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To invest in 2 hippies starting a personal computer company in 1976. To invest in 2 guys in starting a search engine in 1996. To invest in a kid in Harvard maki

To invest in 2 hippies starting a personal computer company in 1976. To invest in 2 guys in starting a search engine in 1996. To invest in a kid in Harvard making a social network in 2004....

acidburnNSA 9y ago
True, but also for multiple homes, fancy cars, world travel, etc. When I worked at a hardware store we had a brochure we could order in a gold-plated Ducane grill for $4 million. That recent graph showing the top 1% having a 6% wealth growth rate is wholly unsustainable for any society. So there's something to be said for trying to level it off.
- aswanson 9y ago
  What makes you think the government would be better at job creation through confiscating more capital than individuals who created the wealth redistributing it through investments and purchases? Every summer home or car bought puts people to work as well, its not like the money disappears.
  - acidburnNSA 9y ago
    I'm not sure that tasking the government with job creation is a good solution. There are many kinds of wealth redistribution that people are talking about these days and I'm only pointing out that it may be necessary. What fraction of wealth are the richest among us spending and investing rather than saving? Yes Bill Gates and Warren Buffett are saving millions of lives, and yes we have Facebook now. But what should we tell Marta Ramos? Enjoy the $0.50 raise after all that hard work! If the wealth continues the trend to concentrate at the top then there will be an increasingly large and unhappy group of people who will elect increasingly non-mainstream politicians who promise to help them, eventually leading to who knows what kind of unpleasantries for all.
    - WalterBright 9y ago
      > What fraction of wealth are the richest among us spending and investing rather than saving? 100%. Nobody has a Scrooge McDuck cash vault. Bank deposits are also spent, in the form of depositor's money being loaned out by the bank.
      - acidburnNSA 9y ago
        I should said: "Investing in things that help society." Arguably, the bit of money in banks that gets loaned out as mortgages and then repackaged and sold off as mortgage-backed securities which then get bet on with even more leverage as collateralized debt obligations is helping the financial industry middle-men who cash out on the fees a lot. Obviously the classic depositing/loaning service of banks is essential for progress. But hundreds of billions of those deposits are going to making the rich richer. It would be nice if we could come up with a way to provide capital to people who need it while also maintaining a strong middle class. I don't know how to do this but it's worth talking about. What I really want to know is how much of people's savings (passively invested in banks and things like index funds) is going to fund things like the new Facebook vs. how much is not really doing that much.
        WalterBright 9y ago
        > Investing in things that help society. People tend to invest in things with a high rate of return. That high rate signals it is doing things that people want done and are willing to pay for. I.e. it helps society. > a way to provide capital to people who need it That's exactly what banks do. My bank branch is plastered with posters trying to sell a loan to everyone who walks in. > passively invested in banks and things like index funds If you're arguing those are not productive investments, I don't think that's very defensible. > how much is not really doing that much. If you're arguing that rich people tend to invest in low performing investments, that doesn't make much pragmatic sense. People get rich by investing in highly performing investments, not dogs.
        acidburnNSA 9y ago
  - mathiasben 9y ago
    but that isn't going to produce broad based results. for every vacation home and extra car purchased there's millions being underutilized. the tax policy enacted in 1954 saw to it that those funds were put to good use or taxed aggressively.
  - cakedoggie 9y ago
    Because we know what the alternative is, it is happening now.
deleted 9y ago
[deleted]
existencebox 9y ago
I just _had_ to rebut some of these: Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly cap. (And I'd also note that 10% of "any money over that" still adds up given some of the salaries paid to top execs) Secondly, Google's initial funding was only 100k in 98` dollars. The significant 25m round was from kleiner perkins and sequoia, and I certainly imagine that corporate funds for investment would not be held to the same limits as personal income tax. Finally, facebook was bootstrapped out of their own pocket until they got a 500k invesmtent from thiel in 04 $'s. Once again the "big" investment a year later came from a firm. In all of these cases the initial seed/bootstrapping money would come FAR under the 400k limit expressed, adjusted for inflation, and that assumes people wouldn't both save over multiple years, or that we wouldn't see more reliance on companies rather than individuals in early stage investment if the tax code shifted such that it was more advantageous. I defend this largely because in my own readings of history I've attributed a large amount of the current economic state to events of the late 70's and 80s, the tax code changes being a major one of them, and I think your points unfairly detract from the validity of reintroducing such tax structures.
- aswanson 9y ago
  Great, now rewind and re-run that history but with the Mike Marrkula, Andres Bectolsheim, and Peter Theil being taxed and 90 percent above 400k. How motivated would they have been to risk their capital knowing that 1)They have much less of it 2)What they do make will be taxed at 90 percent 3)Bonds are a safer bet. Further, in this thought experiment, assume that Perkins and Seqouia are much smaller, less successful firms with less money to invest because most wealthy individuals have made the rational choice that risk capital is not worth it.
  - existencebox 9y ago
    One would hope that we could draw the appropriate logarithmic taxation curve to constrain risky investment without eliminating it outright. I personally do not see a massive problem with curtailing some of the power/amount of money flowing around in some of these entities; but don't see it as an all or nothing as you suggest. I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio. (I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)
vanderZwan 9y ago
Since when do we need investment to come from one person?
- aswanson 9y ago
  We don't. But many good investments don't look good at first, and often it has taken a single person to go out on faith to put money into a high risk/high rate of return investment. If their capital gets taxed at a much higher rate, they will more likely be conservative with what they are allowed to keep and wont place risky bets on the future.

To invest in 2 hippies starting a personal computer company in 1976. To invest in 2 guys in starting a search engine in 1996. To invest in a kid in Harvard making a social network in 2004....

acidburnNSA 9y ago

True, but also for multiple homes, fancy cars, world travel, etc. When I worked at a hardware store we had a brochure we could order in a gold-plated Ducane grill for $4 million. That recent graph showing the top 1% having a 6% wealth growth rate is wholly unsustainable for any society. So there's something to be said for trying to level it off.

aswanson 9y ago
What makes you think the government would be better at job creation through confiscating more capital than individuals who created the wealth redistributing it through investments and purchases? Every summer home or car bought puts people to work as well, its not like the money disappears.
- acidburnNSA 9y ago
  I'm not sure that tasking the government with job creation is a good solution. There are many kinds of wealth redistribution that people are talking about these days and I'm only pointing out that it may be necessary. What fraction of wealth are the richest among us spending and investing rather than saving? Yes Bill Gates and Warren Buffett are saving millions of lives, and yes we have Facebook now. But what should we tell Marta Ramos? Enjoy the $0.50 raise after all that hard work! If the wealth continues the trend to concentrate at the top then there will be an increasingly large and unhappy group of people who will elect increasingly non-mainstream politicians who promise to help them, eventually leading to who knows what kind of unpleasantries for all.
  - WalterBright 9y ago
    > What fraction of wealth are the richest among us spending and investing rather than saving? 100%. Nobody has a Scrooge McDuck cash vault. Bank deposits are also spent, in the form of depositor's money being loaned out by the bank.
    - acidburnNSA 9y ago
      I should said: "Investing in things that help society." Arguably, the bit of money in banks that gets loaned out as mortgages and then repackaged and sold off as mortgage-backed securities which then get bet on with even more leverage as collateralized debt obligations is helping the financial industry middle-men who cash out on the fees a lot. Obviously the classic depositing/loaning service of banks is essential for progress. But hundreds of billions of those deposits are going to making the rich richer. It would be nice if we could come up with a way to provide capital to people who need it while also maintaining a strong middle class. I don't know how to do this but it's worth talking about. What I really want to know is how much of people's savings (passively invested in banks and things like index funds) is going to fund things like the new Facebook vs. how much is not really doing that much.
      - WalterBright 9y ago
        > Investing in things that help society. People tend to invest in things with a high rate of return. That high rate signals it is doing things that people want done and are willing to pay for. I.e. it helps society. > a way to provide capital to people who need it That's exactly what banks do. My bank branch is plastered with posters trying to sell a loan to everyone who walks in. > passively invested in banks and things like index funds If you're arguing those are not productive investments, I don't think that's very defensible. > how much is not really doing that much. If you're arguing that rich people tend to invest in low performing investments, that doesn't make much pragmatic sense. People get rich by investing in highly performing investments, not dogs.
        acidburnNSA 9y ago
- mathiasben 9y ago
  but that isn't going to produce broad based results. for every vacation home and extra car purchased there's millions being underutilized. the tax policy enacted in 1954 saw to it that those funds were put to good use or taxed aggressively.
- cakedoggie 9y ago
  Because we know what the alternative is, it is happening now.

deleted 9y ago

[deleted]

existencebox 9y ago

I just _had_ to rebut some of these: Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly cap. (And I'd also note that 10% of "any money over that" still adds up given some of the salaries paid to top execs) Secondly, Google's initial funding was only 100k in 98` dollars. The significant 25m round was from kleiner perkins and sequoia, and I certainly imagine that corporate funds for investment would not be held to the same limits as personal income tax. Finally, facebook was bootstrapped out of their own pocket until they got a 500k invesmtent from thiel in 04 $'s. Once again the "big" investment a year later came from a firm. In all of these cases the initial seed/bootstrapping money would come FAR under the 400k limit expressed, adjusted for inflation, and that assumes people wouldn't both save over multiple years, or that we wouldn't see more reliance on companies rather than individuals in early stage investment if the tax code shifted such that it was more advantageous. I defend this largely because in my own readings of history I've attributed a large amount of the current economic state to events of the late 70's and 80s, the tax code changes being a major one of them, and I think your points unfairly detract from the validity of reintroducing such tax structures.

aswanson 9y ago
Great, now rewind and re-run that history but with the Mike Marrkula, Andres Bectolsheim, and Peter Theil being taxed and 90 percent above 400k. How motivated would they have been to risk their capital knowing that 1)They have much less of it 2)What they do make will be taxed at 90 percent 3)Bonds are a safer bet. Further, in this thought experiment, assume that Perkins and Seqouia are much smaller, less successful firms with less money to invest because most wealthy individuals have made the rational choice that risk capital is not worth it.
- existencebox 9y ago
  One would hope that we could draw the appropriate logarithmic taxation curve to constrain risky investment without eliminating it outright. I personally do not see a massive problem with curtailing some of the power/amount of money flowing around in some of these entities; but don't see it as an all or nothing as you suggest. I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio. (I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)

vanderZwan 9y ago

Since when do we need investment to come from one person?

aswanson 9y ago
We don't. But many good investments don't look good at first, and often it has taken a single person to go out on faith to put money into a high risk/high rate of return investment. If their capital gets taxed at a much higher rate, they will more likely be conservative with what they are allowed to keep and wont place risky bets on the future.