Splitting the Pizza

pizzaApple underwent a 7-1 stock split last night, such that shares that traded at $645 yesterday opened this morning at $92. Much of the media coverage took a playful tone, e.g., “Don’t freak out. Here’s why Apple’s stock is below $100.” I was particularly intrigued by the brief story on today’s NPR Morning Edition. As the host explained, it’s not that Apple is worth less, just that Apple’s total market capitalization is being divided into a larger number of shares. “It’s like a pizza. If you cut it into 8 slices instead of 6, you don’t get a larger pizza, just smaller slices.”

How ironic, coming from a news outlet that embraces fully the naive, sophomoric, “vulgar Keynesianism” that dominates today’s economic policy discussions. NPR’s researchers, writers, hosts, and guests are 100% convinced that dividing the economy’s stock of real wealth by a larger number of paper tickets gives us, well, more real wealth!

Comments

  1. Your explanation of Google’s reverse split sure mad me hungry for pizza. Now that Google’s share price seems more affordable everyone gets a slice of pizza on me! :)

  2. “NPR’s researchers, writers, hosts, and guests are 100% convinced that dividing the economy’s stock of real wealth by a larger number of paper tickets gives us, well, more real wealth!”

    So long as China keeps banking tickets for manufactured goods we import, and the Indians keeps banking tickets for services we import, and the Middle East keeps banking tickets for our very lifeblood, oil, that we import… a larger number of paper tickets DOES gives us in the U.S. more real wealth. But of course that wealth mainly flows to the ticket-printers in finance and government, and that flow of wealth is unsustainable… what happens when productive exporting ticket-accumulators become ticket-redeemers?

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