11 ms·

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basica

• humanrebar 11y ago
  > Does society prefer Snapchat or a cure for cancer? I generally share your concerns, but oncology and the market for donations to cancer-focused charities are surely bigger than Snapchat. I'm not sure counting unicorns is a good heuristic for importance.
• Ashendar 11y ago
  ' I think a significant amount of money is going into advertising, pointless startups, entertainment and social media.' My suspicion is that a lot of it is going into housing, driving up the costs for home buyers with no productive benefit for the economy.
  • laotzu 11y ago
    Well that is obvious after 2008. Last I checked there are around 5 vacant houses for every homeless person in America. According to anthropologist David Graeber, the real original (pun intended) meaning of the phrase "real estate" was royal estate, referring to the British monarchies' royal estate in the 17th century.
  • nwah1 11y ago
    You'd be correct. http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality http://www.economist.com/blogs/freeexchange/2015/03/wealth-i...
• yummyfajitas 11y ago
  It's not about 5 year return, it's about the fact that the potential cancer cure simply has low returns and huge risks. People are absolutely willing to make long term bets (e.g. snapchat, which has negligible revenue right now, and is entirely just hope for the future), they just need to be good bets. Molecular targets are getting harder to find. Getting a drug through the FDA is insanely difficult, costs huge amounts of money, and often fails. Further, there is significant political risk once you get it through - very few countries will pay full price for your drug (mostly just the US), and who knows where the US is going? Pharma is both a scientific and a regulatory challenge - making money involves the stars aligning. If you want more cancer cures, make it easier to become very rich by selling them.
  • deleted 11y ago
    [deleted]
  • anonmeow 11y ago
    It's more straightforward to tax snapchats and facebooks some more and put the money into cancer research.
    • yummyfajitas 11y ago
      All that does is turn cancer research into a bad government investment rather than a bad private investment.
  • ci5er 11y ago
    > Molecular targets are getting harder to find. Is this because we've already harvested the low-hanging fruit? Are there any new paradigms on the horizon that could change this? > If you want more cancer cures, make it easier to become very rich by selling them. It's an odd thing about Americans, though. They really don't seem to mind if Jobs or Zuckerberg get insanely rich (although there was some grumbling about Gates back in the day), but they loose their collective fecal matter if an evil capitalist with a cure for cancer even tried to recoup the capital invested in its development. "People are dying because it is not free!", they would screech. And the (US) government would cap the price because by that time they will be the sole domestic channel for any new therapy's delivery and done and done. Big pharma knows this, and if they don't, their investors do. Better off improving female viagra or something.
• fulafel 11y ago
  Addressing climate change is another obvious thing that seems to fare very badly in the current resource allocation regime.
• sanxiyn 11y ago
  > The return on investment for a cancer cure is probably small. This must be a joke. Lipitor generated $125 billion revenue for Pfizer while in patent. A cancer cure will be worth more.
  • robotresearcher 11y ago
    And the costs were what? And the costs of all the failed projects were what? Your reply says nothing about ROI without that information.
• hellbanner 11y ago
  When Value is defined as "more money", then this will happen. Money often functions as a lack of efficiency and is prone to re-produce itself. For example: if cancer was cured with a pill, forever, the total revenue from curing cancer is pill sales price * people born, which would be less than current treatment costs. Maybe https://en.wikipedia.org/wiki/Gross_National_Happiness https://en.wikipedia.org/wiki/Gross_National_Happiness isn't such a bad idea.
  • sanxiyn 11y ago
    So pill will disrupt treatment market, like Red Hat disrupted Unix market. Free market encourages such efficiency.
    • bluetomcat 11y ago
      The problem is that technological disruptions like this pose a threat to the economy as it is organised and run today. In particular, modern economy cannot cope with unemployment. The masses of laid-off people would either have to engage in yet more pointless jobs, or "disrupt" the social order. This is very unlikely to increase efficiency overall.
    • laotzu 11y ago
      What's a free market?
  • OvidNaso 11y ago
    "Money is a sign of poverty" --The Culture
• merpnderp 11y ago
  Capitalism has never been about making the world a better place. All systems deal with humans and humans inevitably prefer helping out themselves and people close to them over others, which leads to corruption regardless of the system. And capitalism seems the best method for controlling innate human corruption (see China's incredible economic growth once socialism was all but abandoned for capitalism in the 80's pulling a billion people out of abject poverty). As for investors preferring Snapchat to curing cancer? The amount of money invested in cancer dwarfs Snapchat's investments by magnitudes. You don't just cure "cancer" you find cures for the hundreds of different diseases that fall under the umbrella of cancer. There's so much money invested in cancer there are often not enough candidates for a new clinical trials. If we have a shortage of anything, it is medical research scientists. And the way to get more of those is to change the regulations so there is more room for profit medical research.
  • erikpukinskis 11y ago
    > capitalism seems the best method for controlling innate human corruption Capitalism seems better than past failures. But it is surely a local maximum. We have thousands of years of social evolution in front of us. Experiments have hardly been exhaustive, and material conditions seem to be changing faster than ever.
    • amelius 11y ago
      The best way to control corruption is transparency. Eventually, IT systems will solve large-scale corruption.
      • theworstshill 11y ago
        I agree. Although it will be hard to separate the need for transparency to one's rights to privacy. You can deem that some actions inherently leave you no rights to privacy, but I'm afraid it'll be only a matter of time till everything you do is under the watchful eyes. On the other hand, humans are at the best when they know theyre being watched. Its a difficult tradeoff.
      • deleted 11y ago
• lumberjack 11y ago
  Exactly and then people wonder why the economy is not growing enough: https://news.ycombinator.com/item?id=10686732 https://news.ycombinator.com/item?id=10686732 I think two big contributing factors are the so called "active investors" and corporate taxes. Active investors force companies to optimize for short term gain which of course hurts growth. Corporate taxes are too low. The private sector is not generating enough growth and to fix that the government does the exact opposite of what it should do. It hands the private sector more capital instead of taking it away. The private sector is already at a loss with the capital it already has at its deposition. I bet most of it goes into speculative Wall Street financial vehicles and I do not think any of it ever gets to entities that are short on capital or it goes to the wrong entities that are short on capital because most academics would be more than happy to get 0.01% of the capital that goes to social media startups.
  • vannevar 11y ago
    Yes. Water, water, everywhere but only a handful are allowed to drink. We live in a contradictory age where more capital has accumulated than ever before (and thus can be said to be plentiful), but where it has at the same time become increasingly concentrated within a relatively small socio-economic network. Capital continues to evaporate away from the 99% to the 1%, but no longer precipitates back out.
• bko 11y ago
  Why would a cure for cancer be a small return on investment? You're assuming that the only people who could enter the market and find a cure would be the current players who are profiting from the current treatment or some global conspiracy to keep the cure hidden. If someone were to discover a very effective treatment, they would surely profit nicely. Hepatitis C was recently cured, a brutal disease that affected some of the most marginal people in society [0]. And it was done thanks to a profit motive. Barring extreme price controls on drugs by politicians, this type of progress can be greatly encouraged by the profit motive. [0] http://www.scientificamerican.com/article/we-now-have-the-cure-for-hepatitis-c-but-can-we-afford-it/ http://www.scientificamerican.com/article/we-now-have-the-cu... [edit] I would also like to add, the non-profit approach [IMO] has failed to produce anything but the abundance of the color pink and self congratulatory galas for wealthy donors. Perhaps the profit motive and choice that has served society so well in practically all aspects of our lives can be equally leveraged on solving hard problems like disease.
  • merpnderp 11y ago
    Whenever I think of profit motives being a good thing I'm reminded of the Steve Job biography where it speaks of his time at a commune. He would sleep under the kitchen table and watch people sneak in at night to take food from the fridge which was supposed to be shared. People want as much as they can get for their work, and not a single apple less.
  • zardo 11y ago
    >If someone were to discover a very effective treatment, they would surely profit nicely. That would depend on how much it cost them to develop the treatment, and how much money the patients can pay. It's not sure that it would be profitable.
• theothermkn 11y ago
  > Misallocation is a massive problem. A little girl and her grandfather, an economist, are walking down the street. Suddenly, the little girl tugs on her grandfather's tweed blazer and says, "Look, Grandpa! There's a $20 bill on the sidewalk! Somebody must have dropped it!" "Nonsense!," said the grandfather. "If that were a real $20 bill, someone would have already picked it up!"
• ChuckMcM 11y ago
  I don't think you can look at a subset of capital expenditures and then conclude "capital is misallocated." You would have to look at all the businesses funded and see where the money is going. Also I would caution you about falling into the trap of confusing "valuation" with "capital". SnapChat might have had a $16B valuation but really only "allocated" a bit more than a billion dollars. If you subscribe to the 'too much money is idle' point of view like continuations does, then you should be very bullish on the startup eco-system growing for all kinds of businesses, and that gives the capital a chance to be allocated to something useful, like another Watsi.
  • Retric 11y ago
    If you see a large amount of money (as in 100+ of billion) flow in and significantly substandard returns then it was misallocated. The VC industry has seen substandard returns over the last 20+ years. So, it's not a good allocation of money. PS: Some people get rich at Vegas, that does not mean gambling is a good investment.
    • ChuckMcM 11y ago
      I don't disagree but would like to understand your metric, "substandard returns" suggests you have a metric in mind, how do you arrive at the 'standard' ?
      • Retric 11y ago
        Risk adjusted ROI. The bond market is the classic example, if you look at the class of bonds paying 10% vs 2%. If your risks where in line with the 10% bonds, but the payouts where inline with the 2% bonds it's a low ROI investment. Now, looking ahead you don't know what the risks are. But, you can examine the ROI for 1990 investments and you can see which 2010 investments have already failed.
        • ChuckMcM 11y ago
          Ok, fair enough, but today's Risk Adjusted ROI is quite low. And comparing returns from a couple of decades in the past with current returns seems unhelpful to me. My point is that your standard has to be for your choices of the capital today versus historical returns. So if you compute for expected value of a million dollars sitting in a bond fund today, versus sitting in a basket of startups, are the returns less in the latter case?
• ArkyBeagle 11y ago
  The number of people who Do Things That Matter is just dwindling - most people are basically seat-fillers. This is especially true of say, a Congrefsperson or other equally high-profile functionary like a CEO. Even high status professional work like medicine and law is just rubber-stamp boredom with moments of sheer terror. Things That Matter are more or less on autopilot - see "How It's Made". So the differentiator becomes rent-seeking in nature. This makes things volatile - how is there anything like a "fundamental" to Snapchat - and this increases uncertainty. But “All of humanity's problems stem from man's inability to sit quietly in a room alone.” - B. Pascal. Preferences are real and we don't understand them ( in the sense of "I cannot understand myself" in Zen). But we can certainly see their aggregated effect. and in a way, it's worse even than that - cure cancer. Now something else comes along to replace it. Maybe that's Alzheimers. Cure Alzheimer's? Something else.
• EvanPlaice 11y ago
  Advertising, startups, entertainment, and social media (ie thinly-veiled consumer research) all produce material of value directly or indirectly. Their value is generally high because the output of a small number of individuals has an impact on a very large number of people. In addition to the services they provide directly, they usually create secondary benefits for society such as releasing new technologies into the open source community. If you want to tackle waste, you'd be better off by looking into non-profits. How many funnel a significant portion of their funding into 'administrative costs'? How many exist to dodge corporate taxes in the name of 'good will'? How many are thinly-veiled advertising agencies for political special interest groups? How many aim to provide value to the greater populace rather than a very small subset of the population? What about religion? Not banging on people who follow any specific religion, but nobody ever asks just how much value they're capable of extracting from their followers. How much of that funding goes to providing non-religious services such as entertainment, or backdooring funding to political special interests that support their own worldview. How about subsidizing post-secondary education that abuses pricing as an entry barrier to exclusivity? Why have degrees become a default requirement for most/all middle class jobs? Why the hell does it still follow a strict 4-year rule for undergrad degrees? Why does everybody still waste the first 2 years learning arbitrary 'core requirements' unrelated to their specialty? How can we realistically subscribe to a fire-and-forget model that assumes everything can be taught up front prior to a lifetime of work. The 'waterfall' model has been proven ineffective in technology, why is it still overwhelmingly supported in education? I live in San Diego, a hub for biotech research companies. From what I've seen talking to people who work in the field, funding isn't the issue. If anything, there's already too much capital floating around and the larger companies are swallowing the smaller companies en masse to eliminate competition. I personally knew a guy who works in bleeding-edge cancer research. New advances won't come in the form of a pill or operation. The next generation of treatments hack biology in a way that makes cancer visible to the host's immune system. In addition, cancer is a blanket term to label a class of diseases so one treatment will only treat one/few forms of cancer. Throwing more money at the problem is like trying to hasten software development by throwing more developers at a project. ROI for healthcare is huge, especially now that insurance is mandatory and basically charged as a 'tax for being alive'. The cost for Snapchat is minimal/nothing whereas healthcare via insurance + medicare/medicate costs make up a significant percentage of individual income.