Hedge-fund billionaire Ray Dalio says capitalism needs urgent reform

Yeah only a billionaire like Dalio can afford to recommend massive top-down re-engineering of the economy. If it doesn’t work he’ll just have a few less billion and the rest of us may not have jobs.

> The amount of people wanting to re-engineer society these days is staggering.

It's just like there might be some reason for that!

It seems unlikely that if we genuinely tried to re-engineer the system to make it better that it would turn out worse. The fact is that our problems - the ones leading to revolution - are pretty straightforward and have been solved many times in other countries, including this one.

The most obvious one is public healthcare. This is probably the number one problem facing most Americans - everyone encounters problems with health care, and the terror of medical debt keeps all of us chained to our jobs. But this is a solved problem - health care is twice as large as a share of the economy in the US, with worse outcomes, as it in other OECD countries, which all - ALL - have functioning public healthcare systems.

And this isn't fucking rocket science - there are a number of perfectly fine functioning schemes available. All you have to do is be willing to face down the insurance and pharmaceutical companies. The only problem is there are not many politicians in America willing to do that.

That, by itself, would probably take care of a good deal of income inequality - pharma, e.g., is basically a tax of 1.5% of GDP, taking money from average people and putting it into the pockets of the very wealthy.

If we want to go further the next no-brainer is simple: break up the TBTF banks. We should have done it in 2008. Instead we got Obama shielding the banks while they foreclosed on millions of Americans, not to mention perpetrating several other notable frauds. This is basically "income inequality, the industry" - it is full of vampiric individuals who keep trying to find new criminal schemes for enriching themselves. Putting a stake in it is not that complicated - break up the big players and a financial transaction tax would do it. But again, finding politicians willing to slay those demons is tough.

Of course as a committed anti-capitalist, I don't want to stop there. But the fact is that capitalism can do just fine, as far as staving off revolution goes. The US did it for decades, and only part of that was because of the Palmer raids and COINTELPRO and other such things. The vast majority of it was because of decent pensions, job security, and productivity growth. It just requires a modest commitment to make sure that the vast amounts of wealth we are constantly generating are distributed somewhat more evenly.

I agree with the over confident architect syndrome you suggest, but there is more to solving the current set of problems than just democratizing access to opportunities. There is an accelerating shift towards a world where the only valuable human labor is that of ever more exclusive elites. We deal more and more with information, and going from information to things requires fewer and fewer humans. You need only one search engine, one Operating System, one browser, one online retailer. And only a handful of engineers, scientists, a few artists, writers, athletes, politicians, to satisfy the needs of the entire population. In other words while for a few outliers the rewards will be fantastic most human's economic value is trending towards 0. There is really a need to address the resulting inequality and crisis in meaning, tweaking capitalism is not going to be enough.

>Nothing holding back the working class is caused by plutocrats.

Rich opaque individual families, particularly since Citizens United, have played an important political role in enabling the redistribution towards the upper middle class and the politics responsible for it.

So yes, while in material terms the bigger squeeze for the working class and the poor is the "petite bourgeoisie" rather than Jeff Bezos, the political corruption to a significant degree can be traced back to donors and shouldn't be neglected.

This is especially relevant in the context of Dalio's criticism because he is not just identifying problems, but also demanding that there is a quick, top-down solution to those problems. That requires us to ask why institutions allow bad policy in the first place. You can have the best, most wonkish proposals for how to solve every problem, and there's no shortage of people who propose to have found them. What is lacking is clearly the ability to execute them.

>The ACA, for example, is a great law for entrepreneurial software developers, not so for the lower income small businesses, because of the increased costs.

I am curious if this is a factual critique?

Some quick research.

https://www.healthcare.gov/small-businesses/learn-more/how-a... https://www.irs.gov/affordable-care-act/individuals-and-fami... https://www.commonwealthfund.org/publications/issue-briefs/2...

But this is not may area of expertise, so I cannot judge.

> The ACA, for example, is a great law for entrepreneurial software developers, not so for the lower income small businesses, because of the increased costs. Nothing holding back the working class is caused by plutocrats.

The ACA is what happens when you try to appease plutocrats (specifically in the financial services sector) when dealing with deep problems for non-plutocrats.

> Abstractly, wealthier riders are colluding (via Lyft) to drive down margins of unskilled workers.

The idea that the plutocrats (e.g., VCs) have nothing to do with Lyft is amusing, but not exactly factual.

Wait, why is wealth inequality inevitable in any advanced, meritocratic society? Why is "wealth" even inevitable in any advanced, meritocratic society? The idea that accumulation is natural is bonkers. We have things called land titles that allow individuals to "own" large tracts of the earth that they have never seen, will never touch, and yet can collect vast sums of money for. This is not "inevitable", it is the result of specific political and social constructions that we abide by. These constructions can be changed to prevent the possibility of accumulation without destroying your precious "meritocracy".

I also object to your notions of "gifted, talented young people". People are not collections of talents waiting to be mined; they are the product of specific cultural and social histories. I went to the best schools in the world because my parents had a specific class history, were funneled into a particular segment of American society, and made basic choices committing me to an educational course in line with the expectations and norms of their class. You might call that "talent" - but I didn't learn number theory at 14 merely because I was talented, I learned it because (1) someone else had already invented number theory and (2) I had access to people who had learned the same because of my social history.

It's a real pity that people don't look at the numbers but talk about these issues as if they were categorical decisions between "either meritocracy or socialism". That's a false dichotomy.

There is wealth inequality and then there is wealth inequality. There is a difference between a society in which the average employer earns 30 times more than the average employee, and a society in which the average employer earns 300 times more than the average employee, or one in which the average employer earns 3000 times more than the average employee. Repeat those statements with median.

There is also a huge difference between a society with a Gini index of 0.28 and one with a Gini index of 0.49. And it makes a huge difference if the index is increasing or decreasing or staying stable.

There are dozens of other factors and indicators that can and should be taken into account. For example, the percentage of income spent on rent is a huge factor. If you spend more and more income on rent, your discretionary salary disappears very fast.

You seem to assume that any kind of wealth and resource distribution is fine, as long as society is just meritocratic, but that's clearly not the case.

Moreover, this cannot just about chances for the talented. You also want to live in a society in which untalented people can live a decent life in dignity, a society in which relative poverty does not lead to widespread social unrest or crime.

If the gap between rich and poor wouldn't continually increase and the trend wasn't further aggravated by existing inheritance laws, there would not even be a need for discussion.

Different things work (or don't) at different scales, and with different mechanisms. Is Ycombinator limited in size by available money? Those programs/funds are selective, and tiny by economy standards. There are all sorts of public GDP, arts, and innovation boosting programs, but they tend to be quite different.

In any case, I think those things are wealth, and if they were massively larger and involved lots more people then that would be more wealth equality.

Inequality is inevitable in all societies. The question of how much inequality is acceptable not just that it exists.

Why do we concentrate on wealth inequality so much? What's wrong about some people being ultra rich and just well off? Would it be better if everyone we're equally poor?

Unfortunately, most workers won't actually want anything like this - especially the lowest-income/wealth workers. "Skin in the game" at the firm you're already working for (thus involving quite a bit of relationship-specific capital, which would lose its value real quickly if the firm went under) is just putting all your eggs in one basket.

or to look at it from the entry-level side.

There are currently no shortage of minimumish wage jobs out there (choose your payment-point). The jobs and therefore you as an employer are interchangeable.

What do you offer that makes them want to care for your company more than just the salary you offer? How do you attract better people to your great company, when you can't afford a competitive salary right now?

Politicians picking winners is the last thing we need, and any system in which the government chooses how to funnel resources to entrepreneurs will risk doing that. For pork barrel reasons if nothing else.

How do the builders know what is important to build unless those who are suffering can vote for solutions to their ills?

Thats my argument for funneling resources to the poor: so that entrepreneurs can earn revenue fixing poor people’s problems.

Or (and this is a reason to use markets) so entrepreneurs can earn revenue fixing the problems that entrepreneurs encounter when trying to fix poor people’s problems.

The issue here is with the definition of "value" and "resources" and how they are defined along with "produce". I am not convinced the idea is useful in our circumstances. It brings to mind the original great depression era Technocracy movement who set up essentially an ineffectual fascist cult and had unviable ideas thankfully never put into practice for a reason. https://en.m.wikipedia.org/wiki/Technocracy_movement

Since that logic could just as easily be used to justify all sorts of bad ideas like giving more money to rent seekers and extractives while completely ignoring those who actually could use the resources for gain. Furthermore the assumption that more resources will neccessarily solve the pronlem doesn't follow. There are many issues from distribution of resources and problems caused by production. We don't solve our problems via producing 15,000 tons of wheat per person per day while everyone is suffering from health issues.

Even if the definition is smart enough to recognize secondary and tertiary steps there is the issue of attempted valuation of education and design work. Done wrong it could pay for copyright and patent trolls.

Agreed, incentivizing productive sectors at the expense of non productive (including rent seeking) is the ideal. But it can be tricky to objectively and systematically spot the productive sectors.

But note: if the poor had more spending power there would be more incentive to satisfy their needs without guessing. This would not only lift their productivity[1] but directly reduce misery and political instability. Further more it directly, bluntly and unambiguously addresses the inequality problem.

We would, in essence, allow them to choose the industries that need backing and so avoid too many direct government decisions. And, necessarily, those are the industries that will relive the problem most quickly.

[1]With the additional choices that additional prosperity brings, individuals tend to choose higher productivity activities.

> What ever happened to the philosophy that we should shift money and credit to the people who have a propensity to build stuff that will be useful in the future? The thing capitalism is actually good at?

But good lord man that's Hersey!

About five years ago my opinion about California High Speed Rail is the state of California should have just up and borrowed $60 Billion at zero percent to pay for it.

Piketty has argued persuasively that conflict, chaos, and tumult are historically among the primary drivers of equality. It's no surprise the billionaires don't want any of that!

Someone more conspiracy-minded than myself might suggest that this is why the wealthy support all these high-expense low-payoff wars in distant lands, to use up all the fighters who would more properly be home rearranging this society toward more equal circumstances.

It is much easier to persuade people from varying ideological bents to do something about this problem if its discussed in terms of objective harm, rather than subjective assessments of fairness.

He knows his target audience. One generally becomes a billionaire by focusing on self-interest, not altruism.

> Yet he argues capitalism needs reform because it could lead to real conflict between people in a country and not because it is unfair.

Which is likely a more effective argument to the ruling elite than fairness: To quote Heinlein’s Lazarus Long: Never appeal to a man’s “better nature.” He may not have one. Invoking self-interest gives you more leverage.

> He wants to be safe, so do I, but I'm not a hedge fund billionaire

An economic revolution may target the wealthy, but revolutions are rarely conducted without substantial collateral damage (and harm to the revolutionaries themselves, which is why it takes more than a little transitory pain to provoke them.)