Hello, it's your friendly neighborhood Hank. I'm making a video about state tax and tax policies, terribly interesting. Actually it is pretty interesting. I hope you think it is, because it's going to go on Vlogbrothers tomorrow, but I wanted to add a little bit of something that I couldn't fit into the video, which is why stock prices matter.
 
So, when you invest in the stock market, or the money that's invested in the stock market, whether or not you invest, that isn't the company's operating income - that is the value of the company. 

So, that money doesn't get used to pay people or invest in the company, it just - it basically - it's just like. We've decided that this is what the company's worth.

Now, it confused me for a long time and I couldn't figure out why companies even cared what their stock prices was. Like, what's the point - do your business, and, like, quarter to quarter what do you care what your investors think of you and if they're trying to, like, run away 'cause they're like I don't - you're not gonna make me a quick enough profit I'm out of here, what - why do you care? And I figured out a few reasons and I'm sure that there are more but here are the three reasons, starting with the appropriate.. like the good reasons to the reasons that are kind of crappy.

Er - the first reason is that you can loan - you can borrow money based on the value of your company so that is then operating income. So if General Motors says this is how much my company is worth, um then they can use that as collateral for a loan and they can take out a big, huge loan and use that to
build a new auto-producing power plant and hire a bunch of new workers. So that's a totally legitimate reason to want to have a higher stock price. Um - so that is, like, an actual, useful effect that stock prices have on the world. 

Two, um, if your stock price gets too low it becomes very easy for a competitor to come in and take your company over without, you know, your board of directors permission, even, they can just buy up all your stock and they'd be like "We own you now, goodbye!" Um, and that's something that companies don't want, like, and that's something that investors often don't want either, um, and so that's - that's another reason.

Um, there's a third reason here that is, like, a really big reason and that's because most of the people who run the companies get paid in stock and massive amounts of stock so they make more money off of the stock than then do off of their, like, paychecks. That money - that stock, they can't just sell that stock, they can't, like, get it and sell it and be like "Ah, I made money, yay!" They have to hold onto it for a certain amount of time, there's rules about that and they then want the stock price to go higher purely through, like, for selfish reasons. 

And so like if you get 10 million dollars of stock and then you make - like - there's a deal on the table that's like well this'll be a short term hit to the stock price but over the long run of the company it'll be better or you can not do that and the stock price will go up, you know you maybe as - as a person who is the CEO of that company of on the board, like, what you want in the end is to make lots of money and so you want that stock price to go up because then at the time when it's time for you to be able to sell you want that to be at the maximum value so that you can sell it and then have that as actual income.

Um, now, I'm sure that there are other reasons. I think that there are reasons, ah, I'm not coming up with any. But I know that there are other reasons, if you know other reasons why a company would be concerned about their stock prices in particular, please let me know.

Um, it always seemed to me that it's much more important that you just make money and are able to pay your employees, but obviously the world of big business in America is a complicated one.

So, um, I just wanted to share that. Um, and I'm gonna link this on my, uh, video that I'm putting up now, so that people can know. Now, when I say that, like, stock prices-- like, that money in the stock market doesn't have any real value-- like, doesn't really do anything, that, uh, it does do something. It just doesn't do as much, in my opinion, as actual, like, income, which gets used by families to buy things and do stuff and have services and goods.

Um, the other--another one that I just came up with, that was in the back of my head, is that stock prices, um, just the stock market in general, um, it provides a system by which companies can go public, and that becomes a very good incentive for people to invest in early-stage endeavors.

And that's important. We do need companies to invest in early-stage endeavors, like things that are risky... investors and stuff like that. We do need that, I think that's important. 

And that's an important kind of investing, and those people pay capital gains. When you, like, those people who invested in Facebook, and then they sold the stock, and the IPO-- they would then pay capital gains on all that money, not ordinary income.

So that's, uh-- and that is an important function of our economy, that we invest in startup companies that do new, interesting, and different things, because that's how we keep, uh, the economy rolling, we keep up with, you know, the next stages in what, you know, what the worldwide economy's going to be doing.

And hopefully we can do that with our energy economy soon, because, well, that sure hasn't been happening, and it's frustrating me, an EcoGeek.

Uh, so that's... a tangent, uh, but that's... So, yeah. Uh, I just wanted to make that video. And sorry, it's super long, but hopefully interesting, if you're into this stuff. If you're not, apologies.