3 ms·

While wealth is more concentrated in the US, access to capital is probably at an all time high. Interest rates on loans are tiny and equity markets have never b

by harryh 9y ago

While wealth is more concentrated in the US, access to capital is probably at an all time high. Interest rates on loans are tiny and equity markets have never been deeper.

dv_dt 9y ago
And why isn't productivity increasing if capital required to develop enhancements is available? And a related question if capital and access to it is at an all time high, then why do we have stagnant economic growth?
- harryh 9y ago
  That is definitely one of the big mysteries of the modern era. Personally I subscribe to the hypothesis that we're just running out of low-hanging fruit. As humans developed better knowledge of biology, chemistry & physics there were a whole host of relatively easy to invent items from the steam engine, to antibiotics to air travel to the transistor and modern electronics. These were world changing. But now we're mostly done doing that and are now in the refinement stage on most technologies where we spend an enormous amount of effort to get, for example, 5% more fuel efficient airplanes. Physics is tough. Maybe we'll have some sort of revolutionary breakthroughs in the future that lead to another era of rapid invention but until that happens we'll continue plodding along building a slightly more efficient world instead of a transformative one. This is really just one hypothesis though. The real answer is that no one really knows for sure.
  - dv_dt 9y ago
    Agreed, it's quite believable that the threshold of capital required to develop a given improvement is increasing. That's one reason that individual entrepreneurs are likely making fewer impacts on starting of new companies. Well that and there is a double whammy of labor being paid less of a margin of productivity so individuals and even small businesses are more squeezed of their own capital accumulation. In other words, the Wright brothers today would have a hard time not only because it's harder to develop a competitive aircraft, but because their bicycle business isn't going to yield a sufficient margin to even invest in the development in wind tunnels, motors, etc that they did originally. The thing is, it's individuals that would make the 'crazy' investment without a cut-and-dry ROI, without a calculable guaranteed result - and I think we suffer from their absence in terms of end growth overall. But I also somewhat discount that the rising difficulty level is really why more breakthroughs aren't happening, if that were the case one would see larger and larger accumulations of ventures committing capital and failing (or at least operating). I think the real reason is that not enough capital even tries to attack these problems because they're longer term and difficult to quantify the return. The irony is that I suspect that we get a smaller overall growth by routing capital to mostly knowable investment returns over a larger proportion going to "crazy" non-calculable investments. So, we end up waiting for the die-rolls to match up people like Elon Musk with sufficient fortunes for truly big advancements, and an economic system that mucks around with financial engineering instead of relentlessly and systematically advancing a wide range of real-world applied engineering on big problems.
    - candiodari 9y ago
      The simple alternative explanation is that we're not supply-limited ... we're demand-limited. (Note that demand is what you want AND are willing to pay for, by it's economic definition)
  - Spooky23 9y ago
    My guess is that we're turning everything into little services and few people understand the big picture. By squeezing pennies out of lots of things, we miss the dollars that could make positive change. Look at corporate IT as The gold standard of fail. We design complex systems to allow them to be sourced out (is ITIL/ITSM), and then are surprised when we have built a monstrosity that doesn't really work. You see this type of thinking everywhere. I had an ancient popcorn popper called the "Whirly Pop" that I got in the 90s, which was basically an aluminum pan with a wood handle and metal gear for swirling popcorn on the stove. It recently broke and I bought a replacement -- a product inferior in every way with a plastic handle that will burn your hand, a plastic gear that will melt, and a metal pan and cover so thin that bent it while cleaning with a sponge.
    - candiodari 9y ago
      What about the other elephant in the room ? We appear to be in a second demographic transition. This time instead of going from high birthrates to low, we're going from replacement birthrates to shrinking population. This then results in the need for increased scale, increased productivity, and indeed, the need for innovation disappearing altogether.
Spooky23 9y ago
That's not really true at all. Many companies, especially medium sized businesses are starved for capital as banks are consolidated and are largely out of many types of lending. I had a friend who ran a successful manufacturing company who was forced to shut down production... not because of competition or cost but because of the inability to get working capital. As the regional banks in our region got swallowed up, the local bankers who understood cyclical businesses went away.
- candiodari 9y ago
  You and the parent post are both right. There's just 2 things: 1) we regulated that banks have access to capital (ie. we created the FED that will loan almost unlimited amounts to them. And of course we bailed out "too-big-to-fail") 2) we outlawed that banks loan money to anyone but the government, or very big companies. After all, since they always lost the money, we've imposed more and more rules about who they can lend to. (always lost it, I might add, by lending it to government or big companies when we're talking large amounts, but that is conveniently ignored of course). Of course who they can lend it to means effectively not you or me.

by harryh 9y ago

While wealth is more concentrated in the US, access to capital is probably at an all time high. Interest rates on loans are tiny and equity markets have never been deeper.

dv_dt 9y ago

And why isn't productivity increasing if capital required to develop enhancements is available? And a related question if capital and access to it is at an all time high, then why do we have stagnant economic growth?

harryh 9y ago
That is definitely one of the big mysteries of the modern era. Personally I subscribe to the hypothesis that we're just running out of low-hanging fruit. As humans developed better knowledge of biology, chemistry & physics there were a whole host of relatively easy to invent items from the steam engine, to antibiotics to air travel to the transistor and modern electronics. These were world changing. But now we're mostly done doing that and are now in the refinement stage on most technologies where we spend an enormous amount of effort to get, for example, 5% more fuel efficient airplanes. Physics is tough. Maybe we'll have some sort of revolutionary breakthroughs in the future that lead to another era of rapid invention but until that happens we'll continue plodding along building a slightly more efficient world instead of a transformative one. This is really just one hypothesis though. The real answer is that no one really knows for sure.
- dv_dt 9y ago
  Agreed, it's quite believable that the threshold of capital required to develop a given improvement is increasing. That's one reason that individual entrepreneurs are likely making fewer impacts on starting of new companies. Well that and there is a double whammy of labor being paid less of a margin of productivity so individuals and even small businesses are more squeezed of their own capital accumulation. In other words, the Wright brothers today would have a hard time not only because it's harder to develop a competitive aircraft, but because their bicycle business isn't going to yield a sufficient margin to even invest in the development in wind tunnels, motors, etc that they did originally. The thing is, it's individuals that would make the 'crazy' investment without a cut-and-dry ROI, without a calculable guaranteed result - and I think we suffer from their absence in terms of end growth overall. But I also somewhat discount that the rising difficulty level is really why more breakthroughs aren't happening, if that were the case one would see larger and larger accumulations of ventures committing capital and failing (or at least operating). I think the real reason is that not enough capital even tries to attack these problems because they're longer term and difficult to quantify the return. The irony is that I suspect that we get a smaller overall growth by routing capital to mostly knowable investment returns over a larger proportion going to "crazy" non-calculable investments. So, we end up waiting for the die-rolls to match up people like Elon Musk with sufficient fortunes for truly big advancements, and an economic system that mucks around with financial engineering instead of relentlessly and systematically advancing a wide range of real-world applied engineering on big problems.
  - candiodari 9y ago
    The simple alternative explanation is that we're not supply-limited ... we're demand-limited. (Note that demand is what you want AND are willing to pay for, by it's economic definition)
- Spooky23 9y ago
  My guess is that we're turning everything into little services and few people understand the big picture. By squeezing pennies out of lots of things, we miss the dollars that could make positive change. Look at corporate IT as The gold standard of fail. We design complex systems to allow them to be sourced out (is ITIL/ITSM), and then are surprised when we have built a monstrosity that doesn't really work. You see this type of thinking everywhere. I had an ancient popcorn popper called the "Whirly Pop" that I got in the 90s, which was basically an aluminum pan with a wood handle and metal gear for swirling popcorn on the stove. It recently broke and I bought a replacement -- a product inferior in every way with a plastic handle that will burn your hand, a plastic gear that will melt, and a metal pan and cover so thin that bent it while cleaning with a sponge.
  - candiodari 9y ago
    What about the other elephant in the room ? We appear to be in a second demographic transition. This time instead of going from high birthrates to low, we're going from replacement birthrates to shrinking population. This then results in the need for increased scale, increased productivity, and indeed, the need for innovation disappearing altogether.

Spooky23 9y ago

That's not really true at all. Many companies, especially medium sized businesses are starved for capital as banks are consolidated and are largely out of many types of lending. I had a friend who ran a successful manufacturing company who was forced to shut down production... not because of competition or cost but because of the inability to get working capital. As the regional banks in our region got swallowed up, the local bankers who understood cyclical businesses went away.

candiodari 9y ago
You and the parent post are both right. There's just 2 things: 1) we regulated that banks have access to capital (ie. we created the FED that will loan almost unlimited amounts to them. And of course we bailed out "too-big-to-fail") 2) we outlawed that banks loan money to anyone but the government, or very big companies. After all, since they always lost the money, we've imposed more and more rules about who they can lend to. (always lost it, I might add, by lending it to government or big companies when we're talking large amounts, but that is conveniently ignored of course). Of course who they can lend it to means effectively not you or me.