I’m not against wealthy people, and America has always had a Tycoon class…
But allowing a single person to go from $20B to $130B in assets in 10 years feels like a pretty obvious policy failure.
But allowing a single person to go from $20B to $130B in assets in 10 years feels like a pretty obvious policy failure.
Concentrated wealth doesn’t circulate well, which leads to inflation.
I thought we all had some economic chops on this forum?
I was excited by all new green energy startups due to Biden Admin's policies (BIL, IRA, etc). Oh well...
I know you know all this; I'm just compelled to repeatedly point out the obvious.
https://en.m.wikipedia.org/wiki/Velocity_of_money
Pretty ironic that you'd call out economic chops when this is a very basic and well understood principle. Perhaps be more cautious and less confident in your presuppositions going forward.
The fact that you’re the only one to point it out makes me think that I have put too much faith here.
It’s patently obvious that less circulation is a depressive force on economic activity.
A system that allows this kind of extreme wealth accumulation is quite fundamentally at odds with democracy because extreme wealth can be and is in practice used to influence politics in a way that undermines democracy.
Some people might not care about that, but if your goal is improving the outcomes of the largest number of people, then pretty much everything else is secondary to having a functioning democracy.
1. The amount wealth actually influences politics is hard to measure but likely much lower than most people assume. Trump was outspent significantly both times he won. Bloomberg dropped $1B in a couple months and won nowhere but American Somoa. Probably the two biggest boogiemen, Koch and Soros, have spent billions over the years on their causes, and the present administration and general overton window is actually something neither of them like! The nonelected king-makers in American and EU politics are not actually wealthy people at all, just those with a lot of accumulated political capital, for instance, Jim Clyburn who single-handedly gave the 2020 nomination to Biden.
2. The amount that it takes to finance initiatives is much lower than centibillionaire level. Is the original $20B OP mentioned not sufficient to finance some ballot initiative? Why is it the increase to $130B that causes concern? The truth is that even a wealthy non-billionaire can easily do that, or bankroll someone's run for congress, or fund a partisan thinktank. The maximum level of wealth you'd have to set your ban-limit at would be problematically low.
And when they issue more, then this initial offering again (of new stock).
The interesting thing to me isn't this community specifically, it's that all the prosperity that we (here anyways, for the most part) are enjoying, all the technological achievements, the lifting of billions of people from poverty ( https://ourworldindata.org/extreme-poverty-in-brief ), elimination of many diseases, increased lifespan, were mostly achieved under some version of capitalism.
It's not that there aren't problems (lots) and it's not that the widening gap between the very rich and everyone else isn't a concern but the simple narratives are also wrong.
If people can't profit off of things they won't innovate, and even if they did there is no market if people can't profit off it.
patently absurd. no inventions before capitalism?
This is not to say it's his fault. That's how our laws are written. But that is the point of OP. That our policies should be forcing him to sell and put that money back into the economy.
The only time money actually flows to the company is when stock is initially offered.
A company might be valued billions in the stock market, but this is not money that the company can work with.
> A company might be valued billions in the stock market, but this is not money that the company can work with.
Both of these statements are demonstrably false. Why do you think companies go public (which is quite troublesome) in the first place? Just vanity to see the billions they don't have access to? Or to allow investors to make money without helping the company in any way? It's clear why investors would come to a purely speculative market with no intrinsic value (e.g. crypto) but it's unclear why a company would offer their shares to be traded like a shitcoin.
Being public is the instrument for the company first and foremost. There's the IPO, then companies continuously issue and buyback stocks depending on the cashflow. Look e.g. at the graph of Tesla's outstanding shares [1]. Then companies also sell bonds or borrow money using their own stock as the collateral. The bigger valuation you have the more capital you have access to.
Not to mention that even in the OP's simplistic view of the market there is an actual "new value" aspect: if you buy stocks from a VC or a founder, they use it to fund the next startup.
[1] https://www.macrotrends.net/stocks/charts/TSLA/tesla/shares-...
Fair point about using stock as collateral though.
It wouldn't be called "Initial Public Offering" if it was the "Only Public Offering" like you suggest.
When I say initial offering, I mean whenever stock is newly (initially) issued - whether that's in IPO, after an IPO or also in a private offering. Not sure what the correct term would be.
My point was, money essentially only flows into the company at that point. E.g. company issues stock, investor A buys it.
When investor A sells to investor B, money only flows between these two investors. No money flows to the company.
Unless - as you have pointed out - company assumes the role of an investor in its own stock.
But the fact alone that a stock price is rising as such does not generate any new capital to work with for the company. And that is a point many people seem to misunderstand.
When Microsoft is worth 3.76 trillion USD, that doesn't mean that Microsoft has 3.76 trillion USD it can work with. That was the point I was trying to make.
The above is a mere byproduct of the market working. The market "works" by giving companies and entrepreneurs access to capital, the rest is a derivative of that. Otherwise you can as well trade postal stamps rather than stocks.
Either way the economy is not zero sum game where there's a fixed amount of money. If the stock market grows there is more money. That money reflects future expectations discounted to today but it's still more money.
On the original question, how does Ballmer being very wealthy impacts the rest of us, there is no easy answer. It depends on what he does with his money. It can be neutral, positive, or negative. The sentiment though seems to be mostly driven by jealousy and a sense of unfairness. It's in fashion these days (in some circles) to hate the "rich" (which is basically anyone better off than yourself more or less).
It would be at least as accurate to say it's as close as money can get to not existing at all. Policy should probably not be "forcing" people to realize gains that, in many cases (maybe not MS, but policy has to work for everyone), may as well be Monopoly money.
send me your numbers then edgelord... o wait theyre not just numbers now that Ive asked for some. Go read up on futures markets - they were invented to service a legitimate, real world problem - yes deriviative markets of today have become abstract but its no as black and white as capitalists vs us.
Realistically large companies don't do this. They put their money in hedge funds, which are much less risk averse, which would assume that they are more actively putting the money into the economy.
The value of Microsoft exploded. It seems to me that someone's compensation being directly linked to the value they helped create is exactly how you want people compensated.
The whole point of capitalism is to put chunks of economy under control of capable people. If they managed to get rich then on average they're much better at that than the general population.
This is not an unpleasant side-effect, this is the main reason the whole system exists, remove it and it's not capitalism anymore.
What does this even mean? Pension funds have a lot of board seats? I only see one person from Blackrock on their board right now.
Why would it be bad for a pension fund to have influence on running a company? Are their incentives somehow mis-aligned with other investors?
The Board members are appointed by the Intel Corporate Governance & Nominating Committee, the chair of the committee is Barbara G. Novick, co-founder of BlackRock. The board is de-facto run by the trio of BlackRock, Vanguard and State Street, smaller investors follow their lead.
> Why would it be bad for a pension fund to have influence on running a company? Are their incentives somehow mis-aligned with other investors?
Alignment of interest is not magical: it's necessary to achieve results but it isn't sufficient. You need actual talents, vision, execution to make things happen, not just interest.
Pension funds have no vision beyond "stock go up", no strategy other than "more revenue, less costs". In the end they are roughly as good at running things as are socialist states: economy is owned by everyone so no one in particular, run by people who never proved that can run a lemonade stand. In fact a successful socialist state (if they ever existed) would be indistinguishable from a huge pension fund that swallowed the whole economy.
Thanks I learned something new today. Is Intel unique or is it common? Does Novick have this position due to pension funds specifically, or index funds in general? AIUI index funds own large stakes in many public companies so if this is true, they are all effectively run by Blackrock and Vanguard (or should be).
> You need actual talents, vision, execution to make things happen, not just interest. Pension funds have no vision beyond "stock go up", no strategy other than "more revenue, less costs".
As opposed to other investors? Outside of founder-owners you've described 99% of retail and institutional investors. Why do you believe pension funds specifically lack "talent"? As long as there is competitive pressure in every market, it doesn't matter. Some of them will be right and actually deliver better products, services, and profits.
> In fact a successful socialist state (if they ever existed) would be indistinguishable from a huge pension fund that swallowed the whole economy.
I've long believed that's the only way to make the welfare state numbers (in any country) work in the long run. Not the whole economy but like substantial proportions of the stock market. You can't tax labor to fund retirees when capital captures most of the returns and there are fewer and fewer workers. And you can't renege on promises already made to people who have been contributing throughout their careers. This can work: sovereign wealth funds are an example. Rising productivity is an updraft that pension funds should capture.
I'm not a market guru, just happen to know about Intel because I worked there between 2009 and 2015 and it was sad for me personally to witness the downfall. The company started to rot around 2012, but the stock prices shot up and kept rising for 8 years. The strategy was "higher CPU price, less R&D, less people budget, no risky bets like mobile", this drove the earnings up to the pleasure of shareholders. You can't even call this strategy "shortsighted", it's "medium-sighted" because of the huge momentum that took years to dissipate, but the company's fate was sealed then. I don't know details of what happened to Boeing but suspect it was something similar.
> AIUI index funds own large stakes in many public companies so if this is true, they are all effectively run by Blackrock and Vanguard (or should be).
They almost never have the majority so control is determined by the presence of other figures which smaller investors could follow during the vote. A founder even with a partial control is often enough to steer it. When there's no one left but the funds they run the show.
> As opposed to other investors? Outside of founder-owners you've described 99% of retail and institutional investors.
Well first of all in this thread we are discussing precisely the question of how to redistribute the shares of the founder. OP says that the "policy" should have taken them away. "And who to give them?" I ask.
Second, I don't think 99% of investors (measured by volume of investment) have no strategy.
> Why do you believe pension funds specifically lack "talent"?
Because they're not backed by anyone in particular. Talent is always risky, systems that try to please millions of stakeholders are inherently risk-averse.
> I've long believed that's the only way to make the welfare state numbers (in any country) work in the long run.
I do realize many people think like that and that's why it's so scary for me. I don't believe this system could work.
thats some rot! they should teach other ceos how to ruin a company into the number one spot lol
Who do you think generated that excess 110 billion? Ballmer's advanced managerial capabilities? Sure "the market" might have valued equity more, but that's still the policy failure. Saying that "this is how this works" is silly. It could just as well work some other way.
The only way for your "policy" to "prevent" is to redistribute the control to someone else, usually bureaucrats. And I, again, strongly believe that it's better for businesses to be controlled by entrepreneurs and not by bureaucrats.