And you can sell your tulip. But if the mania stopped and you suddenly _couldn’t_ find another person to sell it to, would you now be upset you paid $5000 for a tulip? What’s the value at which you wouldn’t be upset? Ok, that’s the intrinsic value of a tulip to you.

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runako 12 hours ago | parent | next [-]

The thing about a profitable business that is different from a tulip is that it can at any point decide to issue a one-time or ongoing dividend. It can sell off parts to create cash. It has lots of optionality. Public companies have even more liquidity, which creates more optionality.

Even if you don't have immediate liquidity, it would obviously be worth something to have a slice of e.g. Rolex SA. That's obviously different than owning a tulip.

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cavemandaveman 11 hours ago | parent | prev [-]

Berkshire Hathaway doesn't pay a dividend yet the business has steadily grown more valuable

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WarmWash 8 hours ago | parent [-]

Because dividends are stupid and Berkshire is smart. Share buybacks are the optimal way to do "dividends".

The only reason to do a dividend is because people like the feels of getting a cash payout.

	▲	prewett 4 hours ago \| parent \| next [-]
		Dividends are also one way of income in retirement, much more predictably than selling stock. The yields are worse than bonds, but they can be considered to be mostly to rise with inflation, albeit on a year or two delay. Dividends also act as a discipline to keep management focused on the business, since you need to pay real money to shareholders, instead of just doing whatever good idea you have, regardless of whether it is a net benefit to the company.
	▲	throwaway2037 5 hours ago \| parent \| prev [-]
		I disagree with the last statement. The reason why most companies in the US have at least a nominal (one penny per share) dividend is that many pension funds have a requirement to only hold shares that issue dividends. Pension funds are all tax sheltered, so they don't need to worry about paying taxes on dividends. For retail investors, dividends are mostly worse that share buy backs. Why? Dividends are taxed, and the money needs to be reinvested.