Long-Term Stock Exchange founder Eric Ries

  • Long Term Stock Exchange is the 5th company in the United States that is authorized to operate a national securities exchange. [1:41]

  • Our idea was to focus not on trading stocks, but on creating a better experience for being a public company. One that would allow companies to think more in generational terms. Long term, multi-stakeholder principals. And have that be part of every employee’s lived experience. [2:42]

  • Why is there a need to have a different kind of stock exchange? Over the last 20 years, the number of public companies in the US has been cut in half. If you keep extrapolating that trend what will we have? Four giant tech companies that own everything and everything else will be private? [3:02]

  • Companies are not going public if they don’t have to. The average time to IPO is up dramatically in the last 20 years. There is more M&A activity. There has been a rise of private equity. The general public is being left out of growth. [3:53]

  • Does that really make sense? Is it a good idea for the industry — especially the tech industry —to build products that affect everybody but the positive side of that success should be distributed to only a narrow set of people? I don’t think that is a good idea. [4:36]

  • 80% of the companies that went public in 2018 were not profitable. [6:32]

  • Signs of short term thinking by public companies: lower investment in R&D, lower investments in employer well being. [9:54]

  • We have tried to build an exchange with a different business model. One that is not all about trading. We enable companies to pledge to do the right thing. On LTSE companies make pledges. If the companies violate these pledges that it is securities fraud. [15:12]

  • Example of a pledge: You could pledge and say we aren’t going to use short term compensation instruments. Our executives will only be compensated by longer-term, more value-aligned instruments. [16:13]

  • You would think that a company that was intensely short term, metrics-driven, quarter-to-quarter based, would move fast. But if you actually study companies you notice those behaviors actually slow everything down. The fastest companies have this incredibly long-term oriented philosophy. You would think that would make people go slow. Why is that? [21:07]

  • Budgetary decisions ultimately make things political, slow, and bureaucratic. As a consequence, you don’t have a way to hold people accountable to the things that really matter. [22:49]

  • Metrics are there to support the vision. Not to replace it. [23:08]

  • Full video here.