George ILIEV
Nature and business sometimes make a step back in order to make a step forward. The Mpemba paradox in physics holds that hot water freezes faster than cold water, which is frustratingly counter-intuitive. Scientists from Nanyang University in Singapore recently found the explanation to this strange phenomenon. The key is the heating-triggered relaxation of the weak covalent bonds between the two hydrogen atoms in one water molecule and the oxygen atom in the adjacent molecule.
Initial public offerings (IPO) provide a similar counter-intuitive example in the business world. Companies naturally should want to sell their shares at the highest possible price. Why, then, did Twitter set its stock selling price at $26 per share in its November 2013 IPO, even though the company and its underwriter Goldman Sachs could have realistically foreseen a trading range around the current level of $41-$45. Risk aversion is probably not the whole story. Many consumer products and media companies prefer to make a splash on the market by leaving money on the table for a bunch of happy investors in a heavily oversubscribed IPO, rather than milking every single investor to the top of their willingness to pay. They see this is the way to long-term success. If you don't believe these companies, pick up John Kay's 2010 book "Obliquity" on how to achieve things indirectly.
Photo: Ice Cubes (Source: Wikipedia)
