Comment by caseyy | Hacker News Reader

Comment by caseyy | Hacker News Reader

We should let failing businesses fail. Everyone would have learned their lessons a long time ago and we would have less corporate greed/corpo-political corruption.

And people should be angry at them for failing and causing economic disruption (assuming it would even be as bad as prophets of doom say). Their suffering should be publicly attached to its harbingers — greedy and incompetent executives.

People responsible and accountable for the current situation would face natural consequences of their actions.

But of course, I don’t think it will happen. We bought into the delusion that executives and big business can do no wrong, and that they somehow shouldn’t face the results of their actions. Their employees, stakeholders, and the broader economy just keep being “affected by difficult times”.

But neither these companies would be “difficult times” nor subprime mortgage lenders and CRA’s were “difficult times”. They are and were just groups of greedy executive sociopaths getting a free ride off society, knowing full well the negative externalities of their actions.

We keep letting weeds grow in our proverbial garden unchecked and then say “if we take out the weeds then there will be no more garden”. Well guess how that happened, and guess what’s the only way to get a sustainable garden back. Except with weeds, dealing with them requires action, effort. With large corrupt businesses, we don’t need to do anything — just allow natural consequences.

> We should let failing businesses fail. Everyone would have learned their lessons a long time ago and we would have less corporate greed/corpo-political corruption

In most cases I agree, but for extremely CapEx heavy industries, this is a death sentence.

For example, the entire semiconductor industry in Taiwan, South Korea, and Japan would not exist without industrial strategy and capital provided by local and central government.

In fact, unlike in the US and Europe, anti-trust never had significant mindshare in Asian economies, and much of the economy in these countries are largely split among a couple dozen conglomerates or holding companies.

This is the model that China is using, as it was Taiwan, Japan, and South Korea that played the largest role in making China a multi-trillion economy by investing in China decades before the US and the rest of the West began investing in the early 2000s.

A purely profit driven incentive structure is diametrically opposed to commodification (which is the ultimate form of production at scale) because the margins pressures would be too severe.

This is exactly what caused the entire semiconductor fabrication industry to collapse in the US in the 2000s-2010s, while Asian countries continued to spend tens of billions subsidizing a handful of conglomerates that represented these industries.

These companies exist as capitalist organizations, they don’t build planes and chips out of patriotic noblesse, they do it to turn a profit. In such a system, failed companies go out of business. It really is that simple, anything else leads to bailouts that socialize losses for companies that privatize profits.

If they’re so important, then they should be nationalized.

Nationalization is not ideal because the operation of SOEs can be tainted by the whims of political incentives instead of operational incentives.

There is a reason why formally socialist China and India are trying to develop private sector players in these fields - a private corporation has the ability to be much more nimble around hiring and capital allocation unlike an SOE.

Also, your argument does not challenge my point how Taiwan, Japan, and South Korea leverage massive conglomerates instead of SOEs or small businesses to cement their lead in the Semiconductor Industry.

> There is a reason why formally socialist China and India are trying to develop private sector players in these fields - a private corporation has the ability to be much more nimble around hiring and capital allocation unlike an SOE.

Are they? After Chinese private tech companies got too big, they reigned them in and made them closer to the state than ever. I'd love to see actual proof that China is really lessening it's involvement in companies, because I haven't seen such a trend in a significant manner.

> Also, your argument does not challenge my point how Taiwan, Japan, and South Korea leverage massive conglomerates instead of SOEs or small businesses to cement their lead in the Semiconductor Industry.

I happen to be based in Korea and be familiar with the insides of the conglomerates.

None of the conglomerate subsidiaries have a monopoly in any sector or country like, for example, Google does in ads and search, or Intel did in CPUs for a decade or so, with >80% market shares.

Hyundai Auto is kind of getting there domestically, but that's it, and it's the exception plus the domestic market is only a small part of their revenue.

Similarly, the overwhelming majority of the subsidiaries are not "too big to fail". During the IMF crisis in the late 90s and in its aftermath, several conglomerates failed. As a result, to this day, the financials of the subsidiaries are not particularly intertwined with each other. Sure, they sometimes give each other contracts (why wouldn't you), but that's always just a small part. They're run very independently. And it still happens that they "fail", or at least do poorly enough that the conglomerate wants to get rid of them, in which case there's usually a buyer looking to snap it up and turn things around.

The 90s Asian economic crisis was when we should have learned that the greedy Western speculative investment practices do not work without public bailouts. And yet somehow we all said “Korea is just not western enough” at that time.

What’s the excuse now, I wonder. West is not western enough? America not American enough? Is it that it’s not been made great again yet? No, our economy collapsing is the immigrants fault! Or maybe it’s the far right! It could be anything and anyone, so long as it’s not the unethical capitalism. How dare I even suggest that capitalism can be anything but perfect. Maybe I’m the problem.

This the great American distraction. In reality, it is just a number of self-serving executives grifting society. Parasites so attached to the host that it fears removing them. If we just appease the parasites this one more time, do one more bailout, surely things will only get better, right?

Dafuq?

All I'm saying is, if Samsung Electronics (SK), SK Hynix (SK), TSMC (Taiwan), UMC (Taiwan), PSMC (Taiwan), Nikon (Japan), and Canon (Japan) can remain private sector conglomerates that are subsidized by public financing, then why can't Intel, Micron, etc?

To this day, state-owned banks like KDB Bank (SK), EXIM ROC (Taiwan), DBJ (Japan), and JFC (Japan) continue to furnish a significant amount of capital to a handful of private sector players no matter what at 0.8-1% rates when market rate is around 1.5-2%.

Why shouldn't the US also provide similar preferential financing to private sector players?

I think American capitalist doctrine shoots itself in the foot here. Shareholder return above all else means that most of that public money wouldn't be used to develop corporate infrastructure or capability. It would probably disappear into sick projects and dividends. Companies don't want to develop liabilities that they'll have to maintain after the public money dries up.

This "capitalist doctrine" of shareholder return is alive and well in Japan, South Korea, and Taiwan. Take a look at KOPSI or Nikkei sometime.

The main difference is the government steps in to subsidize (or "bail out") private sector enterprises, and continues to provide preferential treatment for large conglomerates at the expense of SMEs.

Industries like semiconductors and aerospace are very low margin, which makes commodified production extremely expensive because you are operating barely above break-even.

Unlike the countries listed above, the US did not provide similar subsidizes in the 1990s-2010s for these industries, which is what lead to the collapse of the semiconductor industry in the US by the 2010s.

> Are they? After Chinese private tech companies got too big, they reigned them in and made them closer to the state than ever. I'd love to see actual proof that China is really lessening it's involvement in companies, because I haven't seen such a trend in a significant manner

I'm only talking about the semiconductor industry, and yes, the China at trying to develop a private sector in the entire Semiconductor supply chain via the Big Fund [0].

While the capital provided is coming from SOEs, the actual ownership and entities are privately owned.

I recommend reading "State Capitalism: How the Return of Statism Is Transforming the World" by Joshua Kurlantzick if you want to dig deeper into this - https://www.cfr.org/sites/default/files/State%20Capitalism%2...

> None of the conglomerate subsidiaries have a monopoly in any sector or country like, for example, Google does in ads and search, or Intel did in CPUs for a decade or so, with >80% market shares

Again, I am specifically talking about the Semiconductor industry.

For processor fabrication, Samsung is the primary (like Intel in the US)

For memory fabrication, SK Hynix is the primary (like Micron in the US)

For packaging/OSAT, Hana Micron is the primary (like Micron in the US).

All these entities have historically gotten land and government loans at very marginal prices [1], and are parts of historically prominent chaebols (eg. Samsung Group, SK Group) and continue to gain subsidizes to this day [2].

The key linchpin for financing in the semiconductor space in South Korea is the Korea Development Bank, who is providing 0.8%-1% loans to "established businesses" in the semiconductor industry.

This is similar to the CHIPS Act, yet last I checked, Samsung Group and SK Group remain private sector conglomerates.

> They're run very independently.

Yet the bulk of financing in the semiconductor industry always came from state-owned KDB Bank and lent to basically 2 conglomerates and their vendors, and land acquisition was simplified by providing access to land and financing at marginal rates in clusters like Gumi and Yongin.

You cannot deny that the bulk of these funds do simply go to a handful of "too big to fail" conglomerates.

This is the exact same model Taiwan and Japan followed, and what China and India are starting to do, and imo, this is the same model we need to follow in the US as well for our semiconductor industry.

[0] - https://www.reuters.com/technology/china-sets-up-475-bln-sta...

[1] - https://archives.kdischool.ac.kr/bitstream/11125/29891/1/The...

[2] - https://www.wsj.com/tech/south-korea-unveils-19-billion-pack...

The star of this article, as well as the main target of the comment you were replying to, is Boeing, so forgive me for interpreting it as a broader point than just semiconductors, especially since you named conglomerates which have dozens of subsidiaries in orthogonal industries.

> I'm only talking about the semiconductor industry, and yes, the China at trying to develop a private sector in the entire Semiconductor supply chain via the Big Fund [0].

Interesting! Even then, I can see that only lasting until they get semi-succesful, just like Tencent et. al.

Your main point seems to boil down to "subsidizing semiconductors makes sense", and I think you're absolutely right there! But I don't see many here argue against that. It doesn't contradict the message of the first comment you replied to: "We should let failing businesses fail. Everyone would have learned their lessons a long time ago and we would have less corporate greed/corpo-political corruption". Both can be true at the same time.

One note though, borrowing from your other reply:

> This "capitalist doctrine" of shareholder return is alive and well in Japan, South Korea, and Taiwan. Take a look at KOPSI or Nikkei sometime.

The KOSPI is generally seen both by domestic as well as international investors as a complete joke, and a big reason behind it is in fact the main argument the parent comment was arguing for; unlike the US, shareholder returns are not put above all else by the conglomerate subsidiaries. Investors don't like this, and so see the market as completely unreliable.

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