Profit or Wealth maximization?
When learning about financial management for any entity the end goal is always assumed to be maximizing the stakeholders wealth. If that entity is a shareholder, company or individual the assumption is that profit is the desired goal.
I know that if I am putting time and energy or money into a project then I want it to be successful. If we are looking in terms of a company then success is measured in share price.
This might be a flawed measurement as we know from hive or have seen this week from gamestop but that is where we are sitting right now.
Investing, financing and dividend decisions are all aimed to maximize shareholders wealth. This is done by increasing the share value of the company. With hive we see a lot of focus on the price of the token as that is how it is measured up against the other tokens on the market and the perception of success. Anybody who looks a bit deeper will see how flawed that measurement really is.
If you take dogecoin which is sitting at 6.6B of a marketcap and has zero use case against HIVE which is sitting on 56M and has an active community, thriving eco-system and a variety of uses it is hard to correlate the two tokens and their valuation.
The best factor to maximize token price is by good decision making. Choices are made for the benefit of the token itself and not for short term gains. This is where profit or wealth planning comes into play.
Profit v Wealth Maximisation
Profit Maximisation
- Short term focus
- Ignores the time value of money
- Ignores risk
Wealth maximisation
- Dividends and share price
- Long term planning
- Considers risk
- Considers timing
Wealth management is the better strategy as it pushes decisions based on long term results instead of possible damaging moves in search of quick profits.
What do I mean by this?
If I want short term profits then I will back trending projects that carry a lot of risk such as dogecoin. It is popular right now and there will be a lot of fluctuation in it's price leading to opportunities for profit. It is also being carried by a trend which means that at some stage it will dump in price which carries the risk of losing money.
There are better projects that will offer short term profits but if that is where the focus is kept then decisions will not be made in the best interest of the larger community and long term sustainability. If the people making the choices aim for quick profit then it comes with a catch.
That is why I might play around with other tokens for a quick profit but at the end of the day, my balance goes into HIVE. When you see @blocktrades spending the year laying foundations to improve chain performance. That is not about quick profits. That is a long term investment in the health of the chain and opening up doors for future growth.
When you see @leofinance building a layer 2 eco-system that is a large investment of time and money to utilize those improvements. The big players on hive are looking at wealth maximization and planning for future growth.
They aren't looking at the price today and making quick fixes to try and pump the price now. They are building long term sustainable growth that includes all of the stakeholders here.
I would much rather see HIVE at $10 in a few years time than hit $0.50 now while any coin can get have it's market share valued by tiktok.
It's about making choices that will lead to good results. Part of that is how we are portrayed across social media and the brand that we are building now. Actions have consequences which can be either good or bad depending on those actions. Once people have formed an pinion of anything then it is very hard to change their minds. That is why if we are following a strategy for long term maximization it is important to think before you act. What you do today can be the difference between success or failure in 5 years time.
It is about bringing the best experience and creating the best outcome for the most number of people.
- Investors.
- Users
- Developers
- Observers
- Employees
And everybody else that comes into contact with your organization. Try to make all of those interactions as enjoyable as possible and you will achieve success in the long run which will lead to sustainable wealth rather than a quick pump which only benefits the few.
Posted Using LeoFinance Beta
Great points.
People tend to forget the saying Easy Come Easy Go. The long term is where it is at and a high-risk investment to bail you out of whatever is making you desperate for huge short term games is like doubling down on a bad hand.
I love how crypto is not only putting the gains straight into the hands of the individual, but encouraging each to learn and build a base of knowledge. Trusting rich people/institutions to buy the right stock on your behalf and then pay them all the profits in commission is a fool's game.
Power to the people and leveraging Crypto not only for quick profit, but longer term profit due to building your individual knowledge.
@leofinance!
Stock markets are a mugs game at our level. You are only making money for other people but crypto let's us take the risks and make the profits or losses but at least it is on us.
You can gamble on the bull run now but when it's over a lot of those tokens do nothing and people will be left holding the bag. Hive might not be getting pumped but in two years I will have a lot more and it will still have a reason to exist.
There are great projects here and I am happy to stake and hold. I want to be here when it pumps in 5 years time to $100 and backs an eco system with 1000 communities.
Sure I can make a few grand backing doge but if you get caught it could lose 99% in a week.
Even the knowledge of crypto that you gain here is priceless. So many of the coins doing well now have been spoken about here all year for anybody paying attention.
A friend of mine has been very excited about the DOGE that he bought, he's telling everyone to buy and not to sell. It boggles my mind sometimes to think that these markets can be so crazy, that fortunes can be made and lost based on the whims of a market.
Sometimes I feel hollow thinking about the wealth I've made in crypto, and sometimes I feel envy thinking about the the wealth that other people have made in their pumps. I wonder how fate can be so random and seem so senseless.
So your post provides some solace, thinking that in the long run, good projects will be rewarded. Time will tell which ones are really solid.
Have a great day
Easy come, easy go. For everybody that sells doge at 10c and makes a fortune. A lot of people will have bought all the way up and lose everything when it dumps.
I don't need a fortune but I would love to have enough to live on. That's why I keep the long term vision for hive and keep adding to my stack. No matter the price I can keep earning more and actually use it in the different apps with more to come.
For all the other crypto out there, I have yet to see anything as solid as hive with a few tweaks to the system. I might be biased but I can still see the vision.
I envy too but those opportunities have passed and I didn't like them before it happens so I try not to have any regrets.
My thoughts exactly. All parabolic moves tend to come back down, sometimes just as fast; and the ones going for the quick profit are the ones that normally end up getting burned.
Posted Using LeoFinance Beta
Albeit some of this was supposedly common sense, it doesn't seem so. It kinda broadened my understanding of projects, in general. Since I am relatively new to the cryptoverse, trying to take a jab at what really makes the candles swing is sometimes a challenge.
Nevertheless, I think this should satiate most asking about the hive price. Hive isn't a token, it is much more than that. There are more than 10x factors, compared to something like doge, that influence the price.
I tend to believe staying active on the chain and partaking in it, in any way or form, is going to give a better and bigger profit margin than holding and selling a coin with no use case.
Terrific article, and a breathe of fresh air!
Posted Using LeoFinance Beta
Thanks for stopping by for a browse.
There are lots of factors but for any long term project it's important to add value to the system like the apps are doing here. The more you add the more valuable it becomes for everybody rather than a quick pump for a few to profit and others lose out.
I want to see us all win in the end and that happens by good practices.