Esther Dyson vs Bill Campbell: 2002 − 2012
longbets.org
longbets.org
Here is why the statement is way too optimistic:
- Resources always move to places where they can be used most effectively (econ 101) unless there is a significant friction
- For that type of resource (talented programmers/mathematicians) the friction is very small
- Russia has bad regulation and bad business environment in general
- Specifically, very hard to get investments[1], and investors interests are poorly protected[2]
- Silicon Valley utilizes these resource much more effectively, so that even other places in the US - NYC/Boston/Chicago - could not compete effectively
- Also, managerial talent in Russia is concentrated on more profitable business, like participating in natural resource explorations or working for state-run monopolies - very profitable and risk free if you have the right connections
Disclaimer: I'm Russian living in Silicon Valley. That may have affected my judgement.
[1] I can share the following anecdote: When I was helping some friends to find VC funding in 2008 in Russia, I learnt that most VCs in Russia require kick-backs(!) from startups that they're investing in - presumably as a way to steal from their limited partners (and even provide some advice on how these kick-backs could be recorded in accounting books).
[2] Khodorkovsky's and Chichvarkin's examples are probably the most well-known on the West.
There are stories on HN all the time about US investors requiring the same. There are fancy meals on the company's tab, first class airplane tickets from all around the world for board meetings and various other abuses that HN founders complain about.
I guess straight-up cash would be a novelty, but that probably comes from the IRS scrutiny it would engender. Is an exacting tax authority part of the root of American exceptionalism?
Another interesting feature: there are plenty of 'funding advisors' that can help connecting you to a right VC[1] for a fee, typically a few percent of the funding.
Kick-backs are also typical if you are a mid-size company a need to get a commercial loan.
[1] They all claim to have connections to some government-backed VC funds such as government-backed Rusnano or Russian Venture Company.
Same in the US. I think Massachusetts might have a law against it?
But as another Eastern European currently in the US, I agree with you and know what you are trying to say.
June of this year. Here we go: http://www.businessweek.com/1998/45/b3603184.htm http://blogs.reuters.com/felix-salmon/2011/06/07/the-us-ipo-...
Though both approaches have been tried, I suppose. Microsoft would be an instance in which an illegal monopoly (read the court findings, folks) was not split, as many commentators suggested, but regulated. It's arguable that this did result in a loss of standing as a monopoly, though how much of this is a matter of a shifting computer market (servers, mobile, cloud) and how much an erosion of Microsoft's still overwhelmingly dominant share of desktop OS and office suite markets is also of interest.
NB: I think Microsoft should have been partitioned, and that it still behaves as if it had and seeks an illegal monopoly, though its power has been greatly diminished.
Particularly if those financial services are extractive in nature?
Russia's is a "resource curse": http://en.wikipedia.org/wiki/Resource_curse
Our current financial system looks more like a twist on a "rent seekers": http://en.wikipedia.org/wiki/Rent_seeking
They're kind of similar, but only because resource curse countries end up with a bunch of rent seekers and corrupt officials.
Notable WRT resources curse / Dutch disease is the Norwegian counterexample: http://ideas.repec.org/p/ssb/dispap/377.html
But it also has the effect of starving other fields of talent and technical expertise, of bidding up their costs, and related effects which are more similar to Dutch Disease / Resource Curse. The number of physics, maths, and engineering grads working at banks / financial institutions rather than at science / product R&D firms, for example, is pretty staggering.
Still mulling, but thanks for the food for thought.
Could you elaborate on that sentence? What do you mean by "extractive"? In the context of natural resources, I take that word to imply that the resource is depleted (e.g. non-renewable). Do you have a difference sense in mind?
>In the context of natural resources, I take that word to imply that the resource is depleted (e.g. non-renewable).
Is incorrect. Lumbering and agriculture are extractive industries but not "non-renewable". All primary production of resources are "extractive" industries.
I don't see sustainable timber, agriculture, fishing, or solar/wind/geothermal/hydroelectric power as extractive.
Wikipedia appears to agree with me, likewise the World Bank: http://en.wikipedia.org/wiki/Extractive_industry http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTOGMC/0,,c...
Some financial activities -- traditional financing of productive economic activity with real returns -- actually generates productive financial and economic activity. Other forms of finance -- essentially create liquidity based on existing assets, but don't actually turn that liquidity into something productive. Say, roughly, a HELOC. Or they simply squeeze payments out of population that's poorly equipped to refuse them: fees, fines, and penalties added to many financial and services contracts.
I'd argue that both of the latter are "extractive" in that rather than promoting economic activity, they serve to convert some illiquid asset class (or population) into a currency pump for the benefit of the financier.
I don't know if computerized trading falls into this model but I'm inclined to think it does, and would very much favor a transactions tax to put limits on this sort of activity. I suspect the bigger problem is that these systems are poorly understood and have very large downside potential through inadvertent (or deliberate) feedback loops. Think Flash Crash.
Russia is decades ahead of other countries, but they have a long path ahead of them. A good start would be teaching English in elementary school.
Compare that to, for example, someone from the Philippines who will be proficient enough in English that you think they are an American.
In my own personal business, I estimate without native English proficiency my employees would be worth 1/5th or less of what they are to me now. I would have to hire an bilingual manager to run projects, and that person would have to be paid a lot. My turnover would be higher and the accuracy of instructions would be diminished, thus resulting in slower project execution times.
Irregardless of the non-ideal situations of the past, current citizens with English proficiency benefit enormously -- in the form of money.
Being proficient in English is a really big deal. As an American child I was told over and over again that it was important to learn a foreign language to increase my ability to get a job. As an adult, I found the opposite, that English above all other languages was critical in running a successful international business.
You used the Philippines as a counter-example to Russians not having very good skills in English. I think the example was badly chosen: Like if you choose to compare them to Canada or United Kingdom. Of course there are countries where people have better skills in English than in Russia. But I think comparison with one of these extreme examples misses the point -- you should compare Russia to other countries that are competing for being "the world leader in software development".
I do think however that we are discussing about a bit different things though, as I didn't understand how your reply had anything to do with my message -- except for the double quote part.
For instance, if you ran a fund that simply bought BRK shares, and, each year, bought just enough out of the money options to protect against a %10 decline in BRK, that would be a hedge fund. Buying the puts is a hedging position, but I would say that such an investment would be damn conservative, and certainly in line with Buffett's investments strategy. (He cautions against derivatives, but covering a long position with puts isn't what he means.)
I wouldn't be surprised if they had simply agreed on a subset of prominent hedge funds from '08 that the two agree represents whatever range of investments they think is important. I'd assume they're unwilling to disclose the methodology simply to avoid any accusations of outside manipulation or something.
Makes sense to me, at least.
http://blogs.wsj.com/marketbeat/2011/11/21/hedge-funds-kiss-...
Buffett knows what he's doing. And we all know that the wast majority of managed funds perform worse then index funds.
And Buffett did not bet on any one hedge fund, which might actually outperform. He has bet on an index of them! And not over a short time period, where again, they could outperform. But over 10 years!
I would be SHOCKED if Buffett loses this bet.
Thanks for sharing the site!
0. http://en.wikipedia.org/wiki/Clock_of_the_Long_Now
1. http://www.seattlepi.com/ae/article/You-don-t-have-to-be-a-s...
(I even copied over most of the Long Bets: https://encrypted.google.com/search?q=longbets%2Eorg%20site%... )
OWS is not anti-business, it is anti-corruption, and there's few things more damaging to progress than corruption.
I guess this is the problem with any protest movement - you have no top-down control, and so any good messages can get lost in the noise. I think the occupy 'brand' is pretty much damaged beyond repair for now, but if the core of the people believes what you say, then it's possible to create a new organisation and leverage from occupy before it's forgotten. But a new organisation would have to be top-down and control the message to get the point across.
For my part, I agree with the points about regulatory capture and corporatism. Large businesses pretend to like capitalism, but in reality, they get terrified of smaller startup companies stealing their lunch money and rendering them irrelevant in a decade or less.
Too big to fail is indeed too big to exist. The role of governments must be to prevent monopolies from forming, not to legislate them into existence.
I do not think OWS, to the extent it has a coherent set or ideas or ideologies, is anti-business per se; I think it is opposed to the zero-sum thinking that characterizes much of Wall Street and political life right now. See, e.g.: http://www.slate.com/blogs/the_reckoning/2011/11/21/it_s_the... :
<blockquote>In fact, blame for the failure of the congressional super committee belongs with every American who failed to vote in the 2010 midterm election. Nothing encapsulates the dysfunction of American democracy better than the fact that we abdicate responsibility for governing our country (and running our economy) to a radical minority every four years out of laziness and, to a smaller extent, deliberate efforts by both parties to depress turnout they know will favor their rivals.</blockquote>
Or, from HN, http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-... (Clayton Christensen: "How Pursuit of Profits Kills Innovation and the U.S. Economy.")
Notice how people are not saying "Occupy tech firms in Silicon Valley," and I think they aren't because it's pretty clear that Apple, Google, etc. are generating real value that improves lives; it's not at all clear finance and many parts of government are doing so at the moment and it may be that they're actually destroying value while taking advantage of an insider's feedback loop that prevents market forces from actually acting on them in any serious way. If anything, I suspect OWS, to the extent it has a coherent ideology, would be pro-business, as long as that business isn't doing things to hurt people, institutions, or government.
Run a large enough one and they bail you out and let you keep profiting on it. I haven't seen a single person charged in the mortgage meltdown despite that almost everyone at every bank was in a better position to see the problems than I was, as a borrower, did.
If our laws were applied without regard for the wealth of the guilty almost every bank employee in the majority of the world would be charged with conspiracy to defraud their customers and at least permanently banned from ever professionally handling money. (They did worse than Kevin Mitnick, they deserve worse punishments.)
As for corporations having rights, it's ridiculous. My cycling group doesn't have rights, the individuals in it have rights. Corporations are groups of individuals and thus, indirectly, have all the rights they need. Anything beyond that is corruption.
No, I think OWS is very pro-zero-sum thinking. Its core messaging pits "the 99%" against "the 1%". It's class warfare in its purest form.
There are many smart people who are painting more reasoned critiques of our society onto OWS than the movement is actually articulating. Perhaps that's inherent to mass movements in general, but I judge OWS by its most common messages, which are far from what you've described.
There are two OWS-related messages that would have broad appeal, and I'd suggest they focus on those: "Our Laws Are Not For Sale" and "Too Big To Fail Is Too Big To Exist".
The Occupy movement is about finally having a discussion about these issues.
Households that make more than $500,000 a year pay less in taxes as a percentage of their earnings than households that make $50,000 a year. They also benefit disproportionately from the protections our society offers and suffer less from the economic uncertainty that has become the bane of middle-class existence in the last two decades.
Now I am certain you can find more than a few members of that group who are sympathetic to the plight of the middle class but how many can you find that would be in favor of rescinding the Bush tax cuts?
My responses to this will be minimal, as we're considerably off-topic.
If you need a cite for every sweet deal lobbyists have sought just to agree that the lobbying class is getting a sweeter deal than the rest of us, you're being intentionally obtuse.
We all benefit from a stable government and economy. I don't see how one using it more efficiently should be punished.
Likely they applied for a patent on some obvious technology, or invested in a company that did, like Amazon, and are essentially being given that poor person's tax money to support these government monopoly grant.
Ditto anyone rich from resource extraction. Our laws give the resources to the people who currently own the land, despite that our countries really hold all land in trust for future generations (see the right of eminent domain). You can be rich off public resources simply because you siphoned them off via a tiny chunk of land you hold while turning a blind eye to any environmental problems you were causing.
When the rich actually, in general, contribute a tenth as much or work a tenth as hard (mentally or physically) as the poor, dollar for dollar, what you said may be valid. And there are some who do, but in general, riches come from exploitation, and until this is corrected it's got to be handled at another level (like income taxes, etc).
An example: progress requires, above anything, a rentier class not hell bent on furthering their greed at the expense of everyone else, via shadow banking, obscure contracts and general, short-sighted stupidity. Regulated, if you will.
I don't see many "pro-business" governments doing anything to solve that. I see many of them giving their corporate friends cool, undeserved subsidies under the pretense of "industry being of national interest".
Nobody has taken the other side of it. I'm skeptical (but intrigued) by bit coins, but I wouldn't take the other side of this bet, simply because bit coins have just started out and aren't yet a "fully mature form of money". That is to say, its a lot easier for a penny stock, or any other cheap commodity, to double (or outperform by 2 orders of magnitude) a global currency or form of money that has millions of owners, and relatively stable value.
>[Me:] "Must the makers of predictions (eventually) accept a challenger? I get the impression that several of these predictions are dubious yet have been sitting for awhile without forming a bet. It seems against the spirit of the site to allow predictors to grand stand without having to put their money where their mouth is."
>[Them:] "Predictors put their money where their mouth is by paying $50 to be published. They do not, however, have to accept challenges to their Predictions."
If it were up to me, they'd also allow bets with odds other than 50-50. Still, I think it's a great site.
That's pretty shady, especially since it sends a misleading message to see a bet being offered with no challenger - without knowing about that part of the policy, I'd assume that meant nobody had the balls to take them up on the bet, not that they themselves didn't have the balls to accept any challengers!
Longbets should be removing bets from public display if too many reasonable challenges have been submitted without an acceptance. I'd leave it to them to decide what "reasonable" means, maybe something like falling within a certain range of amounts (perhaps making the offerer specify this beforehand?), with argument content that passes a cursory review.
I'd at least suggest that they manually review "bets" that pass a certain threshold of page views and/or challenge requests, and tried to determine whether the bets were proposed in good faith or not, up to and including interacting directly with the people offering the bet and asking them for explanations about why the challengers didn't meet their requirements.
You should be more than happy to take this bet, at any amount that he's willing to offer. I know I would be, as long as it was denominated in USD.
Let's say the wager was $10k - if you buy about $198 worth of BTC at the start of the bet, you're guaranteed to come out ahead by at least $9,802, regardless of what happens. Do the math if you don't believe me - that's a bet I'd be happy to take...
If the bet was in terms of Bitcoins instead, then I'd be a lot more hesitant - you could still hedge against an unbounded loss by buying the BTC up front, but if the price of BTC went down by more than 50% you'd end up losing USD even though you won the bet (also if the price went up by a factor of more than 100 but less than 101, which is unlikely enough to mostly ignore), so you'd need to be somewhat of a BTC bull to be comfortable with that.
Edit: I see now that Longbets mandates that proceeds go to charity, which means that if you followed my strategy you'd be making a donation in some cases since you don't see winnings from the bet. I suppose that changes things a little bit, but even so, I'd happily throw in $198 of my money to make sure with 100% certainty that $10k went to charity.
Which makes it extra scummy if it's true that the offerer of this bet won't accept any challengers...