I will use a baseball card trading analogy to present my question:

The baseball card trading market, like any other market, follows the laws of supply and demand. The demand for baseball cards can be categorized into two groups of people: the Steves and the Bobs.

The Steves are the businessmen, the investors. They buy cards in hopes that one day they will appreciate in value (perhaps due to stellar performance/popularity of that player) and then sell them for a profit.

The Bobs are not businessmen and have no interest in profit. Instead, they are baseball lovers, they are collectors. They would pay large amounts of money for rare/limited-supply cards to add to their collection. It is the Bobs' demand that truly gives these cards their value.

Now let's say Bobs no longer existed. The Steves may not even care and still continue trading. Even if all the Steves realize that there is no demand from Bobs to give these cards their value, they can still maintain their own demand for the cards and continue using player performance/popularity as a determinate for value. However, they would be kidding themselves. This type of demand seems so artificial and volatile.

My question is: Are there any Bobs in the stock market, or is everyone a Steve?

If everyone is a Steve, then doesn't the stock market and demand for stocks survive simply because we will it to? This seems like such a psychological concept that I still struggle to wrap my mind around.

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    Again, you ignore the fact that companies, as opposed to trading cards, actually produce value. Voting to close as off-topic, this is an economics question. – littleadv Sep 18 '13 at 21:23
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    It's quirky, but may have some educational value. I have heard many people say things similar to the last paragraph. – James Roth Sep 18 '13 at 21:34
  • I suppose I'm still struggling with the best way to present my question. I understand that companies differ in this aspect in that they produce value. But if stockholders cannot simply claim a percentage of a company's value equal to their share, then the fact that companies produce value seems irrelevant to the "Bobs". – elin05 Sep 18 '13 at 22:09
  • @elin05 Have you heard of dividends? Companies pay their shareholders. They also have "stock buybacks" which are opportunities to "simply claim a percentage of a company's value equal to their share". Those are the two main ways companies directly compensate shareholders. – C. Ross Sep 25 '13 at 15:19
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    It seems a pretty apt analogy for cryptocurrencies, though. – Henning Makholm May 22 at 19:04

Baseball cards don't pay dividends.

But many profitable companies do just that, and those that don't could, some day.

Profits & dividends is where your analogy falls apart. But let's take it further. Consider:

If baseball cards could somehow yield a regular stream of income just for owning them, then there might be yet another group of people, call them the Daves. These Daves I know are the kind of people that would like to own baseball cards over the long term just for their income-producing capability. Daves would seek out the cards with the best chance of producing and growing a reliable income stream. They wouldn't necessarily care about being able to flip a card at an inflated price to a Bob, but they might take advantage of inflated prices once in a while.

Heck, even some of the Steves would enjoy this income while they waited for the eventual capital gain made by selling to a Bob at a higher price. Plus, the Steves could also sell their cards to Daves, not just Bobs. Daves would be willing to pay more for a card based on its income stream: how reliable it is, how high it is, how fast it grows, and where it is relative to market interest rates. A card with a good income stream might even have more value to a Dave than to a Bob, because a Dave doesn't care as much about the popularity of the player.

Addendum regarding your comment:

I suppose I'm still struggling with the best way to present my question. I understand that companies differ in this aspect in that they produce value. But if stockholders cannot simply claim a percentage of a company's value equal to their share, then the fact that companies produce value seems irrelevant to the "Bobs".

You're right – stockholders can't simply claim their percentage of a company's assets.

Rather, shareholders vote in a board of directors. The board of directors can decide whether or not to issue dividends or buy back shares, each of which puts money back in your pocket. A board could even decide to dissolve the company and distribute the net assets (after paying debts and dissolution costs) to the shareholders – but this is seldom done because there's often more profit in remaining a going concern.

I think perhaps what you are getting hung up on is the idea that a small shareholder can't command the company to give net assets in exchange for shares. Instead, generally speaking, a company runs somewhat like a democracy – but it's each share that gets a vote, not each shareholder.

Since you can't redeem your shares back to the company on demand, there exists a secondary market – the stock market – where somebody else is willing to take over your investment based on what they perceive the value of your shares to be – and that market value is often different from the underlying "book value" per share.

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    The Daves I Know: youtube.com/watch?v=JF1chLj1fro – ChrisInEdmonton Sep 18 '13 at 23:33
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    @ChrisInEdmonton Excellent -- I was wondering if somebody would notice the Canadian in-joke I snuck in there :D – Chris W. Rea Sep 18 '13 at 23:41
  • There's also going private, which is a slight variation on the other ways shares change hands. – Acccumulation May 22 at 19:12

The Bobs tend to show up at the top of bubbles, then disappear soon after. For example, your next door neighbor who talks about Oracle in 1999, even though he doesn't know what Oracle does for a living. I don't think the Bobs' assets represent a large chunk of the market's value.

A better analogy would be a spectrum of characters, each with different time horizons. Everyone from the high-frequency trader to the investor who buys and holds until death.


Actually, this is a pretty good analogy to certain types of stocks, specifically tech and other "fad" stocks.

Around the turn of the century, there were a lot of "Bobs" buying tech stocks (like they would baseball cards), for tech stocks' sakes. That's what drove the internet and tech stock bubbles of high valuations.

At other times, the tech stocks are bought and sold mainly by "Steve's" for business reasons such as likely (not merely possible) future appreciation, and command a much lower valuation.


Mostly ditto ChrisWRae, but let me add a couple of comments.

I presume in the stock market there are very few Bobs, i.e. people who like owning stock independent of its monetary value. I suppose there might be some people who think it's cool to have a pretty stock certificate and hang it on the wall or some such, but that has to be a tiny number.

Yes, a stockholder can't claim a share of the company's assets. But he receives dividends. Suppose that there was no way to sell a stock once you bought it. Would that make it worthless? Not if it pays dividends. You would continue to receive income from it, year after year, forever. (Or at least until the company went out of business.)

That's what ultimately gives stocks their value: the anticipation of future dividends.

BTW I think you indirectly bring up the problem of "investing" in collectibles. The market for collectibles is very uncertain. I remember when the price of Beanie Babies and Furbees was soaring and people bought them as investments. Then the fad passed and the value of these things collapses, and a lot of these "investors" found themselves with a pile of worthless junk. I'd advise anyone: If you collect baseball cards or commemorative coins or beer cans or whatever because you think they're cool and you enjoy having them for their own sake, that's fine. But if you're buying these things as an investment, expecting the value to continue to rise, I'd be very cautious. Especially if there something that just became a fad recently. It may pass as quickly as it came.


The Bobs buy development-stage-companies but buy them very early. The Bobs want to feel like that they are supporting research-and-development.

Now a hyped development-stage-website that is just building up a following is not conducting R&D and is a different category.

However, the Bobs could be investing in socially-responsible companies instead of in R&D companies.

Also, the Bobs could invest in companies that have one project that requires just development. The project likely has a goal of being profitable but it is a long time to being profitable.

And so the Bobs are just willing to wait long periods of time for profitability of the company. If there are enough Bobs then there is enough stock support. Stock analysts, on the other hand, recommend buying or selling based on balancing market-maker positions. Then the Steves are likely to accept recommendations of the stock analysts. The Bobs believe in project prospects while the Steves believe in popular support.

All of these situations could occur in either profitable or unprofitable companies. So the Bobs might be investing in a profitable company because of one particular aspect of the company. The Steves are mostly interested in the overall company.

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