The Pizza Theory of Business Valuation: "The Pizza Story
Imagine that you have gone to a pizza restaurant with a very hungry friend. You are sitting at your table waiting impatiently for the waiter to take your order. The waiter eventually arrives and takes your order. He, then, turns to your friend, who is, by now, quite starved. Your friend tells the waiter:"
"Please get me a cheese pizza as quickly as you can and because I am very hungry today, please make sure that the Chef cuts my pizza into twelve slices instead of eight."
The waiter looks at your friend in a puzzled way, scratches his head and walks towards the kitchen. Equally puzzled, you ask your friend to explain his irrational behaviour. He tells you:
"If I request that my pizza be cut into twelve slices instead of the usual eight, then the total amount of pizza I will get to eat will be more than before. The size of my pizza depends upon the number of slices it is cut into. If you don't believe me, take a look at what happens in the corporate world and the stockmarket."