Hey everyone, Eric Ries here. I’m the founder and CEO of the LTSE (and also the Lean Startup guy). Happy to see the discussion here and will try and answer a few questions. Unfortunately, a lot of the details of how the LTSE works are subject to regulatory approval, so I can’t share too much while we are working out the details with them. Still, I’ll do my best to answer.
I had a similar idea (x) a few years ago, but leading this kind of project is way beyond my capabilities. I'm thrilled to see people try to accomplish this, and you seem to have a fantastic team, congrats.
(x) My first idea was to create a market where you couldn't resell a stock until some (long) time has passed. Pretty much the exact opposite of algorithmic trading trying to pass orders at light speed. Another was to forbid any kind of option (not stock options, options) or any other indirect way of speculating over a stock. The idea was to try to ensure the stock owners that someone wouldn't be able to crash the stock of a company he doesn't have any interest in, just for profit.
All of those considerations stemmed from the 2008 crash of course, and all the irrational behaviors that followed. But i still think there should be a way to provide a "safer" place for business owners to attract new shareholders.
Eric, this is a very interesting project, I'd like to see this succeed. Be aware that Hacker News has a very negative bent when it comes to new ventures like this. You're going to get a lot of criticism about how this will never work, etc, etc.
Go read the Show HN of DropBox to see what I mean. Good luck!
Ha, no kidding! You should see what they say about LS.
I don’t mind, part of being in public with new ideas is putting up with a lot of snark and cynicism. It’s a bug in the human reward system - skeptics are right 99% of the time.
Hi Eric, are you using the Lean Startup methodology to develop this? It seems to me you're trying to solve a very big problem directly, and there is less room for iteration... Would you say that when the LTSE opens in 2018 it is an MVP and iteration will start?
Most of the value of the US equity market is held indirectly - through ETFs, mutual funds, pension funds, etc. This suggests that direct ownership is not particularly valued among the vast majority of investors. Have you calculated the size of the market for direct investors who value voting rights? And their patterns of trading?
My question doesn't make that assumption. It questions the size of your target market. You are proposing to "reward" certain investor behaviors but I am suggesting that the numbers indicate that the vast majority place NO value on the reward you are offering.
It seems clear to me that the vast majority of people who have an interest in having exposure to the equity markets do NOT value voting rights.
If more people valued voting rights, then more would hold the stock directly or would only invest through intermediaries who advertise that they behave as shareholder activists. But, comparatively speaking, not many investors do.
Yes, it is in the same regulatory category as NYSE or NASDAQ. Yes it allows you to buy shares of listed companies in all the ordinary ways, including retail brokers.
The best of the next generation of companies :)
Not a bad guess, but not quite right either. Our detailed rules (all 900 pages of legalese!) will be public soon enough.
How will you add liquidity to LTSE, as (from the little details given) it seems like the market will be moving very sluggish because trading volume is "conceptually" limited.
The LTSE is part of what’s called the National Market System, so our stocks still trade on other exchanges. We don’t limit the ability of traders to access the stock.
Does that mean that you do not speak of ownership in terms of a weighted graph of nodes, or that indeed your rules do break down when there is a possibility of circular references?
I imagine all such graphs in the USA will have humans as root nodes, since the 14th amendment makes it a bit tricky to create ownership edges into humans.
We hope in time that better rules will help alleviate the liquidity crisis that is freezing up SV. That said, I don’t think A/B round companies should generally be public
Thanks for the comments and happy new year