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Opinion
Matt Levine

Nobody Is Drilling the Oil

Also ESG deposits, Trump SPAC, Zillow’s algorithm, Facebook and tungsten.

One claim that you sometimes hear about financial markets is that they are excessively focused on the short term and systematically undervalue long-term investment. Public investors want good earnings and big stock buybacks this quarter, and get impatient when corporate managers spend money on projects that will add lots of value in the long run but won’t pay off immediately. Great ideas don’t get funded if they can’t show results quickly. This concern strikes me as overstated — look at Tesla, etc. — but, sure, there is probably some truth to it.

Another claim that you, uh, rarely hear about financial markets is that they are excessively focused on the long term and systematically undervalue short-term cash flows. Public investors want a perpetual stream of growing earnings; if you offered them a company whose business model was “make a ton of cash for 10 years, pay it out to shareholders in dividends, then vanish,” they would turn up their noses and put a very high discount rate on those cash flows. An entrepreneur with that business model would have a very hard time getting financing.