dbfclark

The point here is really about what you might call advertising economies of scale -- if one good nets its producer $10 per sale and another $100/sale but the price and effectiveness of advertising are the same, it's much more exciting to advertise the second than the first. Google is segmenting these markets in a way that newspapers and tv can't: only one person can buy the top keyword per search, so while TV advertising is wall-to-wall insurance, loans, and cars, the same phenomenon expresses itself in google terms through high-priced keywords.

As to cord blood:

http://en.wikipedia.org/wiki/Cord_blood

claims that

"The cost of private cord blood banking is approximately $2000 for collection and approximately $125 per year for storage, as of 2007."

which sounds to me like a pretty high-margin (in dollar terms) business, hence the attractiveness of advertising.

"That said, I don't think this error was made in this article, and that the 47.62 is the net, effective tax burden."

Nope, he says it's the marginal rate. See my comment above.

Several points from a NYC taxpayer:

47.62% is the top marginal fully loaded tax rate on ordinary income. That is, 35% individual federal plus 8.97% state tax plus 3.88% city, less rounding and maybe a few dollars of unused credits. This is the rate on the next dollar of ordinary income (and the number you use if you wish to maximize your claimed tax rate). The claimed capital gains number of 27.63% is 15% plus that same amount for state and local taxes, which do not treat capital income differently (the .62% on the end of both is the giveaway). Neither of these numbers is an effective tax rate (=tax actually paid/pretax income), or "tax pressure," whatever that is -- at my guess, Mr. Wilson probably pays effective tax in the 30-40% range, depending on how much capital gains he realized in the year.

On capital gains rates generally, tax does work on the margins, but this means that we should worry about what kind of investments are incentivized by lower capital gains rates. I seriously doubt that a Mr. Wilson taxed at the regular income rate for capital gains would put even one fewer dollar into his fund, making 20+% pretax, if his other choice were, as he says, the mattress making 0%. Even at equal income and capital gains rates, the incentive to maximize your returns is pretty strong, so the idea that the differential rate is changing behavior in a useful way needs more analysis than Mr. Wilson gives it.

For corporate taxes, effective rates are indeed what matters when comparing tax burdens since corporations get such a variety of credits; that said, the fewer deductions/lower rates tradeoff is free economic growth and we should do it (it'll never happen, though, since congress is too dysfunctional).

And last on "double taxation": gopi is right that most corporations are organized as passthrough entities -- they pass all income through to their owners, who then pay tax on it. Those that aren't do have lower taxation of dividends to make up for the equivalence of share buyback and dividends.

At the peril of being annoying long after the fact, I did read the post, and he does have a point that's a little deeper than your rejoinder: wine does not have the competition-destroying superstar effect we see in categories with less constrained supply. Your examples are not comparable to the kind of market position the players mentioned in the original post have. The favorite brands do not drive out the smaller players. Is that a "power law" or not, well, hard to say; if it's purely size-based, sure, but if we're talking about the way that a big brand dominates a market, no, there is no such thing in wine.

The quick answer is "no, it doesn't, nothing does":

http://cscs.umich.edu/~crshalizi/weblog/491.html

The better answer emerges if you think about the example a little more closely. The big power law brands driven by customer appreciation are in media -- people love Lady Gaga (say), so she sells gazillions. Nobody loves yellowtail or sutter home. Many people love Screaming Eagle or Chateau Lafite. However, wine is an agricultural product; you cannot produce more bottles of a great wine than you can grow in some very particular fields in a year. The way scary hit-driven industries work is that you sell things way above marginal cost to everyone who wants them; in wine, since there's actually scarcity, very few people who love a brand can get as much as they want of it, so the prices at the top are insane (recent vintage screaming eagle is indicated at $2-3k per bottle), but the brands are smaller.

I'd guess the way to think of it is like the music industry before recording devices or electricity -- sure there are stars, but because supplies are limited nobody can by a megastar.

My answer would be "no," since rather than buying just a small piece of your movie idea, Amazon studios options the entire thing immediately. Their arrangement is "if we decide we want to make your movie, we will pay you $200k and that's all."

In some sense $200k is actually quite a lot for a no-name script, but since Amazon gets all the equity I don't think we can call it a seed fund. This may be how the movie industry works (all the upside for a new writer is in reputation), but since you don't get to make the movie and earn the profit it doesn't seem comparable.

A single payer NHS actually does change the overall cost of healthcare: the UK pays about half as much per person as the US does for its healthcare system as a whole with no noticeable difference in measured effects.

The reason is simply market forces: people import drugs to the US from Canada because the power of single payer there changes what pharmaceutical companies can charge Canadians for drugs. The UK pays less for drugs, doctors, the whole shebang. Operations are cheaper in the UK and Canada (not to mention the rest of the world, which is more extreme in general), period.

The takehome point is simple: pretending that consumers must be price-takers for any good as vital as healthcare entitles producers to arbitrary profit. I hope not to spend all my savings on healthcare and my best hope is to get some kind of market power, be that from an insurance company or the government.

The real thought here, I think, is that adoption drives hardware improvement -- only if you're selling a hojillion chips can you make them cheap, good, and profitable. From this perspective, what you'd want to say is that large market share advantages are extremely defensible and can let you crush the little guys (which apple was through the 90's). But how do you get there in the first place?

The analogy between android/iOS and windows/mac I think has to be well-taken, but most discussions (including this one) leave out the most important difference. Windows got to sell a hojillion units by being the best at selling to business. You buy multi-thousand-dollar machines for all your employees because you expect productivity increases; you don't worry too hard about whether they like the machines or not. The decision maker buys on specs and price if it's not just a salesforce versus salesforce game (a likely win for the open platform because there are more players behind it).

The current generation of mobile, however, is a consumer phenomenon. Businesses aren't buying modern smartphones for their employees -- they're hooking the employees' phones into their networks. Adoption is not driven by purchasing managers but by consumers and therefore by user experience, consumer marketing, branding, etc. in addition to specs and price. This puts the open platform with the worse user experience for the average user at a big disadvantage, particularly if the price differential isn't that large in absolute dollars, which it isn't by comparison with the computers of the 90's (the gap between comparably-specced PC's and mac's being enough to buy multiple smartphones).

I don't know that it makes sense to think of any platform being as strong a winner as windows was; the very presence in the market of a company eager to use an operating system as a loss leader means that android will probably never shrink as small as apple did. However, Apple's advantages in design and branding play to the challenges of the mobile market in a way that they simply didn't for PCs. To this, add the scale advantage Apple currently enjoys (as monopsony buyer of flash memory and LCD's) that locks in big profits that competitors can't touch and it seems quite clear which way the playing field is tilted.

tl;dr: windows won by owning the business market; mobile plays to apple's strengths in a way PC's never have.

Kind of what's going on here is that only very successful companies face a large enough impact from the tax that exercising the option of exit is at all attractive. Say your SF startup was being acquired for $50mm, $10mm of which is employee equity hit by the tax (investors and founders don't pay it). You end up having to pay $150k between you, which only now is starting to be a big deal -- even one order of magnitude down, it's not worth the hassle of moving your office to a low tax jurisdiction just to dodge 15k of taxes imposed over 2-5 years -- and of course you have bigger issues to worry about so the tax doesn't matter that much. Spread over 100 or so employees and it looks like a fairly small salary increase to be paid for cost of living reasons.

I faintly recall a discussion of when you should accept dilution (which a tax is) if it raises your chances of success. I tend to assume that startups locate in SF rather than the non-SF bay area for reasons that they feel give them more than a 1.5%*employee equity higher chance of success (shorter commutes for your people, etc.).

More generally, it's only going to be the very large companies that want to exercise their option of exit for this reason: moving sucks and nobody wants to do it. By the time it's millions of dollars in taxes (i.e. valuation > $1bn or so) you'd think about it, but I'd guess not before. So it's not the greatest idea from a tax equity perspective: a tax only the extremely wealthy find it worth their while to dodge is still regressive. Lame capitulations to keep the few companies with this high-class problem in the city are probably correct from a utility-maximizing perspective, if kind of morally distasteful.

One recalls

http://www.abc.net.au/news/stories/2010/09/17/3014462.htm

which may be pertinent. The fundamental truth is still the Tim O'Reily aphorism that the main enemy of most authors isn't piracy but obscurity. There's some sense in which this is a form of freemium pricing -- use a lower-quality (in this case, crappy scanned) version to drive engagement, then use engagement to drive sales of the good, pay version.

There's a decent chance that the actual publishers get this -- near as I can tell, the real problems with understanding this idea come from the top of the multinational media companies that own the publishers.

Is it actually the case that filtered replication can be used cleanly for access control now? My understanding from the various docs was that currently you can write a filter but not require that users replicate through it -- that is, if you have permission to replicate, you have permission to replicate and that's it. For real access control using this I think you'd need something like a permission to replicate distinct from permission to read and a permission to replicate only through a specified filter. I suppose I'm off to have a look through Max's source, but if I'm wrong about these things I'd appreciate the correction...

...ok, back. Right now there appears to be no access control at all. Granting that this is a relatively early-stage project so it doesn't necessarily matter too much, but my question still stands.

I definitely enjoyed Royden a lot -- I got through my real analysis qual back in grad school using Royden to teach myself essentially all of the material. Readable and excellent. And as to minds heading the analysis way: I'm about as algebraicly-minded as they come and I thought it was highly readable.

The point really is that "risking your capital" is not in and of itself a productive activity -- making stuff is. I work as an investment analyst myself which is good in both the "fun" and "profit" departments, but I'm not about to pretend that I'm creating value for the world in any but the most indirect of ways.

If your argument shows that all taxation is immoral and not to be borne, doesn't it prove rather too much?

By way of being nitpicky: there is no jab at entrepreneurs here. The two named classes of undeserving rich people are financiers and law firm partners and I put it to you that a less value-creating lot relative to compensation could hardly be found in American society.

Law firm partners, really, are a paradigmatic example of surplus value extraction: law firms get paid by people who produce things to play negative-sum games on their behalf. And while I think it's very wrong to say that all profit is an extraction of value from labor, you could hardly find a purer example of value extraction than a law firm associate being paid <$100/hour and billed out at >$300/hour...

There's a few points where he really gives the game away:

-$60k/year for three children in private school -$50k building home equity -$50k in the 401k

But the real point is in the sections about having bought the house at the top of the market and the equity portfolio having fallen: Mr. Henderson feels poor because his net worth has dropped. He has less savings than he used to, so of course he feels he has to save several average family's annual income to catch up.

Being a high-powered law professor can't help, of course -- that's one of those jobs where your not-so-clever peers are big law firm partners and your half-decent students make your salary two years out of school. Even more so than the average 99%er, law professors have a ginormous amount of keeping-up-with-the-jones' self-pity.

Nope, powers: depending on indexing, the first three multiples of 5 are either 0,5,10 or 5,10,15, and we have neither a zero-cent coin nor a 15-cent one. The first three powers of 5, on the other hand, are 1, 5, and 25.

This actually makes the non-uniformity worse, not better -- things priced at an even number of dollars don't factor into the calculation before tax (and there are lots of those), but after, change amounts get disproportionately weighted to the amounts of change produced by even numbers of dollars. Argh.

The story (picked up from Daniel Davies at http://d-squareddigest.blogspot.com) goes that the way one argued with Milton Friedman was to listen until he got to the part of his argument where he said "let's assume x" and then say "no, let's not!" That is, the part of the argument doing all the work tended to be hiding in some premise that economists consider innocuous but is in no way representative of the world.

So here, premise (2): "probability of a transaction resulting in value v is uniform." No! Not true! In reality, people price a disproportionate number of transactions to make easy change with the coins we have, be easily divisible, be .01 less than a larger number of dollars, and so on. The discovery that cash transactions had a uniform distribution of change would actually be quite weird.

But worse is the smuggling in of an unconsidered definition of the good in the form of the efficiency metric -- fewest coins per transaction. Even granting the uniform distribution, making change out of your pocket is still solving the subset-sum problem in your head, which is of course NP-complete. The existing setup of coins, including the first three powers of 5, makes this problem very easy while almost all the proposed "better" solutions actually make this aspect of the problem harder rather than easier. Who cares if I have to handle a few extra tenths of a coin per transaction if it means I don't have to spend two minutes puzzling out how to make change?

I suppose the lesson, as usual, is that business logic is lived experience, not theory.