The IPO is dying – Marc Andreessen explains why
vox.com
vox.com
I've got enormous respect for them, too, but I'm beginning to think that the breadth and depth of expertise and foresight they display shouldn't be taken too seriously.
and so does being at the nexus of the tech industry and seeing the entire ecosystem from the inside-out, "behind the curtain" so to speak. they have a lot of insider information, not the least of which is basically every single pitch that comes across every other VC's desk in town, and the actual financial health of funded companies operating in the marketplace. they all share information, that's why they don't sign NDAs.
We have the meme that a great programmer is 10x better than a lacking peer. I think that is the absolute maximum upper bound on how much better someone can be, and that is in a limited, specific pursuit.
When it comes to predicting the future shape of society, we're talking about the average of many, many disciplines- not a discrete thing like programming ability. So I really think at best it'd be like a 2x-3x factor of improvement.
And with something as difficult as understanding the future, 2-3x isn't much, because you're multiplying a standard ability of near 0.
What kind of evidence could you ever collect for this statement?
Nope nope nope. Money does not make you instantly smarter than everyone else.
Not sure why this is my craw... but everytime I see andreessen mentioned I always end up thinking of the crazy "Snowden is a traitor" bit. ah well.
In my experience, people who have done actual, rigorous firsthand research usually keep quiet about it unless they are trying to alter the general public opinion, in which case they'll throw out the minimum amount of information necessary to give credence to their unfounded and self-serving speculation. Why? Because solid, accurate information is very valuable in business, and why give it to your competitors for free?
He actually went as far as to tell investors beware of investors not from the valley. So people don't steal in the valley as they do anywhere else?
Google's a great example of that. They have made the world enormously better, and profited greatly thereby. Their profit is a small fraction of the value they've created. And that's why they won. Their competitors got greedy, and wanted a much bigger share of the total value created.
I feel like he alluded to critiques that have been handled with far more depth by economists, but he was talking in a medium that doesn't really permit much more than a shallow, abbreviated treatment.
> it strikes me more as the view that is convenient for him to have
Some of the economists pushing the second critique Marc uses, that recent data doesn't line up with Piketty's model, aren't just complaining out of convenience or self-interest.
Peter H. Lindert writes in the NBER review "Making the Most of Capital in the 21st Century,"[1] "Oddly, however, for the twentieth century trends that he and his collaborators have documented so well, the relevance of the wealth/income and capital/income ratios for the income distribution is less compelling. Across countries, the levels and movements of this ratio do not correlate well with those in income inequality."
Before dismissing Lindert as a right-wing partisan, check out some of Lindert's other work, where he argues that social programs don't have as large an impact on GDP as most people claim,[2] or his arguments in favor of progressive taxation.[3] [4]
Matt Rognline also has strong critiques of Piketty's reasoning and data,[5] even while emphasizing that he believes inequality is still a hugely important concern.
It's possible to worry about Piketty regardless of what's in your wallet.
Regardless, even if Andreessen's motivations were suspect, it doesn't actually tell you anything about the truth or falsity of his claims. "Bad faith" isn't sufficient to make an argument invalid, anymore than good intentions can make something true. Andreessen and these economists' reasoning might be poor, or Piketty might be able to salvage his model by convincing everyone that recent trends really are an aberration. More analysis will be useful to be sure. But questions about motivations or who is arguing in good faith or out of self-interest won't really have any impact on the outcome of those discussions.
[1] Sadly, gated: http://www.nber.org/papers/w20232 [2] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=372842 [3] http://www.amazon.com/Growing-Public-Spending-Economic-Eight... [4] http://www.economist.com/node/2553322 [5] http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf
Sure. I think professors duking it out in their field of expertise is a big part of how human knowledge advances. And I love it when people with deep experience give their take on things within that realm. Andreessen on Piketty is neither.
> Regardless, even if Andreessen's motivations were suspect, it doesn't actually tell you anything about the truth or falsity of his claims.
That's both wrong and irrelevant. Statistically, what people will find convenient or profitable to believe tells me a fair bit about what they actually believe. And therefore, the average correctness of their claims in those areas.
It's irrelevant because although that's a good rule to apply in debate or in formal analysis of an argument, that's not what's going on here for me. Full analysis of an argument as complex as this is a lot of work, and that work has to be earned by the speaker. Andreessen, of course, understands this: A16Z throws away pitches every day without granting them the work of formally analyzing their arguments. They don't have the time for that, so they employ heuristics like, "not an expert in the domain."
Section 6-7 of the paper are most relevant. Section 6 analyzes the question of whether SOX is causing a decrease in IPO's using estimations of SOX compliance costs. It concludes that: "[w]e find the effect of paying the compliance cost on the profitability for small firms to be limited." They also look at whether SOX compliance is driving U.S. companies to other countries that don't have such a regulatory regime: "[i]f SOX is an important reason for why companies, especially small companies, are not listing in the U.S., we might observe many U.S. companies going public abroad." They do not find that effect to exist.
They present the alternative hypothesis: that there is an increasing benefit to being part of a large firm (being acquired via M&A) than there is to being a small, independent public firm (doing an IPO). They analyze this hypothesis in section 7, by looking at the post-IPO behavior of companies. They hypothesize that if the burden of regulation is the driving force, we might see many companies go private after IPO-ing. Alternative, if it's the increased advantages of scale, we will see companies be acquired post-IPO. They find evidence of an increasing number of companies being acquired within three years of an IPO.
They conclude: "We posit that there has been a fundamental change in many sectors of the economy whereby the importance of bringing products to market quickly has increased. This hypothesized change has resulted in lower profits for independent small companies relative to the potential profits generated as part of a larger organization that can realize economies of scope and rapidly expand production. If this explanation is correct, fewer firms are going public and staying independent because value is being created in a sale to a strategic buyer in the same or related industry."
Doesn't take into account branding, sales, and marketing of a new organization which are always able to drive business purchases. Even in face of a formidable competitor.
Of course if you want to look at things at a point in time you could also be correct. But roll back to when Cisco started and see if there were companies that also had "one of the world's most powerful enterprise sales operations" that lost out to someone else. Like Cisco.
So while you could be correct it's also possible that "many networking companies sell to Cisco," because it's a "pay window".
After all wouldn't that be one of the reasons that you sold your company?
However, he seems to be totally glossing over the fact that IPO regulations have already been weakened in recent years. This has resulted in less transparency and increased secrecy and that is exactly what people like Andreessen have been asking for.
It is questionable whether this increased secrecy actually benefits the economy or the average investor (of course, it is clear that the lack of transparency does benefit powerful interests in the country and that is why a bipartisan majority in our dysfunctional congress was able to miraculously come together and pass a bill to reduce regulations and cut down on IPO transparency). http://takingnote.blogs.nytimes.com/2013/09/13/the-twitter-i... touched on this topic in the context of Twitter's IPO.
There's your problem right there. There is a great TED podcast from one of the regulators on savings and loans ("how to rob a bank from the inside") that said basically "we failed to stop either crash but we jailed 9,000 people the last time - this time not one got prosecuted."
I think we have lost our willingness to prosecute big business. I mean Madoff was prosecuted because he was just nakedly fraudulent, but an entire industry pretended liars loans was just a phrase.
So, want a better stock market, want smaller IPOs, want stronger financial system. Hire cops and let them do their work. We don't prevent murder or robbery - we prosecute it. Same here.
But even if anyone was willing to be seen "punishing wealth creators" and "discouraging business" and "killing jobs" in this partisan climate, nobody of any party will want to face the political blowback for expanding bureaucracy and spending more money. There is a strong, non-partisan general allergy of the voting public to regulation, enforcement, and government in general.
It's probably not the whole story, but it's compelling.
I mean Madoff was prosecuted because he was just nakedly
fraudulent
http://thelastpsychiatrist.com/2014/05/cyberbll.html
Here's a "class struggle" example: name one Wall Street type
who went to jail post 2008, everyone picks Bernie Madoff. Now
name one person you know who was harmed by Bernie Madoff.
That's weird.
Note he didn't cause the crash, his criminal
empire was a "victim" of the crash. What got him jailed was
stealing from the wrong people-- that the media coded as either
"celebrities" or "pension funds".Madoff was jailed because he was clearly responsible for what was precedent had determined to was fraud.
It is true that Madoff did not cause the 2008 crash but don't tell me that the public at large do not know one or some of the hundreds of thousands of VICTIMS from the fallout of the 2008 crash, which Bernie Madoff, Allen Stanford and other fraudulent financial institutions and bankers were party to. As usual the media looks after itself scandalising the truth to sell copy. As a Madoff class action lead plaintiff these past 5 years who has followed most aspects of Madoff related litigation together with cause and effect, I know that it is a misrepresentation to promote the idea that only celebrities or pension funds were defrauded. Indeed pension funds were attracted to Madoff and Madoff related investment schemes as their track record was in fact conservative, showing a consistent modest profit over a long period of time. To wrongly believe that individuals where not harmed is because the silent majority do not have the money to hire lawyers to fight their case. Many of the INDIRECT VICTIMS were pensioners like myself, having worked hard all their lives in order to provide for themselves and their families and then duped by bankers and unscrupulous financial institutions who had jumped on the Madoff money making merry-go-round. The US Justice Department has received over 51,700 Claims from 119 countries for more than $40 Billion US dollars. When you understand that Irvin Picard the Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS)has distributed nearly $10 Billions to Madoff Direct Victims and taken nearly $1 Billion in expenses and legal fees and that there are still claims for over $40 Billions from INDIRECT VICTIMS outstanding, gives one an understanding of the enormity of the crime and the complicity and involvement of the 'Established Financial Institutions' For verification check the Madoff related web sites. http://www.madofftrustee.com http://www.madoffvictimfund.com Sincerely NevilleSeymourDavis NevilleDavis@me.com
I, too, am dubious about Pikkety's thesis. But I'd like to call out a distinction between the concentration of wealth, and the static nature of the oligarchy. One will continue to happen, the other Pikkety could be dead wrong about.
Andreessen says (paraphrasing) in the interview, 'Pikkety says wealth and oligarchies will happen, but look at the Forbes 400 and you see lots of churn, where is this supposed stability that will happen with rich people cementing their gains'.
It's true that Pikkety presents a view of social mobility becoming increasingly static, and reverting to a supposed historical norm.
But one lovely book I have pg to thank for reading, "The World We Have Lost", talks about how things were in England according to an analysis of actual data (county records etc). One chapter, 'The One-Class Society' ('gentlemen' were the class, the only class that mattered), speaks of how there actually was a large amount of 'churn' in the gentleman class -- even outside of cities and the merchant classes, it was possible for a father to become a substantial yoeman, and his heir to become a gentleman. Families went up, families went down.
But despite a certain amount of mobility being possible, all effective wealth and power that mattered was still very concentrated, as it has been for much of recorded human history, for many reasons.
This was momentarily interrupted by the usefulness of humans as wet robots that were briefly able to exert the political and economic leverage necessary to drive hard collective bargains about their compensation.
That was temporary. (Offshore wet robots, and eventually dry robots, taking the place of the less-needed troublemakers).
Wealth, even if mobile, will inevitably become more concentrated due simply to better technology and efficiency -- how can this not be so? It seems self-evident.
So, I guess the question is:
If technology magnifies individual differences in productivity, and if we accept as a given that attempting to tax away the resulting fruits of that productivity is on the whole economically injurious to an economy, how can wealth not become more concentrated over time?
(Yes, of course, there will be churn and disruption, and wealth will change hands. Even as it did among the gentleman class in England in the 1500s; families came up and families went down. But because of technological magnification of productivity it should tend to go to fewer people. This just seems like a natural law.)
But you won't hear something like that from marc, even if there were decent evidence to support this view(the nordic countries might be one such evidence).
But according to [1] The ussr in 1980 has a similar gini coefficent(which measures inequality) to modern day finland[2]. That seems pretty good.
[1]www.roiw.org/1993/23.pdf
[2]http://en.wikipedia.org/wiki/List_of_countries_by_income_equ...
1. Natural resources
2. Massive advantage after WW2 (low damage, all other factories in Europe were destroyed)
3. Cultural context
In the end of 1940s GDP/person in Sweden was 2x comparing to Germany. Now they are closing the gap, Sweden got relatively high unemployment and the government is cutting the taxes to stimulate the growth.
http://3.bp.blogspot.com/-hiivxsweO-A/TevbWlBTyoI/AAAAAAAAA8...
http://shaneleavy.blogspot.co.il/2011/06/economic-growth-tre...
That chart is doggy. No 2000 recession
You're right about germany(the war hurt it really bad) but if we choose say the UK, sweden and the UK show similar GDP/PPP numbers. But it seems that sweden has much greater income equality than the uk according to [2].
[1]http://en.wikipedia.org/wiki/List_of_regions_by_past_GDP_%28...
[2]http://en.wikipedia.org/wiki/List_of_countries_by_income_equ...
OTOH a few iconic Swedish companies, like IKEA [1] and Ericsson [2], largely withdrew from the Swedish tax system.
This may have something to do with motivation, e.g. the motivation to merely stay afloat.
[1] https://en.wikipedia.org/wiki/IKEA#Profits [2] Can't readily find a concise document; relying on Ericsson's employees word-of-mouth ere.
West Germany also traditionally (though this is weakening post-reunification due to "internal outsourcing" to the East) had a corporatist industrial-relations system similar to the Nordic one, which is based on consensus-finding between multiple stakeholders (industry, unions, governments), so things like pay and working conditions are agreed upon jointly in sector negotiations.
look at the Forbes 500 and you see lots of churn,
where is this supposed stability that will happen
with rich people cementing their gains
> Forbes 500
> churn
> people
So the entities on the list change, but these entities are shells that a public market of callous, nameless, ever-hungry, demanding strangers loans money to, with the aim of extracting a 10% profit (or more) from their share loans, but because the names of these arbitrary, ephemeral entities change with the shifting sands of the economy, this means no one is "cementing their gains"?
If I compile a list of social clubs, ranked by gallons of beer consumed, and those social clubs report how much beer is being imbibed on the weekends nation-wide, and any individual citizen can join any club they want (no discriminatory conditions for membership) at any time they want (a different club every weekend), providing they chip in for at least the beer they drink and more (if they're feeling generous), how can that list be used to determine who accumulated the most liver damage this year?
"a list of companies "
I think you are confusing the Forbes 400 with the Fortune 500. The Forbes list is of people, the Fortune list is of companies.
I happened to attend high school with the children of Dennis Bakke, who graced the Forbes list for 3 straight years. Shares in AES, the company he started, peaked at ~$68/share in the Fall of 2000. By July of 2002, AES was at $3/share. He hasn't been on the list since the plummet.
That story is fairly common among the lower ranks of the Forbes list.
Let me get this right - it's hard to tell who accumulates wealth (liver damage) if we don't know who is coming to the parties?
I wouldn't accept that.
Obviously 100% confiscatory tax rates would remove personal motivation. But there is a great deal of room below 100%, that would both allow for redistribution of wealth and for plentiful motivation for the overachievers.
Consider a scheme where typical capitalist is 100 richer than typical worker - still plenty of room for motivation, don't you think?
Besides that, inheritance tax does a lot to redistribute wealth, without necessarily destroying the motivation.
Another thing I can imagine is that wealthy individual will have to spend the money he made, or have it taxed heavily. All the lavish consumption is still a good motivator for working hard and getting rich, but without as much long term inequality.
Bottom line is that motivating best performers is not necessarily incompatible with redistribution.
Which isn't to say I favor 100% (or even exceptionally high) tax rates, merely trying to be precise.
Rational action is like common sense - not all that common.
Which is to say you are arguing against the point neither me nor lifeisstillgood were making, the point you made up yourself.
And it's "typical" not "maximum". If a typical capitalist is 100 times richer than the typical worker, and workers outnumber capitalists 1000:1, then 90% of the of all wealth (and thus economic power) is with the workers, yet capitalists still have their incentive to work their hardest - some of them will only be 10x, and some 200x of the baseline. The key is that in this scheme capitalists are all competing with each other for the same slice of the wealth pie, instead of competing against the workers, as they do today.
Indeed. The lowest top marginal tax rate in the U.S. between 1940 and 1980 was 70%, and it went as high as 90%. That didn't exactly kill innovation or growth.
It always amuses me to reflect that the time that we were most afraid of communism was also the time that we were closest to accepting it, at least if the marginal tax rates are any indication.
Anyway I don't think I could support 90% or even 70%, but I could definitely get behind 50%.
That said: people did not pay those rates in the 50s[1]:
The Internal Revenue Service reckoned that the effective rate of tax in
1954 for top earners was actually 70 percent.
Or lower. Marc Linder, a law professor at the University of Iowa, has
shown that a more comprehensive interpretation of income that
includes capital gains suggests the real effective tax rate for millionaires
was 49 percent in 1953. The effective rate dropped throughout the
decade, reaching 31 percent by 1960. That 31 percent is just slightly
higher than the 29 percent level a Congressional Budget Office report
figures the average effective tax for the top quintile will be in 2014.
[1] http://www.bloombergview.com/articles/2013-01-02/1950s-tax-f...
I mean, imagine that you have some bright ideas about building spaceships or electric cars or microchips, etc. How would you start a Space X, or a Tesla Motors, or an Intel without first accumulating some resources, well beyond the "100x the typical worker" level?
Well, you could borrow it from several hundred other wealthy people — but they'd want nice quarter reports and obviously low risk.
In a previous HN thread, we considered the possibility of medicine becoming automated, imagining that (say) 80% of doctors’ labor is replaced by machines.
In this case, the monetary earnings of many doctors will go away, and those earnings will instead go to a small number of technology companies who make the products that obviated them. That feels like concentration.
If this happens, it also happens that medicine will have become dramatically cheaper, and therefore more available to a greater number of people. Thousands of doctors lose while millions of humans win. This feels like egalitarian distribution.
So perhaps we’d call these technology companies ‘oligarchs’, yet economic (not monetary) gains have gone to a much broader set of people than before – anyone who consumes medical service.
If there are several such technology companies, they will compete, reduce prices and increase the widely-distributed consumer surplus. This can happen simultaneously with their CEOs (oligarchs) getting inordinately wealthy.
With smart planning, all of this should be OK. After all, the economy will be producing more than ever. But we have to embrace the idea that large-scale human unemployment will happen going forward, and adjust for that. Supply of human labor already dramatically exceeds demand for it, and that delta is rising fast.
I'm not sure what the answer is. I'm not an advocate of higher taxes or welfare programs, but there are going to have to be ways to obtain money other than traditional jobs if we are going to keep using it as a means of exchange. Smart economists need to be working on a solution - now.
The comics will probably be the last to lose their jobs (long after we have no need for the very many people currently involved in transportation, for example) but a virtual infinite number of monkeys typing very fast on an infinite number of keyboards with a really clever machine learning filter eventually beats them, I'd bet.
And, I'm not sure the very common line "market forces manage the economy better than planners" is actually universally true. I think without governmental controls and regulation we might have severe economic events starving a third of the world to death every 20 years or so. So, there is a balance, even for market economies.
In addition, lets look at your final statements... Technology replaces the need for human labor. What if technology did the planning? Some really good algorithms refined over time by really smart people. Do you still think simple human greed would produce better outcomes for humanity? I don't.
And one more point... a debt based economy where money is expanded might be the actual reason for the success of "capitalist" countries. Oh, and some conquest. And, the economic punishment of countries not falling in line with "market economy". Maybe "capitalism" itself has less to do with the actual outcome than is often claimed by capitalists.
What is an example of a successful state that has chosen between these two models? The successful economies are all mixed economies, with a strong role for both government planning and private competition. Germany is perhaps the canonical example of following this mixed-economy model as an explicit theory (vs. just stumbling into it). Other successful countries mostly deviate a little to one side or the other: the Nordic countries traditionally have more planning than Germany does (especially around infrastructure, urban planning, and major industrial initiatives), while the U.S. traditionally has less. But we're talking about modest variations: the U.S. public sector is ~35-40% of GDP, Germany's is ~40-45% of GDP, and the Nordic countries are at ~50-55% of GDP. Nobody is running a successful economy with a public sector at ~5-10% of GDP.
I suspect the Chinese mixed model is also going to prove quite dominant in the 21st century. Compared to the European social market economies, it's less social, but more centrally planned, which may or may not be an advantage.
We can give them $1000 cash, or we can charge them $1000 less for the healthcare they buy. Same thing.
So, in a sense, money became less important in the acquisition of healthcare. Purchasing power increased.
This is why I make the distinction between money and economic value. The latter is the real goal.
EDIT: Here's the whole list, for completeness: Clark, Civilisation White, Medieval Technology and Social Change McEvedy, Penguin Atlases of Ancient and Medieval History Laslett, The World We Have Lost Bernal, The Extension of Man Franklin, Autobiography Girouard, Life in the English Country House Pirenne, Mohammed and Charlemagne Runciman, The Fall of Constantinople Cipolla, Guns, Sails and Empires Hadas, A History of Rome Oman, The Art of War in the Middle Ages Vasari, Lives of the Artists Bovill, The Golden Trade of the Moors Caesar, Gallic Wars Kuhn, The Copernican Revolution
They are:
1. Dreadnought (by RKM)
2. Storm of Steel (by Earnst Junger)
3. (bonus) Josiah The Great: The True Story of The Man Who Would Be King
They're topical, too -- SoS didn't have a quality English translation until 15 years ago, and Josiah The Great was based on the early-2000s discovery of a trove of documents that corroborated the amazing tales of the first American in Afghanistan, who became the inspiration for Kipling's short story (and John Houston's near-best-picture winner, and the movie Michael Caine says he wants to be remembered for), 'The Man Who Would Be King.'
While in a laissez faire system wealth will tend to concentrate this can be countered by tax and similar measures regardless at to whether they are injurious to the economy or not. In the UK we've had technology undermining workers since the industrial revolution and people protesting it since at least the Luddites in 1811. In spite of things like the introduction of electrical equipment in the 1920s, inequality fell substantially between then and the 70s due to tax rates going as high as over 90%, free education, the NHS, council housing and similar pro equality policies. Then since the 80s with Regan / Thatcher things have swung the other way. Political policy can override much of the technological pressures on equality. Indeed both extremes, everyone owning everything equally or one king owning everything and everyone else owning nothing and being his serfs/servants can be approximately achieved by suitable political and military power.
Individual investors can't directly benefit from Facebook's appreciation the way they could Microsoft's. But their retirement fund sure can.
Meanwhile, there's probably a strong case to be made that in the large, individual investors shouldn't try to hit these kinds of home runs, because they're outgunned by institutional investors and they don't have the capacity to diversify as well as institutional investors can.
Imagine what would happen if you could really micro-invest, $10/day in 10 different projects. You'd even have kids actually learning to invest from age 10 that could beat the "pros" by the time they are in high school.
Also, I don't know where you work, but in Canada, tech workers usually aren't awarded a retirement fund, but rather, matching contributions to an RRSP, which is an retirement savings investment account that I control. So once again I'm out of the growth investment game. I'm assuming a 401(k) works on the same basis...
I never know what to make of that kind of complaining about shorts.
The "The returns degrade down to S&P 500 levels" statement about investment managers was strange. Often those guys don't match S&P 500 returns and so that level wouldn't be a degradation...
The whole thing has a feel that makes me wonder if he was misquoted or something.
Maybe the stock market needs more risk tiers with differing levels of regulation, even a growth market where regulations are relaxed for smaller companies, essentially private investment open to public. One size fits all of the public market will regulate all the growth out, it is not even really an option for small-medium business to even try anymore like he says.
I still agree with you, even with your own sleight of hand. :)
He talks about the drop in the number of US public companies being caused by the lack of new IPO's. It's also fueled by private equity delisting public companies, Dell being a prime example in October of last year.
The benefits of staying private are not just due to the onerous regulatory requirements. Delisting has tax benefits. It also concentrates ownership and provides flexibility in executive compensation - and both of these resolve some conflicts of interest between public investors and the exec team.
Staying private or going private also provides you with defensibility against takeover - one less thing for the exec team to worry about so they can get on with the job.
There's also less transparency in the organization which can give you a competitive advantage.
And I've no idea why somebody who is in investment wouldn't be well aware that secular bear markets are typically longer than 10 years (http://www.tradingonlinemarkets.com/Articles/Trend_Following...).
He seems to be a complete buffoon from this interview.
There were more IPOs in the first quarter of 2014, than in the first quarter of 1999 (which makes sense given the market highs):
http://www.marketwatch.com/story/us-ipos-partying-like-its-1...
And this year is tracking to be the best year since 1999 / 2000:
http://www.renaissancecapital.com/ipohome/press/ipopricings....
Depends. If the future is like the last 30 years, we'll see another "productivity boom" but zero rise in real wages.
In 1980, being an IT worker was basically a $10 an hour job.
Fraudsters and con men have been engaged in a Red Queen's race against investor intelligence and government regulation since there has been economies.
https://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis
These regulations might be messy but they contain valuable information that has been learned from this arms race. They're patches to try to prevent the same thing from happening again. It's much like computer security, where OSes and network protocols are constantly patched or re-engineered to be resistant to newer attacks. "Attacks only get better."
It may however be possible to improve Sarbox by reducing its complexity, thereby reducing the complexity tax that harms smaller companies and discourages growth IPOs.
There were two basic defects with Enron:
1) The energy traders were rogue by virtue of poor governance. The problem was baked into the compensation scheme there and could not be undone.
2) Skilling was rogue, but his sort of SPE manipulation was actually quite common.
The rest of the company is believed to have been fundamentally sound.
Enron was the big hero until they basically put CALPERS at risk. Then the story changed. I watched as the California energy deregulation unfolded. It was apparent that it would fail exactly as it did.
There's a larger background of boom-bust globally but especially concentrated in the US for ( I think ) path-dependent reasons. See "Nation of Deadbeats" for a semi-historical treatise on the subject. This goes back to John Law and the Mississippi Bubble - but each is different.
I don't get the feeling the whole subject is clearly understood. The dominant "left-right" beliefs are not helpful. The left believes regulation can fix it; the right thinks ... something else will ( usually a bland nod towards competition).
Thinking about stability is quite new. It's not clear we know what we're doing.
Prevention by regulation IMHO creates as many problems as it solves because it punishes everyone involved, not just the guilty. I'm more in favor of prosecution (for fraud or insider trading, for example) as a method of prevention (where you just get punished for breaking the law after the fact).
If they've broken the law and are found guilty, that's exactly what you want (rule of law, equality before the law and all that). Otherwise, I agree with you.
Consider the investigation of Mark Cuban for insider trading, which didn't even result in an indictment or prosecution. I don't think it was politically motivated, but the mere possibility of that made a lot of people nervous.
I mean, if a big family own a lot of real estates, and that real estate gains value, then doesn't this increase of value also makes the general economy grow as well ?
It can't be as trivial, so there's probably something i'm missing in the definitions. Anyone ?
Piketty discussed the return on capital versus earnings. He doesn't claim one is superior to the other, or even that in the long run one will certainly trump the other. He simply argues based on the evidence that it is likely that in the long run, because it appears that the long trend is negligible economic and demographic growth, there is no intrinsic law within capitalism that ensures capital returns will not become so important that inequality can reach massive levels.
"each generation should earn their own way" could be Pikkety new and less attractive call to arms
Edit: I think this is an interesting discussion well worth having. From my experience talking to people, many believe that if government introduces exactly the right laws, we'll wind up with a utopia, which is IMHO very naive. Very few people consider the drawbacks and unintended consequences of each law.
It probably doesn't help that he's in business and daily contact with Ben Horowitz, who is even more sucked into the norms of that culture (check out the comments on https://news.ycombinator.com/item?id=7191642).