Profit or Wealth maximization?

Profit or Wealth maximization?

By niallon11 | HIVE Blockchain | 8 Feb 2021


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.



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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


niallon11
niallon11

Blogger and promoter of the HIVE blockchain. Follow me at https://peakd.com/@niallon11 or on twitter at https://twitter.com/niallon11


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