You are paid based on what you can do now but the corporations are valued based on future earning potential. why do we have two different yard stick to value people Vs. business? let's explore

Tesla shares are trading at 107 times current earnings and Apple is valued at 29 times current earnings. You are paid based on what you can do now and your net worth is current value of assets less debt on a any given day even though you are likely to earn more in the future.

Why?

Imagination is unlimited but reality has limitations. We value imaginary intangible stuff much more generously than reality, the corporation exist only in our collective imagination but your existence is real.

Through human evolution across all cultures, we all believe in imaginary super entity that is much more intelligent and valuable than real "Us" so to speak.

We use our imagination to derive business valuation using imagined future cash flows and discount rate (Risk free rate + Risk premium). The valuation enables corporation create lot more value because they can transfer wealth longitudinally back in time by issuing shares.

The dichotomy is quite stark, most of companies with high P/E ratio are relatively new, the ratio moderates as they mature.

It is the exact opposite for people.

You will only get mortgage based on what you earn today, you cannot raise equity based on your future potential because you are unfortunately "Real". your older self will reap the benefits after you deliver.

This results in large wealth gap and inequality in the society.

So, what is the solution?


What if one transforms real younger people into imaginary holding entity and sell shares.

It will let younger people transfer wealth from the future older self longitudinally back in time. People and businesses would be more evenly matched.

Hypothetically, It will be exciting to compare Harvard 2022 graduates Index fund Vs. Oxbridge 2022 graduates Index fund. The market will surface the real life time value of Harvard degree, it will break long held pricing monopoly of the Universities especially the Ivy league schools in US.

There are so many possibilities, I can write a book about it. You think all of these are Woo-Woo, think again.

Four siblings Daniil, David, Maria and Anna Liberman are offering stake in their entire financial future - shares in their life.

So far, the Libermans have traded around three per cent of their futures, which investors have valued at four hundred million dollars, or about a hundred million dollars per Liberman.

They spent a few months in conversation with the Securities and Exchange Commission to list themselves on the stock market, which they hope to do by 2023.

Are you ready to IPO yourself or invest in your class mate, friend or a colleague?


Photo: Daniil and David Liberman from Wikipedia
Reference: The New Yorker - Is Selling Shares in Yourself the Way of the Future?

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