The Rot Economy
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Rare goods, long queues, no choice, bad products and the leadership is off, chasing its own tail in some basebal metric detached from the world. It even features market-libertarians having to defend practices like shredding perfectly fine goods in ware houses.
The moment the ussr was gone, the race horse finally could binge and become something very similar to the ussr economy, but instead of obsessing on tanks & steel, it focused on excel sheet virtual wealth wankery, disguising the slide back into the gilded age feudalism.
What are we getting via VC-led industrial policy? More jobs in selling advertising?
Oh, its much worse than that, it exposes the hyporacy of hustle culture, and entrepreneur porn entirely if you're paying close enough attention with things FTX.
The covertness of ivy leagues parents leaning on the VC heavy hitters (Sequoia et al) and making this Sam and his girlfriend to be a super genius' while operating like 2-bit clowns with almost no oversight or due diligence and bribing politicians to get favourable legislation in place for them to corner the market.
I wish it were just crumby ad jobs, but it goes way deeper.
DARPA is the agency that funded ARPANET, and other defense research.
Plus seriously, if you think spending 4% of GDP will cause a country or "empire" to collapse you need to read some history books.
Source:
https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locat...
EU certainly is, or we have all signs of it: Most funding for French startups come from the BPI, so the BPI drives everyone to the AI Blockchain TechHR and whatsnot, while…
…while, as an example, and I underline it’s just one example of broader customs, French people regularly take hostage managers in factories for 2 to 10 days, until they sign off an agreement, provided limited supplies of water and food. None of those agreements was cancelled for duress. So we put all public funding into having the next Apple, while not letting actual customer demand drive the economy, and still preventing middle class people from actually going big.
I’m already rich so I try to remain emotionally detached, but when the state drives what should be built (Macron putting 500m into AI, and a billion into Intel chips of the previous-previous generation), it really is a state-driven economy.
Regarding those Intel chips: Which chips exactly caused the chip crisis? High end latest gen ones or older tech? And now you can guess on which chips the vast, vast majority of national defence hardware runs. That idea actually isn't to bad.
This is simply ahistorical, every developed country got there with the help of the state.
Did the interstate highway system get built by venture capital? Did the power grid?
Western governments are no longer capable of these kind of major projects.
London is running out of water.
United Kingdom has huge canals connecting manchester, London, and Birmingham. They were dug without industrial machinery. With shovels.
When I propose to English people that there is plenty of water in scotland and maybe they should expand canals network and repurpose it to redistribute water, they think its madness. Some kind of unachievable, socialist plan.
China has built a canal network to redistrubute water. That why they will be earing our lunch - actually its their own lunch. We arent making lunch, we are wondering why market didn’t bring us lunch.
So much of the recent nuttiness worldwide is due to embracing a rebranding of ‘central planning’. It doesn’t work.
The USSR collapsed and 3 decades have past. Except Venezuela there is no menace of worker revolution at the horizon anywhere in the world. There is absolute zero menace to corrupt capitalist governments who run a two-party turnist democracy.
Maybe indeed a more localized phenomenon.
in the brave new world (where we had a pandemic + supply chain shock + shortages of all kinds) you no longer have an option. Dealers do not have the car or if they do it goes away instantly. You have zero leverage and they will 1/ get whatever price they want for it (usually above MSRP) and 2/ will wait and be happy you managed to work something out.
Here: https://evto.ca/toyota-vehicle-wait-time-guide/ https://caredge.com/guides/factory-order-wait-times-2023 https://www.whichcar.com.au/news/toyota-wait-times-2023-deli...
I'm going to buy a used car you say? Well, you'd be shocked to learn how much used cars are going for (and there used to be a time during the pandemic, not too long ago where, for certain brands you could actually sell your car for more than you bought it new - which to me it's crazy)
Intelligent investments take more time to culminate than unintelligent ones take to fail, so things would look pretty bad in any savings rich economy.
It's galling to have it work so inefficiently, and much of it just transfers from one rich yahoo to another. But maybe there's a ray of hope somewhere under all that BS?
Wealth tends to collapse over generations in an ultra wealthy family just because the kids aren’t passionate about whatever made the original money and they squander it on half-baked businesses or “bad investments”.
Americans that became millionnaires by doing nothing other than chucking a bit of their paycheck into a 401K each month, are likely to have spent their working lives in a period when financial markets were growing as more and more Americans joined the labour force.
The growth of your portfolio then wasn't entirely dependent on earnings and growth, like it is now. Portfolio values grew by a lot simply because more and more people were being added to pension plan contributions each month. Things were so good that pension plans used to be "defined benefit"-oriented, meaning a certain return % was guaranteed.
The new generation of workers on the other hand get "Defined contribution" where the only thing guaranteed is how much of your paycheck they can take.
There was an LA Times article about this that was discussed here:
Article: https://archive.md/2EPal
HN Discussion:https://news.ycombinator.com/item?id=28140362
I don't think they wasted huge amount of any resources back then. Just time of people who had too much of it anyway.
As if the medieval peasant had it better. The average person lives the highest standard of living in the history of humanity with a life so easy that the biggest problem is being able to afford the Apple Vision Pro or not.
A metaphoric society of complainers about how they only got a BMW 5 series for their sweet 16 from daddy when their friend got a 7 series!
Personally, I am thankful for capital accumulation and that I have been able to live the amazing life I have instead of picking potatoes on a farm all day and then eat potatoes for breakfast,lunch, and dinner. Get married to your cousin and life is basically over at 30. That could have been anyone reading this but you basically won the life lottery instead.
Take Google. Their one, core cash cow is an oil strike. If you strip away all the unrelated and unesesarry.... It's an 80% profit business that represents most of www's monetisation.
Google already have all the market share. It takes >$10bn to meaningfully affect their bottom line and share price. Few of Google's many investments have an obvious chance of achieving this.
Still... The market (and Google's board) consistently prefer to retain (or avoid realising) earnings.
The fact that Google's growth requires almost no capital also generates an inward capital flow.
Google's culture was a good fit for this. First they let a thousand flowers bloom. Then the cultivated university-like subcultures. They alway knew how to spend big on blue skies.
FB is a little more awkward. They know where the bread is buttered. They invested more tightly around the core money maker, but they get to the same place as Google. Way more capital, credit and discretionary spending than they possibly need. Nothing more to invest in.
Well... All this is resources that aren't spent on manufacturing, tooling, energy, construction, etc.
Take chip fabrication, or computer hardware broadly... It's capital intensive. Factories change slow. Markets change fast. Prices continuously fall. It's a nightmare, comparatively.
I say "capital" but the real shortage is risk. Google/FB/etc are "hoarding" all the risk allowance. Where they can invest in highly speculative projects because the money is just there, analogue businesses are still backed by banks, bonds, specialised investment firms and tightly controlled payback schedules... Not an easy world to innovate in.
The modern system now reaches bedrock very quickly. When we can dig no longer we start depleting all our resources trying to dig anyway.
Reality is that were not getting more out of Google no matter how much resources they draw. That's what capital is to firm, resources. Over resources X and under resourced Y.
The Google/Meta problem is different: the challenge of investing in the context of an individual corporate identity and its configuration of human and intellectual capital. Amazon would be a nice contrast to the companies mentioned here. It's a good marriage of the more ephemeral and short term tech capital and traditional physical capital that can have bigger and more stable long term yields. Apparently it sucks to work in most orgs there :/.
Normal people have consequences for the smallest of the mistakes they make in their lives. You can go to jail for failing to pay a parking ticket and have your life ruined if a medical bill goes to collections because your insurance wrongfully denied your claim.
Meanwhile corporations and connected individuals see little to no consequences of their direct actions. Ceos and founders mess up, and workers face the consequences. Real estate companies can literally walk away from their obligations and surrender buildings to lenders, and can still operate with no consequences. Banks can shut down and the executives can keep their millions in bonuses, while you who put your money in, should’ve known better about FDIC insurance limits.
Oh they went to __ school, they must be good. Oh they worked at __ co, they must be good. Oh they worked under __ [team/manager], they must be good. Oh they launched a [fund/startup] before, they must be good.
Once you get the foot in the door once, it's easier to get your foot in the next 10 doors.
The real reason is that dropping him after the first big losses would make it clear that you f'd up by backing him in the first place.
> because he has the resemblance of the kind of messianic white guy that is able to take a product and sell it
Sounds like a farce but Fox really did try to blame “woke banking” for the collapse of Silicon Valley Bank.
Fox News doesn't care about other flavours of right-wing politics unless it directly helps their preferred candidates get elected.
You could change the world with the amount of money he's been given to...do whatever it is he can't even articulate.
I think the answer is in two parts. One, there is a political environment that is very much interested in preserving itself regardless of whatever so-called benefits could come from actually changing the world, and two the market isn't really some kind of god like oracle that always does the "right" thing.
I'll give you an example to better explain what I mean to say.
The Roman Empire had a lot of good things going for it. They had many of the necessary ingredients for an Industrial Revolution to take place more than a thousand years earlier. So why didn't it? Clearly there was a lot of money to be made in hindsight, but in their political environment it was never going to happen.
Rome, as impressive as it was, had a small political class of movers and shakers who owned most of the wealth, and to those people if given more money they'd just buy more farmland. That's it. Literally, to them, the Roman political elite, the only way to invest money was buy farms.
I think in today's day and age we're in a similar conundrum. Obviously it's more nuanced and sophisticated than where the Romans were at, but most of the people who have power today can't understand or imagine the benefit of improving the world. The market isn't magically selecting for those things because they are a large part of the market.
Humans are at best an afterthought.
My example of Rome earlier want meant to point to their political elite as a Boogeyman. I meant it more like despite their best efforts an Industrial Revolution was virtually impossible in that environment.
Funny enough having slaves and oligarchy was exactly the kind of thing that held Rome back. I mean only to imply that in todays day and age, we have our version of that same situation, and similarly there is untold prosperity forever waiting to happen until the status quo changes.
Because they were granted power, and responsibility was the other half of that equation.
This is a silly argument, Hitler was human too.
> It's ordinary people's savings and pensions
Exactly, so my pention is being used to reward unrpoductive businesses that just do damage to society.
Even then, private pension funds are a scourge indeed. State-managed PAYGO systems are far less destructive.
Beside, the distribution of economic power is heavily lopsided. Most people have close to none.
Those who have the brunt of it are setting up the system for their own benefit. Under the guise of FreeMarket™ we end up with an economy planned by the wealthy so that they can grow their fortune.
- Food => A steady state is optimal. Growth seeking directly leads to the obesity crisis
- Health => the sector should be working on planning its own obsolescence, not on growing.
- Housing => Ever increasing humanity's footprint is destructive and should be limited.
etc...
That's what it was before government intervention, at least in UK and US. Worker's organisations had employed their own doctors and managed very good, driving medical professionals wages down. Doctors associations asked governments to intervene, license their profession and used this licensing to punish doctors who would work for such organisations.
And now people see broken systems and think that even more intervention would improve things.
In today's economy power and wealth are not even close to evenly distributed.
Claiming that responsibility should be evenly distributed is therefore a highly disingenuous argument.
Please see the book Technological Slavery by Dr. David Skrbina and the books of Jacques Ellul on this matter.
No snowflake blames itself for the Moloch avalanche it creates.
But I didn't, because the money is mine to do with as I please. Just like the billionairs money is theirs to do with as they please.
- Land was the Lord's to do with as they pleased
- Slaves were the owner's to do with as they pleased
etc.. if the wealth is gathered through exploitation, I think it is appropriate to criticize how that wealth is being used. Hell, it's appropriate to just criticize the wealth, I think.
But these things are shades of gray and rarely as clear-cut as slavery. For example, let's say you're the only job in XYZ town. People aren't forced to work there, but they kinda gotta. Things are not so simple in most cases.
I do not disagree with your thesis, but Adam Neumann got paid close to $1 billion to leave WeWork. Sounds like he ran it in the most personally profitable way possible. Although, still well short of his trillionaire goal.
That is not to say that Softbank completely dropped the ball on monitoring and oversight. Under no circumstances should Neumann have been allowed to self-deal by purchasing buildings with WeWork share collateral and leasing them back to the company.
Man you just made this up. They do lose their equity and nobody lost their bank accounts.
All is well with capitalism /s
The bottom line us that these 3 businesses make money. Billions per quarter. It's coming in so fast they quite literally dont know what to do with it all.
The market is fine with billions lost on the metaverse because its a drop in the bucket. An EU fine doesn't move the needle.
Yes, Google and Facebook are ad companies, and yes they'd like to be more diverse than that, but the fact remains that ads on Google and Facebook work. People keep spending money there because it works. There's real value in efficient advertising and Google and Facebook have provided that real value.
MS already has a diverse business, from OS to Office, from Azure to Xbox, from Teams to Flight Simulator. Bing can afford to be a long-play and seems to be gaining traction.
I also cannot help but think that if this article was written in 2006 Amazon would have been the (legitimate) poster child for the point he's making. Billions spent, never profitable. But look at them now.
Of course there are failures. Of course most of the money is wasted [1]. This is not a secret , its not even a bug, its baked into the VC model. It's been obvious since forever.
The VC model is but one kind of business model, designed for a specific kind of business. And as a model it is applied to a vanishingly small number of actual businesses overall.
[1] money is not "wasted" in the sense that water can be wasted by leaving a tap on. It is spent. Salaries, infrastructure, rent, cars, food, whatever - its all "trickling down" to people or actual profitable companies. Selling shovels, and jeans, is more profitable than digging for gold, and less risky, but that one gold digger who strikes it rich keeps hope up for all the others.
The alternative to VC funding is either traditional bank finance, or boot-strapping. Incidentally neither is terribly more effective at picking winner's- its commonly reported (although I don't know how accurate) that 90% of businesses will fail within 5 years. It kinda makes sense, most ideas kinda suck.
Selling equity to raise money is the worst kind of financing. Most businesses are better off getting bank loans, or bootstrapping. Learning how yo make do, how to build profit on a shoestring, how to be efficient is a good thing.
VC money is useful for a different kind of business. One which needs significant capital, but has potential for massive returns.
I find it hard to feel sympathy for employees who go to work for a startup, get significant salaries, know the risks, and squander their salaries well enough to have nothing to show from it. In an era of a pitiful minimum wage I don't think they're the "working class".
While individual time is certainly wasted either thus model (and indeed all models) societal time is not. By trying lots of things simultaneously we save time overall.
It has ever been thus. When airplanes were invented everyone and their friend started a plane company. Innovation exploded. There was consolidation and now we have a handful. There are startups in the aviation space, but nibbling at the fringes, not aiming to be "the Boeing killer".
Cars are interesting because there's a disruptive transition coming (well, 2 actually). This opens the door to a Tesla (Not to mention a bunch of other EV startups that failed.) In the long run I expect Tesla to either get acquired into an existing manufacturer, die, or become a niche brand. The bulk of EVs will be made by VW , Toyota,GM,Ford etc .
This doesn't mean Tesla money is wasted. It showed the makers there's a market for EVs. That changes the world.
Last I checked their figures (just now) I don't think Uber is a great example. Never yet made a profit, living off capital and their VC gamblers.
Agree they did have billions of income. But it cost them MORE billions to get there. They can't (yet, if ever) be considered a successful business - at best they are potentially successful.
Alphabet, Meta and MS at least have vast profits in the present, not just potential, so they are indeed "better" businesses than Uber, as you say, and thus bad examples to make this point.
Revenue might be going up, but are they actually providing additional value to users? Or just gutting them more thoroughly?
I look at the amount of utility that Google's products provided back in 2013, and I look at how much they provide now. Can't say the improvement has been anywhere close to stock price
Or measuring the utility to advertisers on Google’s platforms in 2023 and projected into 2033, many of whom weren’t using Google ads in 2013.
Google didn’t give me individually a ton more utility (arguably less in search), but I think it did give their actual customers (advertisers) a ton more utility in aggregate.
The stock price I'd not a reflection of utility. Its a reflection of future profit.
As a user, you are not Google's customer. Their customer is the advertiser, and the utility to them is just fine. Advertising on Google and Facebook delivers measurable returns, and if that measure is positive then people continue to do it.
They're all STAGGERINGLY profitable still and the lowered workforce costs will hardly make a dent in the accounting statement.
This is all you need to know about the silliness in this article.
and now almost at $300 again. nuts. Yeah, so many people in 2022 got this wrong. I don't think Zuck was at much risk of killing his company. Meta stock keeps going up, and is one of the biggest performers on the Nasdaq by far, almost back to its old highs.
The metaverse may have been a dud and the company was fined by the EU, but so what. Instagram and Facebook are more dominant than ever, and it's an advertising juggernaut. CPMs and CPC rates at record highs due to record advertising spending. Go ahead and try to find a company that is at the perfect intersection of profits, size, market dominance, and moat like Meta...maybe Microsoft, Alphabet. Not many.
It was not just the job cuts...many companies have/had big layoffs , like during the early 2000s or 2008-2010, and did not see anywhere close to such a huge recovery that Meta saw.
The markets seemed to ignore the $410 million fine that Meta received for GDPR violations, along with the fact that European users will now have to deliberately opt-in to sharing their data
large occasional fines by the EU are bascially seen as a cost of doing business. see Alapbet, which has been fined many times.
I also wish that the status quo is different, but I actually have no idea if I'd be able to stomach what different looks like based on my current upbringing which is thoroughly enmeshed in the systems that enable this.
- The US needs Glass-Stegall back. That's the requirement that banks and brokerages must be completely separate companies. The argument for repealing Glass-Stegall was that banks were now so smart that they didn't need such severe restrictions to prevent collapse from bad investment decisions. The banks were wrong.
- Companies should only be allowed one class of voting stock. The New York Stock Exchange used to require that, back when the NYSE had real power. Allowing multiple classes of voting stock is what gives us President for Life CEOs such as Google and Facebook have.
- No stock buybacks. Illegal in the US from the 1930s to 1981. The US recently banned stock buybacks for 12 months for companies which received coronavirus funding.[1] But that was a one time thing. During periods of low interest rates, companies tended to buy back their own stock with borrowed money to prop up the stock price. This mostly benefits executives with stock options.
- Limits on complexity of corporate organization. This was a thing for utility companies until a decade or so ago. They were limited to a tree depth of 3 in ownership. This was to make regulation easier and reduce the risk of bankruptcy cascades. See "Enron".
- Utility deregulation. Regulated utilities used to be standard. They got a monopoly in exchange for regulation. Since they were allowed a fixed rate of return on investment for rate-setting purposes, they were not hugely profitable but were very stable. The argument in the 1980s for deregulation is that utilities tended to overspend on infrastructure, building about 10% more stuff than they really needed. With deregulation, that money could go to stockholders. When Pacific Gas and Electric was deregulated, the company went bankrupt in only a few years, leaving the stockholders with nothing. And consumer prices went up in deregulated states vs regulated ones.[2]
- Tax law favors debt, where interest is deductible as a business expense, over dividends, which are not deductible. This encourages taking on too much debt.
- US bankruptcy law allows "secured creditors" too much security. Bankruptcy is too easy on lenders and too hard on accidental creditors.
What we need is a return to conservative financial principles.
[1] https://smartasset.com/financial-advisor/stock-buyback-ban
[2] https://ceepr.mit.edu/deregulation-market-power-and-prices-e...
Buybacks give money to shareholders who sell. Dividends give money to shareholders who don't sell. That's a big difference.
Furthermore, the primary reason stock is worth what it is, originates from actual or potential dividends (if they stopped reinvesting or hoarding) companies (could) pay.
That money has to go somewhere. Either it's hoarded or reinvested in infrastructure or spent frivolously on sweetheart contracts to friends of corporate management. But, crucially, without dividends, none of that can be recaptured by current shareholders. In theory, if shareholders of a company wanted an actual, not virtual, dividend, a stable material return on their investment, currently they could force a change in management that would pay out a dividend. In what you propose, that's not an option.
The value of a stock without dividends is almost purely speculative: who's going to be holding the stock when the company's assets are liquidated and returned (minus liabilities) to the stockholders, and what those net assets will amount to when the company is voluntarily or involuntarily shut down—neither of which is a particularly good sign for the state of the company when that happens.
Doing away with dividends seems like it would lead to more instability: all the craziness of VC-style investing, but for public companies that are no longer early-stage growth. How could you have stable businesses or an economy when stockholders are driven, not by the promise of a share of profits this quarter or even an easily countable number of years from now, but by a share of the company's assets when the company is no longer a viable entity? How are those kinds of shareholders going to make good decisions about corporate governance?
I'm mostly on board with the essay, and the need to change things. However, getting rid of dividends (along with buybacks) without radically restructuring everything else... how does that work? How could it? What am I missing?
Interesting to model the effects of that. Buybacks tend to concentrate ownership among the shareholders that are most optimistic about the company's future. Since the only way to take your cash out is to sell, the most marginally-attached shareholders will sell, leaving only the shareholders who believe the company is worth much more in the future. This could have much more dramatic effects on stock price than is financially rational, because it decreases the liquidity of the stock and decreases the pool of people who might sell in response to rational analysis (because they already sold, and their stock is now retained by the corporation itself, which is not a disinterested party).
It also increases the ease of corporate governance but decreases the efficiency of it. Buybacks flush out the most marginally-attached shareholders, those most pessimistic about the company, and so they give company management a shareholder population that is largely on-board with company strategy and not inclined to exit, because they've already had plenty of chances to exit. But the whole point of markets is to aggregate the opinions of many independent parties and avoid groupthink. If the shareholder base is self-selecting, it's particularly vulnerable to groupthink, and by definition has a higher opinion of the company's prospects than the market as a whole.
Multiplied across thousands of stocks, that probably makes the market less efficient than without buybacks, also congruent with the declining liquidity. We don't observe declining liquidity, but much of that is because of market makers and passive investors that don't have an opinion or vested interest in the future of the stock itself.
This is incorrect. Buybacks appreciate the equity for everyone. The gains are real either way, just one (dividends) is immediately realized and is used to frequently invest in more of the stock.
The net effect is exactly the same. One delivers company capital to shareholders in direct cash, the other delivers it to them in increased ownership stakes.
The rest of your post is based on your misunderstanding that buybacks only help sellers, so I won’t dig into the details unless you’re still convinced of that.
Suppose a company has 1T market cap, 10 billion shares at $100/share, and wants to buy back 1% or 100 million shares for $10 billion. They have a cash hoard of 100 billion, and another 100 billion in other assets. What happens, ignoring stock market changes from the buy back or reaction (i.e. hypothetically, this couldn't happen, but to isolate the effects assume OTC buyback at current market price, and no public announcement)?
Before: shareholders get a share of future potential profits. To avoid adding more hypothetical numbers for dividends, I'll simply index this notional dividend stream to 1, or 100%. In parallel they have a claim on the company's assets: $20/share worth.
After: shareholders get an increased share of future potential profits: 100/99, or roughly 1% more than without the buyback. In parallel they have a claim on the company's assets, but those assets have dropped the $20/share equity by 5% to $19/share, evaporating $1/share in equity (conveniently in this example, outstanding shares and buyback dollar amount are equal). Furthermore, the company has lost 5% of its assets, and even more than that percentage of its liquid assets, that it could've used to grow the company.
What effects dominate? That depends on how investors see future investment by the company as a driver of future profits, doesn't it?
It does not serve society to have competition in negative sum games. These suggested changes would close off various silly tricks, and improve meaningful competition.
Introduce competition in the electoral process.
A couple states already changed how they vote. We have the power.
Edit: couldn't resist linking CGP Grey, my favorite youtuber
While I agree none can be fixed until Citizens United is fixed, fixing Citizens United isn’t sufficient.
I mean, it's bad that in our country we have to consider boycotting companies that donate to or support politicians/legislation which work to undermine democracy and such. This is plainly indicative of a broken system, where participating at the ballot box is insufficient to overcome corporate interests.
Taxation is another reason why buybacks are preferred over dividends: dividends are taxed as ordinary income but selling stock held for more than a year is taxed at the long term capital gains rate.
The IRA added a 1% tax to buybacks, but to equalize it fully either you'd need to reduce tax on dividends, extend the LTCG horizon past one year, or just eliminate the lower LTCG rate.
Not really any more. Dividends on stock held > 1 year are considered "qualified" dividends and are taxed at capital gains rates.
Your point remains/is even stronger: In the overwhelming majority of cases, dividends and long-term gains have been taxed similarly for the last 20 years.
And the US style of democracy, where the rules are written by the powerful, is broken and won't fix capitalism. Pity other (Euro) styles of democracy are so intolerable to the US style.
Investors wanted to buy CDOs, they want to be in VC and so forth.
Fascinating point. Out of forensic interest: Did Reagan campaign on legalizing stock buybacks? Or did Wall Street get his ear later on that one?
If you want the economy to serve the people, it must be controlled by the people.
[1] I personally would advocate 67% as the number. So the 33% capital owning class needs at least half the employees to agree that their plans are best for the company.
Closed tax loopholes? They will be sending you to Goolags next.
https://en.wikipedia.org/wiki/Mondragon_Corporation
The main issue is that such companies do not attract large investment, so they cannot really take advantage of modern capital markets. It would lead to slower productivity growth, with fewer crisis, maybe that's better, maybe not. But co-ops are not immune to spectacular failures either (see Fagor).
The do not attract large investment, but they can also be an effective solution to a lack of capital. Mondragon (linked above) was a collective grassroots venture in post-war isolated Spain, were regular workers got together to bootstrap employment for themselves. Oddly enough, led by a young Catholic priest.
It doesn't really fit cleanly into the Capitalism vs Communism worldview. On the one hand, it is definitely about collectivism and labour rights. On the other hand, a co-op is a lot like a modern neo-liberal startup, just with a large and flexible group of founders, where the shareholders and the most productive workers are one and the same.
Again, the piece that doesn't fit nicely: investors. That's the main weakness. Bootstrapped by design. Successful members of society cannot help others accelerate their ventures. They just use their wealth to aggressively consume, or just save a lot. Neither of which is great for efficiently improving the world.
Hard to tell if this is a better model, might be slow but sustainable. The promise of equitably distributed rewards (as in Communism), while still having individual incentives for productivity (as in Capitalism), is rather attractive conceptually at least.
2. This has nothing to do with communism. Communism advocates for the collective ownership of the means of production, i.e. the entire society owns all means of production. Here, every company is still owned by a limited number of people, and there are markets and competition. People are free to join whichever company that will take them. I am simply proposing a fix to imho the worst feature of capitalism.
[1] inspired by anarcho-syndacalism
There's often:
* Minimum ratios of owner workers (never 100%, often more like 30%)
* Maximum difference between lowest and highest salaries (they often have difficulties offering competitive salaries to executives).
* Limits on how much of the profits are reinvested or shared as dividends.
* What happens during crisis times: regulated salary reductions, more executive control...
There can be configurations that can work very well, with a good compromise between worker ownership, openness to investment and global competitiveness.
It's always been niche though. In reality (from personal experience) if the first few founders are able to get minimal capital, it makes much more sense to hire instead of get more co-founders. Even if you can't, it tends to be preferable to keep the founders pool quite small.
Individual shareholder-hires can bring in little capital, have a disproportionate influence on how things are done and are hard to get rid of if things don't work out or if the situation changes (which always does frequently in a startup). There's a reason why this has only been done seriously when workers were desperate to revive an economy, or when they are being exploited by monopolistic corporations. Collective ownership tends to be very hard to organize at the beginning and can be quite inflexible due to the inevitable internal politics. When things are bad, everyone tends to be more aligned towards making things better together. And it only tends to scale when this culture becomes deeply ingrained in the organization.
It can get a bit cultish, Mondragon has their own (rather good) university where they train the type of employees they need (mostly talented hardware engineers, but many other degrees too) and educate them on their culture early. It's just a normal university, you can go anywhere afterwards, but you do end up quite connected to their network in practice.
More info: https://www.nytimes.com/2020/12/29/business/cooperatives-bas...
Repaying labor with a relative pittance due to growth and simultaneously lowering taxes, just to hoard capital at an ever increasingly more insane rate, while of course dismantling antitrust, will obviously just concentrate capital.
Exponentially concentrated capital will need to chase exponential returns…
The naive folly of the efficient market hypothesis is its childishly simplified view of the world; a given in a world of economists treating their social sciences as if it were as bound to nature as physics.
Although one would’ve hoped politicians weren’t so utterly and devastatingly easy to buy, but they clearly went a long with this insanity.
The idiocy of crypto is but a blip compared to the scam run by capital over the last 50 years.
It’s simple, just redistribute society’s gains, jfc…
Lots of people lose money in markets by betting on bad ideas, or companies that are obfuscating their underlying weaknesses.
That's part of the purpose markets serve: Moving money from things that suck value into things that add value. If the OP knows better than the market, hopefully they're shorting Facebook stock and, when that plays out, they'll invest their gains in something new that produces real value.
Of course, markets can remain irrational longer than it takes to write an embittered blog post...
I'm relatively sanguine that Google and Uber will be replaced by something better (something that's not a con game), and that the people who invest in garbage will end up losing to newer, more agile players. That's how it's always seemed to me when you look at any given 5-10 year horizon. The short term is always frothy.
I almost never invest in tech companies... except if I'm looking to make a few quick bucks on some new hype (e.g. I bought Google with a 2-week horizon right after Microsoft announced Bing's AI bot, and after Google took a huge hit because the market overreacted; turned and sold it for a 10% profit). (The exception for me is medical tech which I'm willing to take several-years-long shots on). I sit on real estate and utilities and the odd manufacturer or retailer with a history of increasing dividends, and watch the wilds of the NASDAQ with a daily mixture of jealousy and schadenfreude - because I know my own risk tolerance.
Markets are made of people. Companies are made of people. Poor incentives and deception do indeed lead to catastrophic losses and inefficiencies. Corrections are made. Fools and their money are parted.
I don't have a hatred of criticism of any sort. I do however think there's a smell when someone walks away after losing at the table and complains about the game.
The market is a manmade system that we can control by regulation, and organizing any controllable system in such a way that it generates a lot of waste before self-correcting is not necessary. Real people become aggravated when corrections happen, e.g. immigrants on a worker visa, people who moved their entire lives, people who found it hard to find the very jobs that they lost, etc. You can’t act surprised that people complain because they are on the receiving end of these corrections (“market losers” to you, right?) as if they are supposed to just put up with bullshit that was not even necessary to begin with.
Ascribing such levels of malice out of the gate is a radicalized, religious-like, conspiratorial response to things one disagrees with. It serves no purpose except to attempt to shut down debate. In fact it has, as I have no interest in debating someone who feigns to know my intentions and believes I'm personally responsible for their problems and the state of the world.
No its a conolaint that markets are failing. Market failure is a real term economists use tondescribe real problems.
These massive price swings have nothing to do with how the company is performing and everything to do with macro levers the government pulls. It feels like a big game of financial engineering rather than investing in a profit making enterprise.
As for private sector stupidity the antidote is stronger government and stronger institutions that can counter balance people making dumb decisions, not an attempt to regulate or shame away dumb decisions. The only problem is that the private sector has become too fetishised.
This is hard to achieve without growth.
Degrowth is a bad idea invented by the British to make it look like they collapsed their economy on purpose instead of accidentally. Basically, you always need growth because that's what combats entropy.
What I meant by my comment initially is that in an economy where population is increasing rapidly one can just use growth in economic activity as a pretty good proxy for prosperity.
Classic case of correlation!= causation though.
Adam Neumann is the VC industry, he is just cooler and better-looking than anybody on Sand Hill Road.
Every VC thinks $industry needs disrupting, for the good of the consumer. What's left unsaid is that after the Soviet-scale subsidies run out, the disruptor will inevitably become as turgid and anti-consumer as the incumbent it sought to replace.
This is similar to the sentiment of Bullshit Jobs as posted here yesterday. There is a strong incentive within the modern market economy to value perception over reality. This often involves hiring people to look like they're doing something without any consideration as to whether they're doing anything valuable.
It's insane to me that with the threat of climate change looming, the US spent trillions on foreign wars. In the aftermath of 2008, when money was free we spent trillions more on what? More efficient ways to sell shit people didn't need or couldn't afford?
We had two decades and trillions upon trillions of dollars to improve our system in so many ways and it was almost entirely squandered. Even the most politically and financially ignorant Americans can feel how crappy our system has been for the last two decades.
The question is, what will replace it? A human-centric economy that invests money into physical and human infrastructure? Or the meme of neo-feudalism with people working in Amazon cages and paying for Domino's pizza in installments.
Oh, it went to exactly the intended place: propping up asset prices, corporate profits, and the stock market. Absolutely nothing was an accident.
Let's recognize that in not-so-small parts of the world, the Internet is still on the path to becoming ubiquitous, reliable, and affordable.
Why? Is Apple just a serious company in comparison? At least, with Apple I get the impression that some of their products (e.g. mbp) are leaps and bounds ahead of the competition. I can't say the same for any Google or Facebook product
Just one exhibit to underline my point: https://news.ycombinator.com/item?id=34886732
Apple also does not slaughter golden cows, they execute with long term vision and they slowly agressive with competitors not users.
Also haven’t laid off.
So really, they are in a category of their own.
Ironically that part of the racket - everyone thinks they should be performing better in the future, aka growth. But objectively almost every bet for unlocking money failed (commerce, libra, web3, messenger, motors, real estate, sports, news) - the ones that didn’t were forced on them by Tiktok showing them how it is done.
It’s a badly run business, yes one that has a money printer, but badly run nevertheless
I can't help but this sentence got me triggered. Does the author honestly believe that his article affected Meta price?
"Responded in kind" means "moved in parallel with" | "with similar actions or in an equivalent manner" | etc.
The author doesn't claim the market acted because of their article, they mean that the market acted as though it also believed MZ was going to tank Meta.
I can see the confusion if that's your absolute first parsing of an unfamilar English turn of phrase.
For better of worse the language is riddled with such things and they can be very locale centric.
That being said, it's a weird thing to get hung up on.
It really speaks to a few things: 1) how irrational apparently intelligent people can be, 2) the importance of salemanship, and 3) that the value of capital to those who have a lot of it is much less than its value to those who have little, and so they are more willing to take bets such as those described.
It's an unreliable anecdata to hinge your main point on that, it would only make sense if its more widely noted to the extent that its share is dropping significantly and being regularly reported in general media.
Claim 1: Just chasing the growth, for its own sake devoiding sustainability is bad.
> Greed is how humans function, like it or not.
Claim 2: Good businesses are left uncared, for the sake of lusturous, suicidal businesses.
> Is "good business" a polished term for inefficiency. If so, inefficiency will be severely punished.
Claim 3: mass layoffs are bad.
> The "highly changing" large scale businesses are bound to adapt to the situations rapidly.
Claim 4: Facebook investing in metaverse, crypto boom.
> Certain investments payoff only after a certain inflection point. Doesn't mean those investments are worthless.
Tech's Reckoning; The Scum Economy; Elon's Tragic Kingdom
Fire Mark Zuckerberg; The Uncanny Valley; Social Media Is Dying
Degenerative AI; Google Should Fire Sundar Pichai
Looks like man found his niche :)
Doesn't the "fault" lie within human nature? The desire for more? If that is true, then why expect an economic system to have a different goal?
[0] https://bemorewithless.com/the-story-of-the-mexican-fisherma...
When you talk about venture capitalists, you often are referring to a bank associated with a venture capitalist. Everything in business after all, incentive wise, trickles down from the banking system.
We can't change the way we do business when the incentives are fixed, and banking in general is only marginally overseen by government; most of the regulation and praxis is done by the Fed which is not government; but a private institution.
This point seems to negate the rest of the essay. It's true that nothing lasts forever, that includes human labour...
>When I wrote in October that Mark Zuckerberg was going to kill his company, the street responded in kind, savaging Meta’s stock.
He seems a bit delusional.
It picks on the likes of FB, Google,Uber, Tesla and uses that to justify a whole host of things like he's the only sane one and the rest of the market is dumb.
FB, Google are money printing machines that will continue for years.
>Uber has not made a profit from its businesses
This is just a downright lie. Also, uber is still experiencing high revenue growth but it's costs have not been rising for years. Maybe investors can follow a trend line and understand Uber's not going anywhere?
>They had a net loss of 1.21 billion last quarter, yet the street fell over itself to praise the company because “gross bookings grew 19% year-over-year”
This quote seems especially dishonest. Ubers revenue grew almost 90% YoY... and he uses the 19% bookings as a reason investors liked it?? It's handpicked information to match his points, not reality. He must have searched really hard for the dumb metric.
It feels like the death throes of capitalism.
it's tiresome to see it so frequently.
Not much difference from amount_to_steal-driven-country-"development"
There are things like "Doughnut Economics", but IMHO that seems a bit too much the other way (almost communist-like), and I'm not really sure there's any practical chance of going in that direction anyway.
No.. that "responded" is far too causative. you observed a state of being which others observed and acted on independently: your writing is gold but the street did not "respond" to your writing. That's chutzpah.
If your meaning is "when the market saw what I saw, the market responded" that's fine. You don't define the market.