Overestimating Two Years, Underestimating Ten: The Time Horizon of Company Value

Microsoft founder Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.” The analogy applies elsewhere. A company often overestimates its present value but underestimates its value ten years later. Suppose that in 2013 you had asked ASPEED chairman Lin whether the share price might reach 1,000. He would probably have considered it distant, while perhaps feeling that the 110 offering price undervalued the company. Similarly, suppose that in 2006 you had asked Kaori chairman Han about that year’s offering price. After more than thirty years building the company, he might have felt that the per-share valuation at listing was unfair. Yet if you had then asked whether Kaori could exceed 50 or 100, he might also have struggled to imagine how the business at that time could support a triple-digit share price. The lesson is to face today’s valuation rationally and avoid pulling too much future value into the present. Take each immediate step carefully. Company value will continue to grow as the business develops—and may eventually reach levels that are difficult to imagine.