The lack of understanding of most economists about human nature and nature (or the universe) per se is astounding to frightening. Shareholder value and competition do have a relationship that is not as direct as one might think because it involves human perceptions. Economy is a natural ecological (complex adaptive) system whose entities are after all humans. Rather than competing on natural resources of space and food, they compete on the abstract resource of money. The entity of a business and the even more abstract entity of shareholder value are illusions that have no counterpart in reality. Therefore it is the human illusion of perceived value that drives competition in economy and naturally the same applies to shareholder value.

Anyone involved in running a business knows how flexible accounting is when it comes to portraying a certain business result. That business result is used to sell the business as profitable on the stock exchange. Maddoff produced a lot of shareholder value for a long time by paying out newly received capital as interest, because there is only one value that produces profits and it is ‘perceived value’.

Stock markets are therefore a legalized form of Ponzi schemes because apart from being a gambling venue, their role is nothing else than to create illusionary shareholder value. I am not referring to influencing the shareprice with false information or cooking the books as Enron did. The price of one share being traded one day can change the market value of a large business by millions. That is nothing else than an illusion, because you cannot sell those shares at those prices as it will influence the price as such.

Can you see the wonderful tool that can be used to create ‘perceived value’ from nothing? You create some good illusionary story, or even fire people and reduce the competitive and service capability of a business and its value goes up in expection of the the coming rise in shareprice? Fantastic, self-fulfilling prophecy! In the very, very special situations of corporate takeovers – when one buyer wants to buy all outstanding stock – that shareholder value can be realized. The larger the merger the less it happens in cash terms and illusionary share values are exchanged for each other, therefore documenting the fact that the value is unreal.