cperciva @patio11

          You’ll find that most concerned with buybacks and high cash positions aren’t clamoring for more dividends.

          0 replies 0 retweets 0 likes
        4. End of conversation
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        2. Nicolas Nowinski‏ @nicknow Mar 23
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          Replying to @patio11

          Ha! People, even a lot of otherwise educated folks, have little understanding of math (including plenty of software engineers.) They can add and subtract, but refuse to think from a mathematical perspective.

          1 reply 0 retweets 0 likes
        3. Nicolas Nowinski‏ @nicknow Mar 23
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          Replying to @nicknow @patio11

          Nobody I meet ever says well "I'm not that good at reading comprehension" but plenty of them say "I'm not that good at math." Illiteracy is looked down upon but not understanding algebra (let alone calculus 101) is perfectly acceptable to many.

          0 replies 0 retweets 1 like
        4. End of conversation
        1. Chris Hawkins‏ @happyhawkins Mar 23
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          Replying to @patio11

          The flip side is that if you're forced to liquidate / sell due to low liquid assets and an inability to borrow then your business value will be massively undervalued as you are in a forced seller situation, especially if it is a wider issue. Cash flow issues kill businesses.

          0 replies 0 retweets 0 likes
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        1. Tomas Van den Berckt‏ @tomvdb Mar 23
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          Replying to @patio11

          (Narrator: people do not...) Seriously though, I really think even professional traders struggle with this, as the weight of sentiment and gut feel is a large part of decision making.

          0 replies 0 retweets 0 likes
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