Below is a graph from T-mobile’s 2016 annual report (on the second page). Does anything seem interesting/unusual about it?
I’ll give some space to consider before spoiling it.
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Answer: that is not a graph of those numbers. Some clever person took the numbers, and stuck them as labels on a completely unrelated graph.
Yes, that is a thing which actually happened. In the annual report of an S&P 500 company. And apparently management considered this gambit successful, because the 2017 annual report doubled down on the trick and made it even more egregious: they added 2012 and 2017 numbers, which are even more obviously not on an accelerating growth path if you actually graph them. The numbers are on a very-clearly-decelerating growth path.
Now, obviously this is an cute example, a warning to be on alert when consuming information. But I think it prompts a more interesting question: why did such a ridiculous gambit seem like a good idea in the first place? Who is this supposed to fool, and to what end?
This certainly shouldn’t fool any serious investment analyst. They’ll all have their own spreadsheets and graphs forecasting T-mobile’s growth. Unless T-mobile’s management deeply and fundamentally disbelieves the efficient markets hypothesis, this isn’t going to inflate the stock price. Presumably shareholder elections for board seats, as well as the board itself, are also not dominated by people who are paying so little attention as to fall for such a transparent ploy.
It could just be that T-mobile’s management were themselves morons, or had probably-unrealistic models of just how moronic their investors were. Still, I’d expect competition (both market pressure and competition for control in shareholder/board meetings) to weed out that level of stupidity.
One more hypothesis: maybe this is simulacrum 3 bullshit. T-mobile is in the cellular business; they presumably have increasing returns to scale. More capital investment makes them more profitable, expectations of more profits draw in more investment; there’s potential for a self-fulfilling prophecy here. Investors want to invest if-and-only-if they expect other investors to invest. So, nobody actually has to be fooled by the graph; they just need to see that T-mobile is successfully pretending to pretend to have accelerating growth, and that’s enough to merit investment.
Below is a graph from T-mobile’s 2016 annual report (on the second page). Does anything seem interesting/unusual about it?
I’ll give some space to consider before spoiling it.
...
...
...
Answer: that is not a graph of those numbers. Some clever person took the numbers, and stuck them as labels on a completely unrelated graph.
Yes, that is a thing which actually happened. In the annual report of an S&P 500 company. And apparently management considered this gambit successful, because the 2017 annual report doubled down on the trick and made it even more egregious: they added 2012 and 2017 numbers, which are even more obviously not on an accelerating growth path if you actually graph them. The numbers are on a very-clearly-decelerating growth path.
Now, obviously this is an cute example, a warning to be on alert when consuming information. But I think it prompts a more interesting question: why did such a ridiculous gambit seem like a good idea in the first place? Who is this supposed to fool, and to what end?
This certainly shouldn’t fool any serious investment analyst. They’ll all have their own spreadsheets and graphs forecasting T-mobile’s growth. Unless T-mobile’s management deeply and fundamentally disbelieves the efficient markets hypothesis, this isn’t going to inflate the stock price. Presumably shareholder elections for board seats, as well as the board itself, are also not dominated by people who are paying so little attention as to fall for such a transparent ploy.
It could just be that T-mobile’s management were themselves morons, or had probably-unrealistic models of just how moronic their investors were. Still, I’d expect competition (both market pressure and competition for control in shareholder/board meetings) to weed out that level of stupidity.
One more hypothesis: maybe this is simulacrum 3 bullshit. T-mobile is in the cellular business; they presumably have increasing returns to scale. More capital investment makes them more profitable, expectations of more profits draw in more investment; there’s potential for a self-fulfilling prophecy here. Investors want to invest if-and-only-if they expect other investors to invest. So, nobody actually has to be fooled by the graph; they just need to see that T-mobile is successfully pretending to pretend to have accelerating growth, and that’s enough to merit investment.