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There is definitely a problem with funding which is harmful for value creators. Funding which is not optimally allocated is much worse than no funding at all.

There is definitely a problem with funding which is harmful for value creators. Funding which is not optimally allocated is much worse than no funding at all. Imagine if there are two people: - PersonA who has the potential to produce a lot of value but is useless when it comes to pitching ideas to investors because they spend all their effort thinking about how to solve problems. - PersonB who is useless at creating value but is really good at selling empty ideas to investors because they spend all of their effort thinking about their pitching techniques. In our economy, PersonB will beat PersonA every single time. What this means is that PersonA cannot get any funding at all and they end up being forced to work as an employee of PersonB who doesn't know what the heck they're doing because the only thing they are good at is attracting investors and telling them what they want to hear. In reality, it would be more efficient to let PersonA get all the funding and put PersonB on welfare (because PersonA would be smart enough to not hire them). As good as PersonB is at talking and convincing people to give them money, the reality is that they are less than useless for the economy. Unfortunately, we cannot BS our way to a stronger economy. If you watch some interviews by Masayoshi Son of Softbank, you will understand this. The guy is a genius at convincing people of the most fanciful, outlandish ideas - But he added no net value... He just distributed the funding he received to other snake oil salesmen like himself. The biggest VC in the world didn't know what the heck he was doing and was giving money to other people who also didn't know what the heck they were doing. I think it would be better if the activity of investing or loaning money would be made illegal. People should just get rich and retire; let the next person have a go. Getting rich and not retiring is immoral IMO. These people have every tool necessary to enjoy the rest of their lives but they prefer to stay in control and dedicate their entire careers to preventing other people from getting the same opportunities as they got. Because of them, our entire economy is now founded on the arbitrary top-down picking of winners instead of bottom-up value creation.

Nasrudith 7y ago
While bullshit is certainly a problem there are some major problems with your proposals. 1. How can you tell type A from type B before seeing them to ensure the "right" people get all of the funding? 2. Part of the reason the rich are encouraged to work is because they have proven high value of sort - regardless of the basis of the evaluation. The immorality assumes a smooth transition of similiar expertise would be trivial - along with experience not mattering. To be frank that is seldom the case. 3. Capital availability allows for upscaling which gives massive efficency over the small scale - it is why the megacompanies can retain dominance. If they could only produce product at a worse margin and quality then dealing with a mass of small scale producers would be a way to get concrete gains.
- cryptica 7y ago
  >> gives massive efficency over the small scale - it is why the megacompanies can retain dominance I don't buy this argument at all, especially when you consider that history has shown that they need to get bailed out every 10 years or so. They're successful because they're all running on free credit - Either credit that they took themselves against their own collateral or credit taken out by other entities who fund them (either as investors or as customers). It's very simple. Entities which have capital can use that capital as collateral to receive bank loans which they can use to multiply their profits. There is a nice interview on YouTube where Steven Schwarzman from The Blackstone Group (with assets of $500 billion) explains how this works (and has worked for 30 years as he openly brags): https://www.youtube.com/watch?v=7kThTbLUQdU https://www.youtube.com/watch?v=7kThTbLUQdU Basically whatever capital you have to invest, you can go a bank and take a loan against it and double how much of the underlying asset you can buy with the same base capital... Effectively this allows you to supercharge your ROI... Your $1 million which would have given you a ROI of 10% can be used as collateral to secure an additional $1 million loan so that you end up holding twice as much of the asset and 20% ROI (relative to your original 1 million). You just hold the asset for a year or two, then dump and repeat. Can small business without any capital compete against that? No because they're on a different playing field; one where 20% returns are simply not possible. You could argue that these people are taking a risk, but guess who the Federal Reserve Bank chose to execute the bailout for the covid19 financial crisis? A group called 'Blackrock' https://www.nytimes.com/2020/03/25/business/blackrock-federal-reserve.html https://www.nytimes.com/2020/03/25/business/blackrock-federa... - If that company sounds like 'Blackstone', it's no coincidence, the two companies share a common history. Search for 'Blackrock' in the Wikipedia article about 'The Blackstone group': https://en.wikipedia.org/wiki/The_Blackstone_Group https://en.wikipedia.org/wiki/The_Blackstone_Group When you consider that this credit is printed by banks out of thin air, it's no mystery why the rich get richer. The surplus ROI which they derive from access to free credit is basically just free money.

Nasrudith 7y ago

While bullshit is certainly a problem there are some major problems with your proposals. 1. How can you tell type A from type B before seeing them to ensure the "right" people get all of the funding? 2. Part of the reason the rich are encouraged to work is because they have proven high value of sort - regardless of the basis of the evaluation. The immorality assumes a smooth transition of similiar expertise would be trivial - along with experience not mattering. To be frank that is seldom the case. 3. Capital availability allows for upscaling which gives massive efficency over the small scale - it is why the megacompanies can retain dominance. If they could only produce product at a worse margin and quality then dealing with a mass of small scale producers would be a way to get concrete gains.

cryptica 7y ago
>> gives massive efficency over the small scale - it is why the megacompanies can retain dominance I don't buy this argument at all, especially when you consider that history has shown that they need to get bailed out every 10 years or so. They're successful because they're all running on free credit - Either credit that they took themselves against their own collateral or credit taken out by other entities who fund them (either as investors or as customers). It's very simple. Entities which have capital can use that capital as collateral to receive bank loans which they can use to multiply their profits. There is a nice interview on YouTube where Steven Schwarzman from The Blackstone Group (with assets of $500 billion) explains how this works (and has worked for 30 years as he openly brags): https://www.youtube.com/watch?v=7kThTbLUQdU https://www.youtube.com/watch?v=7kThTbLUQdU Basically whatever capital you have to invest, you can go a bank and take a loan against it and double how much of the underlying asset you can buy with the same base capital... Effectively this allows you to supercharge your ROI... Your $1 million which would have given you a ROI of 10% can be used as collateral to secure an additional $1 million loan so that you end up holding twice as much of the asset and 20% ROI (relative to your original 1 million). You just hold the asset for a year or two, then dump and repeat. Can small business without any capital compete against that? No because they're on a different playing field; one where 20% returns are simply not possible. You could argue that these people are taking a risk, but guess who the Federal Reserve Bank chose to execute the bailout for the covid19 financial crisis? A group called 'Blackrock' https://www.nytimes.com/2020/03/25/business/blackrock-federal-reserve.html https://www.nytimes.com/2020/03/25/business/blackrock-federa... - If that company sounds like 'Blackstone', it's no coincidence, the two companies share a common history. Search for 'Blackrock' in the Wikipedia article about 'The Blackstone group': https://en.wikipedia.org/wiki/The_Blackstone_Group https://en.wikipedia.org/wiki/The_Blackstone_Group When you consider that this credit is printed by banks out of thin air, it's no mystery why the rich get richer. The surplus ROI which they derive from access to free credit is basically just free money.