Exchange Community Ownership

Sam Parr and Shaan Puri discuss the evolution of stock exchanges, highlighting issues with traditional markets and potential innovations. They examine both traditional exchanges and new attempts to reform the system.

Key Points:

• Traditional Exchange Issues:

  • Average stock hold time is only 10 minutes for large traders
  • Quarterly earnings calls create short-term thinking
  • Number of public companies has decreased from ~10,000 to ~4,000 over 20 years

• Stock Exchange Business Model:

  • Extremely profitable with ~60% profit margins
  • Limited competition with only ~15 major exchanges globally
  • Multiple revenue streams:
    • Powering other countries' exchanges through software licensing
    • Competing for IPOs
    • Transaction fees
  • Strong defensibility through:
    • Network effects
    • Regulatory protection
    • Enterprise contracts

• Long-Term Stock Exchange Innovation:

  • Eric Rees created LTSE to encourage long-term thinking
  • Key features:
    • More voting power for longer-term holders
    • Mandatory holding periods
    • Companies must have long-term planning
  • Current status:
    • Limited traction with only 2-3 companies listed
    • Companies still list on traditional exchanges simultaneously

• Crypto's Contribution:

  • Introduced concept of community ownership
  • Allows early users/contributors to own piece of network
  • Challenges include:
    • Attracting wrong type of participants (speculators)
    • Regulatory hurdles
    • Need to balance incentives

• Future Improvements Needed:

  • Potential elimination of quarterly earnings calls
  • Better alignment between long-term value creation and market incentives
  • More ways to reward early community contributors