Viswanathan K's Thoughts

My 7 year-old daughter has this habit of explaining how she drew something: “You start by drawing a circle, then the ears, erase a bit of the top of the circle to make space for the hair…” All such descriptions will always end with the word: “Simple!”. After yet another (un-asked for) description of how she drew something, again ending up with that smug “Simple!”, I couldn’t resist responding: “Obviously, it must have been simple. Otherwise, how would you have been able to draw it?” Without batting an eyelid, she snapped back: “It’s simple for me . It would be hard for you .” ~~ One time, as I tried to tempt her to watch something on National Geographic instead of her usual cartoons, I said: “The host will challenge people to do crazy things. You interested?” Her response was instantaneous… and honest: “Yes. I am always there for anything crazy.” ~~ There’s this professional artist in our apartment who took art classes for the kids. Unfortunately, ju...

How much is a company worth? For a company listed on the stock exchange, that’s easy. Multiply the total number of shares with the price of a single share and you get the value of the company (as seen by the market). But sometimes, the numbers just don’t add up. Like Matthew Klein showed about Yahoo! in March this year . Yahoo! was valued at $39 billion by the stock market. It owned 24% of Alibaba that in turn was valued at $153 billion. 24% of $153 billion is $37 billion. Did that mean Yahoo!’s own businesses were only worth $2 billion? But wait, it gets even more insane. Yahoo also has a 35% stake in Yahoo Japan, which was then valued at $32 billion. 35% of $32 billion is $11 billion. That meant Yahoo!’s intrinsic worth was…negative!! And you thought Wall Street guys were smart! Stock markets like to value companies in the same industry (somewhat) similarly. Like all steel companies. Or all airline companies. Then the tech companies complicated that system. Like Apple (both...