Tag: haruspicy

Under Which Lyre

Playing around with Google ngrams for some reason made me think of this:

The
 elder
 Mill,
 whose
 philosophy
 I
 will
 not
 praise
 otherwise,
 was
 on
 this
 point
 right
 when
 he
 said:
 If
 one
 proceeds
 from
 pure

experience,
 one
 arrives
 at
 polytheism.
 … It
 is
 commonplace
 to
 observe
 that
 something
 may
 be
 true
 although
 it
 is

not
 beautiful
 and
 not
 holy
 and
 not
 good.
 Indeed
 it
 may
 be
 true
 in
 precisely
 those
 aspects.

But
 all 
these 
are 
only 
the
 most 
elementary 
cases 
of 
the 
struggle 
that 
the 
gods 
of 
the 
various

orders
 and
 values
 are
 engaged
 in.
 I
 do
 not
 know
 how
 one
 might
 wish
 to
 decide

‘scientifically’
 the 
value 
of 
French 
and 
German 
culture; 
for 
here, 
too, 
different 
gods
 struggle

with 
one 
another…



We
 live
 as
 did
 the
 ancients
 when
 their
 world
 was
 not
 yet
 disenchanted
 of
 its
 gods
 and
 demons,
 only
 we
 live
 in
 a
 different
 sense.
 As
 Hellenic
 man
 at
 times
 sacrificed
 to
 Aphrodite
 and
 at
 other
 times
 to
 Apollo,
 and,
 above
 all,
 as
 everybody
 sacrificed
 to
 the
 gods
 of
 his
 city,
 so
 do
 we
 still 
nowadays, 
only 
the 
bearing 
of
 man 
has 
been 
disenchanted 
and 
denuded 
of 
its
 mystical
 but
 inwardly
 genuine
 plasticity.
 Fate,
 and
 certainly
 not
 ‘science,’
 holds
 sway
 over
 these
 gods
 and
 their
 struggles.
 One
 can
 only
 understand
 what
 the
 godhead
 is
 for
 the
 one
 order 
or 
for 
the 
other, 
or 
better, 
what 
godhead
 is 
in 
the 
one 
or 
in 
the 
other 
order.
…

 

The
 grandiose
 rationalism
 of
 an
 ethical
 and
 methodical
 conduct
 of
 life
 that
 flows
 from
 every
 religious
 prophecy
 dethroned
 this
 polytheism
 in
 favor
 of
 the
 ‘one
 thing
 that
 is
 needful.’
 … [But] today
 the
 routines
 of
 everyday
 life
 challenge
 religion.
 Many
 old
 gods
 ascend
 from
 their
 graves;
 they
 are
 disenchanted
 and
 hence
 take
 the
 form
 of
 impersonal
 forces.
 They
 strive
 to
 gain
 power
 over
 our
 lives
 and
 again
 they
 resume
 their
 eternal
 struggle
 with
 one
 
another.

Post Keynesianism in Practice

From the FT the other day:

That Facebook is worth $50bn or Twitter $10bn, is recounted as fact. … But there are still precious few numbers to analyse and business models are no more proved than for dotcoms a decade ago.

To illustrate the ridiculousness of trying to value these things consider LinkedIn. Its S-1 registration statement (with US regulators) provides rudimentary financial statements from which to model the company. Revenues, operating costs, capital expenditure and depreciation and amortisation schedules are available for the past five years. It is then a hop to forecast earnings before interest, tax, depreciation and amortisation and, thus, future free cash flows. Discount these cash flows (made easier because there is no debt) and you’ve got a valuation.

But who on earth knows what forecasts to make? Private secondary markets supposedly value LinkedIn at $2.5bn-$3bn. To arrive at the bottom of that range requires sales to expand 60, 50 then 40 per cent over the next three years, before tailing off to a terminal growth rate of 3 per cent in 2019. Ebitda as a proportion of revenues has to double to 20 per cent and stay there. … If sales growth tapers off faster than expected or if systems spending becomes a bottomless pit, you can halve that valuation for starters. But what if LinkedIn’s platform easily copes with millions of new members? Double ebitda margins to 40 per cent and a $5bn company is easily within reach. Who knows? No wonder it’s easier to simply quote the same price tag as everyone else.

Fundamental or Knightian uncertainty tends to get treated as something airy-fairy, as part of the philosophy-of penumbra rather than economics per se. But as this example shows, it’s unavoidable in plenty of practical questions. Mainstream models avoid dealing with the problem by assuming that the true probability distribution of all possible future events is always known. But in the real world of business people aren’t so silly. As the man says:

The outstanding fact is the extreme precariousness of the basis of knowledge on which our estimates of prospective yield have to be made. Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behaviour does not govern the market. …

Investment based on genuine long-term expectation is so difficult to-day as to be scarcely practicable. He who attempts it must surely lead much more laborious days and run greater risks than he who tries to guess better than the crowd how the crowd will behave… It needs more intelligence to defeat the forces of time and our ignorance of the future than to beat the gun.

Economists might not believe in Keynes any more. But business journalists certainly seem to!