My favorite comment in this story is the one where someone says “i could probably write a better article if i was drunk and high.” Yup.

Why is this ratio (P/R) a silly comparison? After all, P/E is one of the most-used ratios to look at in valuating companies and P/R is similar. Basically, the idea is that a company’s valuation (our P) should reflect current and future earnings, which is what the price is derived from. As such, the current revenue (that’s the R) and especially current earnings (E) should not be completely divorced from it. So, Finance 101 tells us that overly-high ratios means a company is “over-valued” and over-low ratios means a company is “under-valued.” But this is too simplistic.

(Side note: Also, the general practice is definitely and for good reason to look at P/E – price to earnings, not P/R, but I think the P/E ratio is so high at this point that I think she even realized that using words like “quatrillion” in headlines sounds like some sort of joke.)

Apple and Linkedin are companies at very different stages of their growth. Linkedin is tiny and immature — they literally just started turning a profit this year. If managed correctly, it will grow much more. It made a little over 15 million last year, which is practically negligible. Apple, on the other hand, is a huge company that is basically at maturization. To compare their P/R ratios is like having a precocious 14-year-old science fair winner and a NASA scientist take a test on astrophysics and then using their scores to determine their future academic potential (without taking into consideration age or experience). It’s just silly.

Linkedin, at it’s current price, reflects a $8 billion valuation. To compare, Apple is currently valued at $300 billion. So, despite Ovides’ silly headlines, the market does realize that Linkedin is a much smaller, much riskier company. Making the argument that a $8 billion valuation still is on the higher side is understandable and probably even right, but flashing around numbers like “3 trillion” and making it sound like it’s being valued higher than Apple or the GDP of the United States is incredibly intellectually dishonest.

In short, if you were going to look at ratios, earnings is more important than revenue. But even apart from that, focusing on either the P/E and P/R is not a great idea. The revenues of Linkedin as a point of comparison just have no meaning at this point because it’s not really a good reflection of it’s potential value. Only when the company has had a little time to mature does it mean anything. Going even further and comparing Linkedin’s ratios with a very large, mature company is idiotic.

The reason I’m calling this bad journalism is because if you know anything about finance, what I just detailed out here is really not very high level and is plainly obvious to anyone with a basic finance education. They for sure should know better. The Wall Street Journal is betraying the public’s trust in publishing this bullshit. But Ovides knows that Linkedin’s IPO is the big news of the moment and the Journal wants to have the catchiest headline — so, who cares about journalistic integrity, right?

Of course, maybe I’m being too harsh. They might all just be idiots.

When I began typing this, I started off planning on writing a post about my qualms with getting information from newspapers reporting on scientific discoveries, but then got off on a tangent about why I want a puppy and when this might happen, etcetera…but I’ve removed that section now and we’re back in business (that was pointless, I know).

So anyhow, my point was that when things are reported, issues are oversimplified and that important nuances are removed to an extent that is counterproductive to people trying to make crucial decisions about their health or lives or whatnot (e.g. one article says that something is always great, another say that the same something can kill you, but in actuality whether one or the other result will obtain is dependent on whether the party in question meets specific criteria).

Sometimes, there’s enough specificity to be useful, but a lot of the time the arguments are completely one-sided or it seems like the reporter just settles for a “hey, this happens and but sometimes it doesn’t happen” without enough detail for anyone to understand why one situation would occur versus another.

The problem is, the information gets condensed and not expanded from there and most people would not bother to delve into the topic further before forming conclusions. Almost no one would be able to find the source material, and instead other sources will cite, summarize and further overgeneralize the already over-broad information. Eventually, word gets around in some snarky, 140-character form.

Anyway, I wanted to launch into some discussion about media and how it’s changing to suit consumers, and the various issues with journalism as it is currently moving to be more accessible. The problem, of course, is that I think it has been and is already sacrificing a disproportionate level of integrity for the sake of “user-friendliness,” and that no form of media other than books seem to have found a way to inform that manages to be sufficiently accurate.

I was also going to talk about how people who look to movies and television instead of reading to glean insight on the human condition or philosophy or politics are being sadly mis-educated. I love movies and television, but I go to them for entertainment and inspiration, not information. If you want to learn, you gotta read.

Blah, blah, blah — ergo I heart books and people should read more. The end. I was going to write something more cogent, but it’s such a preachy thing (I know) and anyone who would bother to read it (out of my readership of like 3 people) would probably not be the people I would ideally like to direct the message at anyway, oh, sweet irony…my point is, I really do think people should read more.

Anyway, afterwards we all went to the Majestic, which is this diner that Dave is obsessed with. It was, however, actually quite good. I’ll try to get a picture of it next time cause you have to see it to understand.

Oh, and one of the IT monkeys at work introduced me to a new game called Plasma Pong which seems a little too addicting for me to install on my computer right now. Nevertheless, during the next break…maybe. It’s like pong, except you can shoot out or suck in plasma with your paddle, and the game has a pretty impressive rendering engine for the plasma for any of those die-hard dorks out there.

In other news, I watched one of the most depressing movies ever. I was looking for a fluffy Korean drama-ish type movie. You know, just some silly characters in some ridiculously cheesy setup. Anyhow, I ended up watching Sad Movie (yes, I do realize that perhaps the title should have tipped me off, but try to work with me here), which stars Tae-hyun Cha (My Sassy Girl). I mean, the description I got from IMDB just said it was about some people struggling with their relationships.

Anyhow, it turned out to be like a Love Actually from hell. There were 4 pairs of people, each with a different type of relationship. Except, whereas in Love Actually everyone had issues, worked through them and then was happy, in Sad Movie, they all have issues, work through them and then miserable things happen to everyone! So depressing! Anyhow, the moral of this story is: Sometimes, things are more obvious than you would think. Lesson learned.

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