Many people
don’t fully grasp how the stock market works and what its economic function
actually is. Behind all the complicated
maths and (deliberate and unhelpful) mystique is a very simple economic
function. Entrepreneurs need capital to
operate their businesses and individuals need outlets for savings. Individuals can give entrepreneurs money in
return for a SHARE of the company’s future profits or a STOCK of the company’s
capital. An individual can, at any time,
sell this right to a share in the company’s future profits to another
individual – this market, which can be organised or informal, is known as the
share market or stock market. Below is a
great cartoon from the 1950s, unearthed by Graeme Acheson, which provides a
helpful (if dated) explanation of how the stock market works.
Michael Aldous and I had our book The CEO: The Rise and Fall of Britain's Captains of Industry published a few weeks ago. You can find out more about it and buy it at Cambridge University Press's website . It is also available at Amazon , Waterstones , and Barnes & Noble . The CEO has already been reviewed in The Sunday Times , The Observer and Financial Times .