On Google, Stock, and IPOs
This weekend, I had a conversation (actually an IM) with a friend of mine who's in the computer trade press. She'd asked me what I thought of the Google IPO. I responded by talking about how interesting it was to auction off some shares and keep others for long-term planning, and the potential implications for an initial stock price “pop” or for Google's ability to think long-term vs. quarter to quarter. I was beginning to get off into some esoteric stuff about how valuations occur when I realized that she totally wasn't following. After chiding her for saying she's a business reporter who doesn't really know how the stock market works, I realized that there are some things that are so complex not many people really understand it. (I know I don't.)
Then I began to muse about what stock really was (I likened it to issuing currency against the assets of the company, with an exchange rate and so on). At that point, I remembered why I find economics so confusing: it seems like some kind of faith-based system. It works because we believe it should work. I mean, what really backs most of the currencies of the world? And how can China buy American debt (they're financing a good bit of it right now, thank you)? My head began to hurt so I ordered pizza and watched “Whose Line Is It Anyway.”
Economics is for people who are smarter than I.