What Makes Us Tick? (1952) [video]

https://www.loc.gov/item/mbrs01891370/

by dragontamer • 5 years ago

105 53 5 years ago

I'm not sure if the Library of Congress website can survive an influx of hacker-news traffic on their video streaming. So I'll leave a brief summary here.

This 1952 cartoon is a very good explanation of the theory behind the New York Stock Exchange. The first few minutes are a bit of humor to set up Mr. John Q Public who is trying to save up his nest-egg for retirement (roughly the first 3 minutes). This naturally leads him to look into stocks, which the video then explains what stocks are.

The remaining 8 minutes of the 11-minute cartoon then goes into the theory of stocks: how stocks raise money for a business (a hypothetical oil-barrel company). First, a private equity raise with a bank ($3-million), and then later, the company IPOs on the NYSE directly for even more money ($20-million). The numbers are small by modern standards (showing off the last 70 years of inflation), but the concept remains the same: investment banks get earlier rounds of investment... and eventually an IPO on the stock exchanges brings in even more money.

There's also a good segment about what exactly goes on a ticker-tape, who looks at ticker tapes (the various partners of NYSE across the country), who places orders, and what happens on the NYSE floor (how buyers / sellers meet up). Modern computers do the same job and faster: broadcasting the last price sold on the exchange, and automatically matching up buy / sell orders with each other. As such, the ticker-tape analogy with humans is actually a very good mental model for what these computers are doing.

Though many things have changed in the last 70 years, it seems as if the stock market still plays the same role and function today as it did back then.

phnofive2• 5 years ago

What's missing, in my opinion, is share dilution - do initial investors get a say, since they too hope for growth to compensate for the lost proportional ownership?

Kranar3• 5 years ago

Depends on the corporation's bylaws, but generally the board of directors issues new shares. Investors get a say in so far as they agree to the bylaws and elect the board.

quacked3• 5 years ago

Portions of it are available on YT: https://www.youtube.com/watch?v=GnJCOof2HJk&t=449s

zinekeller• 5 years ago

I'm not sure if the Library of Congress website can survive an influx of hacker-news traffic on their video streaming.

Seems that they use Cloudflare for their video distribution, it'll be fine.

vannevar2• 5 years ago

Though many things have changed in the last 70 years, it seems as if the stock market still plays the same role and function today as it did back then.

Does it, though? The cartoon (which was probably a little naive even back when it was made) presents a world where corporations have a duty to provide good jobs and to serve the national interest in times of crisis. It describes the stock market as the mechanism for these corporations to raise money for growth and to share their profits with public shareholders. It talks about how carefully the NYSE vets the companies going public, and how a company must have substantial real assets and profits to be considered.

But I would argue that today, the tail is wagging the dog. Capital uses the market as a way to aggregate more capital, and if it happens to provide some money for growth and some of the wealth gets spread around, that's just a happy side effect. Those considerations are secondary to the game. Companies go public now with virtually no assets other than name recognition, and no profit in sight. There are public companies with billion-dollar valuations and less than 200 employees. There is no implicit or explicit expectation of social value, a company is judged solely on its return on capital, a judgment that will always be weighted towards those with the most capital to begin with. The idea that it contributes to the national standard of living, or can provide some value in a national emergency, doesn't enter into the discussion at all.

The cartoon is goofy, but at least it has a notion of civic obligation that no longer exists.

dragontamer6• 5 years ago

The point of this cartoon is for the USA to puff out its chest about the benefits of capitalism in the age of the Cold War. Capitalism vs Communism is the underlying theme of this cartoon (though unspoken, we cannot ignore the timeperiod this cartoon was made in).

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That being said, the cartoon is correct about the fundamentals of how the stock market works, and its theoretical benefits. I'm sure companies existed back then that were terrible, but we gloss over those facts in propaganda to make the audience feel better about their society.

RC_ITR• 5 years ago

showing off the last 70 years of inflation

Be careful with this point. Inflation is the value relationship between money and non-money.

Part of the reason companies raise more now is because they are bigger and more profitable, not just because dollars are worth less relative to goods.

For example, Ford went public in 1956 on a market cap of $3bn (one of the largest in the world at that time) on net income of c. $200mn, for a c. 15x P/E ratio.

Today, Ford is worth c. $80bn and its net income is c. $4bn, for a P/E of c. 20x.

The only inflation there is the move from 15x to 20x.

EDIT: and to make this point more clearly, new cars have only inflated 3x since 1956, even thought Ford is 25x larger. https://fred.stlouisfed.org/graph/fredgraph.png?g=JbBS

folli• 5 years ago

So the ticker-tapes (which I only know from old time movies) really reported on every single transaction that occurred within the stock exchange? I assume that's quite a lot of data that was processed, even 70 years ago?

TedDoesntTalk• 5 years ago

every single transaction that occurred within the stock exchange?

Yes

I assume that's quite a lot of data that was processed, even 70 years ago?

“The New York Stock Exchange in 1954 had the most prosperous year since 1933 with its volume of business totaling 573,374,622 shares. This compared with 354,851,325 shares traded in 1953.”

https://www.nytimes.com/1955/01/01/archives/54-stock-market-...

So in 1953, not even 1 million shares per day traded on average.

froh• 5 years ago

Thanks for the summary, which actually made me have a look.

Regarding the Library of Congress website, it seems to me that leverages a well greased global CDN and will serve the video just fine.

quacked3• 5 years ago

I hate the stock market almost as much as I respect it as an incredible tool. The further out you can guarantee future rewards in exchange for labor and materials, the more prosperous your society will be, and we've seen that in spades. The Dutch invented the concept of common-stock and became the masters of the sea in no time flat; I wouldn't be surprised if the progress (if that's what you believe it is) of the Europeans in philosophy and government was engaged in a feedback loop with the ability of the "common man" to tie his own fortunes into the engines of commerce, rather than into his own social status.

At the same time, it feels infuriating that in order to afford medicine, clothes, food, shelter, and defense once you're past your working prime you must attach your fortunes to companies that have very little to do with the actual services you require in retirement. Personally, I think that the American middle class has been totally taken hostage by Wall Street via the 401(k) and the IRA; anything that threatens "market performance" (e.g. a series of metrics made up and owned by the market owners) threatens their ability to provide for themselves. In this way, any serious large-scale action that might mend a social ill is off the table if its implementation damages large-scale market performance.

AlanSE• 5 years ago

At the same time, it feels infuriating that in order to afford medicine, clothes, food, shelter, and defense once you're past your working prime you must attach your fortunes to companies that have very little to do with the actual services you require in retirement.

This feels like the worst possible argument against public corporations. There's a whole sector of the stock market for health care, and you can easily buy funds that only invest in that. What other services to retirees need? You will be able to find listed companies providing all of those services.

There are some technical imperfections in a basket of equities. If your intention is to exactly hedge living costs, then you would also seek to own bonds from those companies, much of the economy is not public, and so on. There are valid points to be found, I don't think these are what you're concerned about.

In the big picture, owning the means of production is the only game that makes sense. What's the alternative? The best store of value is a collection of things that people are paying for, because that's central to the economic definition of value. Otherwise, everything is gold or bitcoin.

ff317• 5 years ago

Part of the problem is that most 401Ks have a very limited set of investment options. You get a short menu of choices arbitrated by a clueless HR person at your company and the self-interested financial company that manages the 401K plan: a bunch of standard mutual funds and index funds, some are semi-targeted (e.g. large-cap vs small-cap, whole-market, foreign-vs-domestic, target-date, tech?). If you're lucky, there might be a couple of different bond funds, and maybe a money market option to park cash temporarily. There's not often the flexibility of a regular investment fund (e.g. an etrade account) to go after other specific options or individual stocks and bonds, or especially any kinds of commodities, futures, options, etc.

I get the rationale: it's set up that way so that it's a "safer" investing option, because they're afraid people will make bad choices and lose their 401K balances. But the flipside is you don't get much flexibility in making the wisest or most self-interested investment decisions. The 401K -managing firms love it though, as they get to sell a bunch of funds that are often in-house and have fees, and the real free-market-trading investors like it because the 401Ks put a bunch of very predictably-timed money into predictably-common choices, and they can rely on this to gain a little advantage/arbitrage.

whimsicalism4• 5 years ago

One big issue I have with the market - and not one that I really know how to address, is that it seems like it has provided an easy mechanism to launder wealth intergenerationally that was acquired through incredibly unjust means.

Just as a single example, many of the descendants of the merchants who made their wealth off of even something as far back as the Middle Passage [0] or supporting slavery in the US are often in elevated status today (both politically and with wealth). Wealth diffuses with time and transactions, but still - it spreads outwards from social proximity.

[0] https://en.wikipedia.org/wiki/Middle_Passage

Kranar3• 5 years ago

How was the stock market involved in this laundering? At any rate, today's markets are quite rigorously monitored so that the provenance of any single share is reasonably well established.

vineyardmike3• 5 years ago

it feels infuriating that in order to afford medicine, clothes, food, shelter, and defense once you're past your working prime you must attach your fortunes to companies that have very little to do with the actual services you require in retirement.

This seems like an incredibly weak argument for an incredibly good point. Its crazy that you must attach your fortune to companies that have very little to do with you in general. A wealth manager, or annuity or other similar service (pension) seem like a very reasonable (conceptually) place to attach your wealth - their job is to provide for your retirement. Saying "buy stock market indexes and government debt" seems like a very indirect way to hedge your retirement.

kgin• 5 years ago

2/3 of Americans don’t have and will never have a 401k or IRA.

JohnWhigham• 5 years ago

Kind of related: what was it in Hollywood that did away the old time-y presentations like this in animations? The grand orchestral music, the personable-but-still-authoritative male narrator, amazingly well-paced script. Was it Hanna-Barbera and how they commoditized animation?

dragontamer6• 5 years ago

The opposite. These presentations were 100% within the propaganda period of the USA. These sorts of cartoons were top-down funded by the US Government for WW2 and eventually, the cold war (well, this cartoon is 1952, well within the Cold War period).

But all of these cartoonists were good at their job _because_ of WW2 propaganda cartoons. US Government practically bankrolled Disney (and other cartooning groups) to ensure we had unity throughout the War.

What changed is politics. We're no longer in a World War nor a Cold War... and propaganda techniques such as this cartoon are now frowned upon.

---------

This is "good propaganda" though. I think our country needs more of it these days. But it'd be a difficult political battle to get people used to propaganda again, especially because there's no communist threat anymore for us to point to.

If we were to ask the US Government to spend $50 million bucks making a similar production cartoon today on a variety of US-subjects (imagine an up-to-date version of this cartoon on the modern Stock Market), can you imagine how many people would be pissed off?

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In any case, as US Government propaganda money dried up from the post-war period (1960s), the quality of cartoons dropped down. People still agreed upon the commissioning of educational cartoons for children (ex: School House Rock), but not upon educational cartoons for adults.

Was it Hanna-Barbera and how they commoditized animation?

Hanna Barbera needed to commoditize animation to save money. With less money flowing into the industry from the post-war period (much less propaganda being made), the quality of cartoons suffered.

jaypeg25• 5 years ago

The US govt is certainly still involved in propaganda. For example, NASA helped with The Martian.[1] DoD released a game, America's Army, about 20 years ago with a total budget of $32 million over 8 years or so.[2] Also, Pentagon pays about $10-15 million annually just for the various pro-military messaging we see at sports events (salute to veterans, etc).[3] These are just some examples, but there are plenty more.

[1]. https://www.popsci.com/why-nasa-helped-ridley-scott-create-m...

[2]. https://www.wired.com/2009/12/americas-army-budget

[3]. https://www.washingtonpost.com/news/early-lead/wp/2015/11/04...

CoastalCoder2• 5 years ago

Thanks, I learned a lot from that post!

One minor quibble (which I don't think diminishes your main point at all):

We're no longer in a World War nor a Cold War...

I don't think that's 100% correct. My impression is that PRC is waging a cold war against the U.S., but the U.S. government hasn't accepted that yet.

I'm certainly no expert on the matter, though. I'd be very grateful for any correction.

lelandfe• 5 years ago

Reading about the OWI is a good starting place to learn more about this stuff, by the by: https://en.wikipedia.org/wiki/United_States_Office_of_War_In...

peter303• 5 years ago

I remember in junior and high school in the 1960s we'd be shown 16mm film instructional videos usually on social topics. They were kind of heavy handed and propagandistic. I think a lot of these have been digitized into youtube for nostalgic entertainment. I dont know what happened between the mid 70s and 2000, when internet video took over.

whimsicalism4• 5 years ago

Watching this really drives home how much being a woman in this era must have sucked.

tantalor• 5 years ago

Is eating bonbons on the chaise really so bad?

gknoy• 5 years ago

It looks like you're getting downvoted, but I think it's clear that the woman's perceived role at the time was NOT just eating bonbons.

I think the fact that the cartoon portrays this in comedy and exaggerated form (just as the man's car is comically Too Small, and his "built to last" house's door falls off) underscores that the woman's role was perceived to be _infinite housework_ (rather than, say, coming home from _her_ job). Consider that her "help" includes the man washing a floor. In contrast, the wife (now relaxing) has handled dishes, meal planning + prep, laundry, ironing -- and the appliances there are portrayed as making that all that work take less time.

As someone with all those tools now, I can confirm that I have a hard time even keeping up with what housework I notice needs doing, let alone all the work that my wife does (and arguably should have to do less of). It feels like that implied portrayal of "wife sits at home goofing off all day because machines do all the real work" couldn't be the norm.

moskie• 5 years ago

The issue being that it isn't an accurate representation of the lived experiences of women at the time. It is my instead the perceived experiences of women from the perspective of misogynists.

givemeethekeys• 5 years ago

And how on one salary, the primary earner could pay for a house, the family's needs, savings for the child's education and then some leftover savings to invest.

a-dub2• 5 years ago

i've been pondering this notion of fractional shares that has become popular amongst retail brokers recently. i read some news about a stock split and it got me wondering how relevant that is now that shares are essentially divisible down to the penny. the fact that splits exist at all says that it's a knob that is intentionally turned at some point... but what did it do?

does it reduce volatility by requiring a larger outlay to participate? (a sort of requirement to put more skin in the game). if so, does its elimination increase systemic risk? does it mean that every stock becomes a penny stock- subject to unpredictable price moves as a result of cheap speculation?

vineyardmike3• 5 years ago

does it reduce volatility by requiring a larger outlay to participate?

Yes. Absolutely. It also makes it less appealing to retail investors. Eg. Berkshire Hathaway A stock is 431,536.38 at time of writing. Amazon is 3,608.66, Apple is 163.27. Apple is supposedly the most popular consumer-held stock. It also makes it harder to use derivative products. eg. Options require buying/selling 100x shares, so Berkshire Hathaway would literally require millions of dollars for one option contract. That surely impacts trade volume.

Does [fractional shares] mean that every stock becomes a penny stock- subject to unpredictable price moves as a result of cheap speculation?

Yes and no. Not all companies are available as fractions. Also, the Robinhood investor who is day trading from his phone at work is probably using fractional and driving price movements (eg. GME), but the day trading full time investor class is not using fractional shares nearly as much. A lot of more professional-focused platforms either don't allow fractions (or don't for pro users), or don't make full features available. Eg. IBKR is a common platform for Algo trading and their api doesn't allow fractional shares (but their manual GUI with app allows it).

This is likely due to technical and liquidity reasons as much as pragmatic ones. When a fractional share is available, that basically means the broker owns the shares, and gives you partial ownership. They need to basically own n+1 across their platform for all users (round up). If you're doing large trading volumes, that's impractical to keep up with on their end - especially if you quickly buy a lot and sell back.

does it mean that every stock becomes a penny stock

Just to repeat, usually brokers only support the most popular stocks as fractional, which already have high volume. This means it may not have a huge impact on the system - but that's just speculation, i don't know if it has had an impact on the stocks like you suggest.

Kranar3• 5 years ago

Yes. Absolutely.

There is no causal relationship between nominal price and volatility. There are correlations between price and volatility, but it's that cheap stocks (such as those below 5 dollars) are usually much more volatile than expensive ones.

The same goes for liquidity, there is also no causal relationship between nominal price and liquidity.

You can verify yourself that Berkshire Hathaway's price has no effect whatsoever on either volatility or liquidity, just compare BRK-A which trades at ~300,000 dollars with BRK-B which trades at ~200 dollars:

https://finance.yahoo.com/chart/BRK-B#eyJpbnRlcnZhbCI6IndlZW...

As a quant it would be nice of this property didn't hold, would be an easy arbitrage... but alas no such arbitrage opportunity is readily available.

oliv__• 5 years ago

I know they are always a bit naïve and overly optimistic but I love these war-era cartoons, commercials and "propaganda" art: the overwhelming belief in America, capitalism and a better future is so contagious, it's like a breath of fresh air in a new spring

UncleOxidant2• 5 years ago

Fun fact: In 1952 when this movie was made only about 4.2% of the US population owned any stocks. After the Depression it took a generation or more before many people were willing to invest in stocks and not view the stock market as some sort of gambling casino. Of course as we transitioned away from pensions in the 80s towards self directed retirement plans like 401k's that began to change as more people were suddenly finding themselves owning stocks and mutual funds.

xivzgrev• 5 years ago

Obligatory “if you invested $100k in 1952 in s&p 500, you’d have $152m today”. Or $14m in real terms

https://www.in2013dollars.com/us/stocks/s-p-500/1952

wly_cdgr• 5 years ago

The part where he is trying to think of all the good things he has done with his life and the first and nearly only things that come to mind are insurance and ogling women who are not his wife on vacation is so brutally dreary and depressing

What Makes Us Tick? (1952) [video]

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