9 ms·

The Value of Everything: Making and Taking in the Global Economy

69 points by SkyMarshal 6y ago

olivermarks 6y ago
I also highly recommend Rana Foroohar's two books 'Makers and Takers: The Rise of Finance and the Fall of American Business' (2016) and 'Don't Be Evil: How Big Tech Betrayed Its Founding Principles -- and All of Us' (2019). These are both easy to read, highly informative and well thought through.
- hitech_dude 6y ago
  But are these books really surprising? Is it any different that the way Western middle class plundered the developing world resources? It's just the wheel going round :( SAD!! :(
SkyMarshal 6y ago
This is a fascinating book and relevant to some critiques that pop up on HN from time to time. Too much of the US economy these days has become about wealth extraction or speculation, rather than real wealth creation. We’ve outsourced large portions of our manufacturing ecosystem while arguing that design, services and finance will make up for it. This book traces the root of the problem back to changes in how Economics analyzes and measures economic activity, and examines some industries through this lense, including VC. Notably, prior to the development of Marginal Utility, economists from Adam Smith to Karl Marx and everyone in between were concerned with the distinction between productive and unproductive economic activity. For example, manufacturing was productive and wealth-creative, while rents levied by the landed gentry were unproductive and extractive. Any form of cornering a market and extracting rent is assumed extractive, unless proven otherwise. The term they used was the Production Boundary, with productive activities on one side and unproductive on the other. A few, like law, that were inherently unproductive but that were necessary inputs to productive activity, are situated on the border. Marginal Utility made value subjective rather than objective. If a product or activity has demand for any reason and could thus fetch a price on a market, then it has value and is productive. This made economics more mathematically tractable as well, and became the dominant Economic theory. But it has also enabled extractive and speculative activities to claim to be productive, and thus gain political acceptance and support. The book argues this is the root of the problem facing the US and other developed countries, and that solving it requires new economic measurements and theories that restore the distinction between productive activity vs extractive or speculative activity.
- lifeisstillgood 6y ago
  I really think economics is undergoing a sea change - a lot of what was mainstream theory is getting overturned (as a lay person looking from the outside) what with MMT and the above (see also Josh Ryan-Collins). I am watching an interesting series from UCL (cannot find it right now) Edit: search "rethinking capitalism" UCL on youtube there is a list (mix?) of twenty videos. It seems to be an undergraduate course aimed at people in public policy. Include the above Marianna Mazzucato as well Edit edit : mainstream their overturned is probably a bit rich - let's say now-liberalism is getting cut out
  - 6510 6y ago
    https://www.youtube.com/playlist?list=PLCB5zYFnXOqye7Z8vs56KPfso2p3cHu8g https://www.youtube.com/playlist?list=PLCB5zYFnXOqye7Z8vs56K...
- clairity 6y ago
  agreed on the lament about us getting away from distinguishing productive/unproductive uses (an argument i've made a lot and am glad to see getting more light of day), but your critique sounds overly pessimistic about marginal utility, which is a fairly value-neutral concept that's been pressed into the service of politics and ideology. value will never be purely objective (at least not in our lifetimes or many, many after), but we can ground it in bedrock shared values like fairness and industry.
  - SkyMarshal 6y ago
    Perhaps I should have clarified, my comment above is 100% paraphrasing what is written in the book. It’s not my critique, but the author’s.
    - clairity 6y ago
      kinda figured, but by submitting the link and quoting it that way, it seems you agree, or at least are pursuaded somewhat? or have different takes on these things? a lot of politicoeconomic theory over the last many decades has been a one-sided push to justify rentierism, consolidate wealth/power, and corner sources of wealth extraction (e.g., globalism, trickle-down, labor movement vilification, etc.). it's a slow boil toward fascism, which is concerning to say the least.
rossdavidh 6y ago
"In this scathing indictment of our current global financial system..." Ugh. Lost me right there. I even agree with nearly everything it says in the summary, but if there's one thing I'm _not_ looking for, it's a book of "scathing indictment" of anything. I get plenty of anger and vicious conversation for free on the internet, unasked for, to want to seek out more. Calm, reasoned analysis would be welcome. If this book is actually "scathing" (and that's not just some publisher's idea of what people are looking for), I can do without, thanks.
- tacocataco 6y ago
  Is logic and reasoning working?
- kristianc 6y ago
  > The book uses case studies–from Silicon Valley to the financial sector to big pharma–to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP. This also reads like the book was written with the conclusions already in mind, and the case studies cherry picked.
  - bryanlarsen 6y ago
    Or it just means that the cover blurbs were written after the book, which is normal practice.
  - SkyMarshal 6y ago
    That’s a possibility, but the build up in explaining those conclusions is in depth and comprehensive. The exploration of the problem space is worth reading, even if you disagree with the conclusions and solution proposals.
    - deleted 6y ago
      [deleted]
- dasil003 6y ago
alexashka 6y ago
These types of books should all be under 'identify problems, offer unrealistic solutions' category. It's really not that hard to identify problems. Weaving them into a somewhat coherent narrative is a little more work. Having realistic solutions is the real kicker. Take Windows, the operating system. It is not unlike a political system - full of problems. Imagine people writing books about where it went wrong and how we need to rethink operating systems to fix it. Wat? Here's a quote from the books' page: > The lesson here is urgent and sobering: to rescue our economy from the next, inevitable crisis and to foster longterm economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society. The lesson is that we need to rethink something? Very cool, we are going to rethink our way out of living in a dysfunctional plutocracy...
- spaetzleesser 6y ago
  "These types of books should all be under 'identify problems, offer unrealistic solutions' category." I tend to agree. Marx was right in many aspects of his analysis but his solution wasn't correct. However, we shouldn't dismiss people who identify problems correctly but offer unrealistic solutions. We should accept that these problems exist and look for solutions even if the author themselves doesn't get it right. The current ruling class likes to shout down everything that doesn't benefit them.
- jahaja 6y ago
  Identifying a problem and offering a solution is very different things. The latter might not fit the scope of the book. Another reason is that if one doesn't offer a comprehensive solution, but rather a shallow one, too many people will just shut-off and discard it as utopian "anti-capitalist" or "socialist". The weird thing is that this usually makes people throw out both the diagnosis and the proposed solution, even if the former is accurate.
- SkyMarshal 6y ago
  Agreed. This seems to be a case where despite understanding the problem, the solution is not readily apparent. The author does a good job of exploring the problem, and states that any solution will need to include reformulating economic theory of value. But I think a viable reformulation will extend or build on marginal utility rather than replacing it, perhaps with differences in second order effects of different activities on value creation.
unixhero 6y ago
This reminds me of the Ferenghi lore of "The Great Material Continuum" https://stt.wiki/wiki/Great_Material_Continuum_Texts https://stt.wiki/wiki/Great_Material_Continuum_Texts
hogFeast 6y ago
I love how the author complains about wealth extraction but the author's last book opined about the brilliant entrepreneurial ability of govts. Just a guess but I never got the impression that the author understood anything about capitalism or what companies in the private sector do. You can complain about finance and make all kinds of statements with horrible historical parallels...the fact remains: this isn't like law, if something isn't valuable in some way then you don't get paid for it. The definition of value is what someone else will pay. The govt, by contrast, is the ultimate wealth extraction vehicle.
- amelius 6y ago
  > The definition of value is what someone else will pay. Never heard of extortionate pricing? Sometimes a large part of the price we pay for a good is actually the price of the system, not the price of the good.
  - hogFeast 6y ago
    Yes, which is why I said it wasn't like law. Law is the price of the system, the price to train lawyers, the intentional complexity of law so that there is more work, time, and complexity. Saying that there is extortionate pricing in finance is hard to prove given the level of competition. The areas of lowest competition, like deposit banking, are generally not "high finance", big salary stuff. And most of the barriers to entry in those areas are imposed by govt, not some natural consequence of finance (again, the author has an amazing ability to pick and choose what facts are relevant). Indeed, the main reason why the industry has consolidated was govt intervention after the GFC. I think what people mean is: oh, this person makes more money than I THINK they should have (pretty much inevitable with academics). But that is something else. Empirically, this line of thought also found no success in the 20th century. Lots of people have thought that another group of people make too much money. I am not aware of any instance where they were able to take that money costlessly (i.e. they were wrong). The point of capitalism is these decisions being decentralised, and we don't need to rely on the self-appointed geniuses to tell us who is making too much money (spoiler: they will think anyone who has more money is an evil extractor, and that they should have some for pointless work...quite why the author doesn't think they are an extractor is worth examining).
benjohnson1707 6y ago
The problem eventually seems to boil down to this: 'if you don't make stuff, then there is no stuff' (E. Musk) And there are less and less incentives to contribute in making / selling things vs. just making more money out of money for a living. It's an important debate that the MM is trying to facilitate. And actually quite a good historic recap of the term value over time. But while the finance economy 'feels morally wrong' (especially when being on the loser side), that doesn't make for a convincing argument yet.
- amiga_500 6y ago
  Finance is subject to the same dichotomy. Some activities, like identifying lending to productive endeavours, are of some value. As are derivatives for producers looking to lock in prices. Then there is also the rentier side, such as lending to non-productive enterprises. People will say, as they do with everything now, "who can make the distinction". Adam Smith could. I think we can. Not trying in case we accidentally inhibit a few rich financiers from become even more rich, where the prize of extricating ourselves from what is fast becoming a nightmare mess is left untouched, is a mistake.
  - twblalock 6y ago
    > People will say, as they do with everything now, "who can make the distinction". Adam Smith could. I think we can. We already do. Finance is an extremely heavily regulated industry. The regulations make all kinds of distinctions. The hard part is deciding what the regulations should be. What, specifically, would you change?
    - amiga_500 6y ago
      Regulations are legal vs illegal, they do not attempt to disambiguate wealth creation vs wealth appropriation. I'd encourage banks to lend into productive industries by taxing land, not labour (and properly tax externalities like pollution) , capturing publicly created location value and allowing wealth creators to retain more (all?) of the value they create. --- Replying to the sibling comment as yet again after typing "rent seeking" => "you're submitting too fast". Surprise! --- I think we should tax things that have an opportunity cost or externality. If you keep gold in a vault, assuming there is enough for industrial production (if not you have a lot of gold!), then please continue to do so. It doesn't impact me. If you hold land I and others cannot use it. You did not create it, society should be compensated via a tax, as the land itself has value due to society at large. A square plot in the middle of nowhere is worth considerably less than a square plot in NY. If you dump sewage into a river or burn lots of coal, you are also damaging the common wealth.
JSavageOne 6y ago
I have a friend who opened a coffee shop a year ago. It's gone really well, she's been profitable beyond expectations, etc (this is not in the U.S. by the way, if it were I'd imagine there's a good chance COVID lockdown would've killed the business, but I digress). I said "wow you're doing really well, have you thought about opening a second location?" Her response? "I thought about it, but it's a lot of work. I actually wish that instead of opening this coffee shop, I had used that money instead to buy an apartment. I would've made more money on the price appreciation doing nothing than what I've made so far on this coffee shop." I was so shocked and disappointed to hear this, but at the same time I couldn't blame her. And to me this basically sums up the problem with modern capitalism. The incentives are all wrong. Our top university graduates overwhelmingly want to work in finance and consulting. Living the "dream" is owning 15 rental properties and living off "passive" income. Nobody wants to do actual work, and even worse, there's often even a negative stigma with doing real work, as if managers and executives are "above" labor. When "making money" is equated to "providing value", it incentives and morally rationalizes the vain pursuit of money, even if at society's expense. I'm guessing this mental gymnastics rationalizing and even glorifying money making and price gouging is a big reason why in the U.S. we still haven't fixed the skyrocketing cost of healthcare and higher education. EDIT: Since apparently people are misconstruing the point of the story, my point is not that the world needs more coffee shops and worker bees doing busy work, my point is that our system incentivizes the wrong things - namely financial asset speculation and wealth extraction over real work (the whole point of the book in this thread). Flipping a condo contributes nothing to society.
- an_opabinia 6y ago
  She'd have to sell the apartment to get the cash from that appreciation. If she liked where she is living, is she going to sell that apartment at the "right time?" And then move? Maybe she's talking about an apartment she wouldn't live in. If she wanted to buy to rent, and it's in an attractive neighborhood, isn't the price going to reflect its attractiveness? And then, are neighborhoods always going to get more attractive in the future? Isn't a coffee shop going to be successful in the same neighborhood rented property would? Wouldn't it fail in a correlated way to property? If it's so easy and obvious, haven't all the good deals in buy-to-rent been bought? Are you going to do a better job than someone marginally more effective a land lord? What about the #1 landlord? What if the neighborhood gets less attractive, and you must sell below what you paid for? What if it's the same attractive, but everyone sells at the same time so prices go down anyway? This happened a lot recently in markets like Miami. No of course what she's saying makes no sense. It's got this... low-information Robinhood Reddit level of finance knowledge that just doesn't reflect how few rags-to-riches landlord millionaires there are. They conflate hindsight with insight. There's the extremely narrow group of people, who won lottery tickets by living in houses in shitty neighborhoods that suddenly gentrified and yes, now they can sell their homes and move and become very wealthy. In California this is enshrined in Prop 13 and it is the single most important reason your friend could never achieve what she's saying here: she would be outcompeted by lotto ticket winners who pay basically no taxes and therefore enjoy margins on rent radically higher than she ever could. In places around the world things like Prop 13 are the actual economic advantages that make capital intensive businesses like property ownership effective.
noch 6y ago
It's worth revisiting Thiel's, "You are not a lottery ticket" (2013) https://www.youtube.com/watch?v=iZM_JmZdqCw https://www.youtube.com/watch?v=iZM_JmZdqCw, in which he outlines a compelling model for reasoning about the present world and the future: Outlook can be located on a grid where: - y-axis: optimistic/pessimistic - x-axis determinate/indeterminate The key point is that we could interpret the US in 1982-2007 as an historical moment where the general mindset was optimistic-indeterminate i.e. we assumed the future will be better but we had no idea exactly what concrete steps to take to make it better. In such an environment, finance and law are the dominant industries (while engineering and art decline). After 2008, there was a shift in mindset to pessimistic-indeterminate in which there is a large increase in discretionary expenditure on insurance/savings (with education being a form of insurance, thus the education bubble: "I don't know what my degree is for, but I had better get it anyway to avoid falling through the ever larger cracks in society."), while real investment in novel/radical projects declines.
LatteLazy 6y ago
It really worries me that people try to understand economics or society by starting with how things should be and labeling anything else "wrong". We've had 1000s of cults and ideologies on this basis. Today we get weird long diatribes and books pushing conspiracy theories. The truth is humans are an efficient market: if someone finds a better way of doing things, it spreads and takes over, this are the way they are because we tried other ways and they were worse. If something is bad, its either because we can't get rid of it without making other things worse or because people themselves are bad and like it this way. This theory is very boring, but overwhelmingly accurate imho.

69 points by SkyMarshal 6y ago

I also highly recommend Rana Foroohar's two books 'Makers and Takers: The Rise of Finance and the Fall of American Business' (2016) and 'Don't Be Evil: How Big Tech Betrayed Its Founding Principles -- and All of Us' (2019). These are both easy to read, highly informative and well thought through.

hitech_dude 6y ago
But are these books really surprising? Is it any different that the way Western middle class plundered the developing world resources? It's just the wheel going round :( SAD!! :(

SkyMarshal 6y ago

This is a fascinating book and relevant to some critiques that pop up on HN from time to time. Too much of the US economy these days has become about wealth extraction or speculation, rather than real wealth creation. We’ve outsourced large portions of our manufacturing ecosystem while arguing that design, services and finance will make up for it. This book traces the root of the problem back to changes in how Economics analyzes and measures economic activity, and examines some industries through this lense, including VC. Notably, prior to the development of Marginal Utility, economists from Adam Smith to Karl Marx and everyone in between were concerned with the distinction between productive and unproductive economic activity. For example, manufacturing was productive and wealth-creative, while rents levied by the landed gentry were unproductive and extractive. Any form of cornering a market and extracting rent is assumed extractive, unless proven otherwise. The term they used was the Production Boundary, with productive activities on one side and unproductive on the other. A few, like law, that were inherently unproductive but that were necessary inputs to productive activity, are situated on the border. Marginal Utility made value subjective rather than objective. If a product or activity has demand for any reason and could thus fetch a price on a market, then it has value and is productive. This made economics more mathematically tractable as well, and became the dominant Economic theory. But it has also enabled extractive and speculative activities to claim to be productive, and thus gain political acceptance and support. The book argues this is the root of the problem facing the US and other developed countries, and that solving it requires new economic measurements and theories that restore the distinction between productive activity vs extractive or speculative activity.

lifeisstillgood 6y ago
I really think economics is undergoing a sea change - a lot of what was mainstream theory is getting overturned (as a lay person looking from the outside) what with MMT and the above (see also Josh Ryan-Collins). I am watching an interesting series from UCL (cannot find it right now) Edit: search "rethinking capitalism" UCL on youtube there is a list (mix?) of twenty videos. It seems to be an undergraduate course aimed at people in public policy. Include the above Marianna Mazzucato as well Edit edit : mainstream their overturned is probably a bit rich - let's say now-liberalism is getting cut out
- 6510 6y ago
  https://www.youtube.com/playlist?list=PLCB5zYFnXOqye7Z8vs56KPfso2p3cHu8g https://www.youtube.com/playlist?list=PLCB5zYFnXOqye7Z8vs56K...
clairity 6y ago
agreed on the lament about us getting away from distinguishing productive/unproductive uses (an argument i've made a lot and am glad to see getting more light of day), but your critique sounds overly pessimistic about marginal utility, which is a fairly value-neutral concept that's been pressed into the service of politics and ideology. value will never be purely objective (at least not in our lifetimes or many, many after), but we can ground it in bedrock shared values like fairness and industry.
- SkyMarshal 6y ago
  Perhaps I should have clarified, my comment above is 100% paraphrasing what is written in the book. It’s not my critique, but the author’s.
  - clairity 6y ago
    kinda figured, but by submitting the link and quoting it that way, it seems you agree, or at least are pursuaded somewhat? or have different takes on these things? a lot of politicoeconomic theory over the last many decades has been a one-sided push to justify rentierism, consolidate wealth/power, and corner sources of wealth extraction (e.g., globalism, trickle-down, labor movement vilification, etc.). it's a slow boil toward fascism, which is concerning to say the least.

rossdavidh 6y ago

"In this scathing indictment of our current global financial system..." Ugh. Lost me right there. I even agree with nearly everything it says in the summary, but if there's one thing I'm _not_ looking for, it's a book of "scathing indictment" of anything. I get plenty of anger and vicious conversation for free on the internet, unasked for, to want to seek out more. Calm, reasoned analysis would be welcome. If this book is actually "scathing" (and that's not just some publisher's idea of what people are looking for), I can do without, thanks.

tacocataco 6y ago
Is logic and reasoning working?
kristianc 6y ago
> The book uses case studies–from Silicon Valley to the financial sector to big pharma–to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP. This also reads like the book was written with the conclusions already in mind, and the case studies cherry picked.
- bryanlarsen 6y ago
  Or it just means that the cover blurbs were written after the book, which is normal practice.
- SkyMarshal 6y ago
  That’s a possibility, but the build up in explaining those conclusions is in depth and comprehensive. The exploration of the problem space is worth reading, even if you disagree with the conclusions and solution proposals.
  - deleted 6y ago
    [deleted]
dasil003 6y ago

alexashka 6y ago

These types of books should all be under 'identify problems, offer unrealistic solutions' category. It's really not that hard to identify problems. Weaving them into a somewhat coherent narrative is a little more work. Having realistic solutions is the real kicker. Take Windows, the operating system. It is not unlike a political system - full of problems. Imagine people writing books about where it went wrong and how we need to rethink operating systems to fix it. Wat? Here's a quote from the books' page: > The lesson here is urgent and sobering: to rescue our economy from the next, inevitable crisis and to foster longterm economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society. The lesson is that we need to rethink something? Very cool, we are going to rethink our way out of living in a dysfunctional plutocracy...

spaetzleesser 6y ago
"These types of books should all be under 'identify problems, offer unrealistic solutions' category." I tend to agree. Marx was right in many aspects of his analysis but his solution wasn't correct. However, we shouldn't dismiss people who identify problems correctly but offer unrealistic solutions. We should accept that these problems exist and look for solutions even if the author themselves doesn't get it right. The current ruling class likes to shout down everything that doesn't benefit them.
jahaja 6y ago
Identifying a problem and offering a solution is very different things. The latter might not fit the scope of the book. Another reason is that if one doesn't offer a comprehensive solution, but rather a shallow one, too many people will just shut-off and discard it as utopian "anti-capitalist" or "socialist". The weird thing is that this usually makes people throw out both the diagnosis and the proposed solution, even if the former is accurate.
SkyMarshal 6y ago
Agreed. This seems to be a case where despite understanding the problem, the solution is not readily apparent. The author does a good job of exploring the problem, and states that any solution will need to include reformulating economic theory of value. But I think a viable reformulation will extend or build on marginal utility rather than replacing it, perhaps with differences in second order effects of different activities on value creation.

unixhero 6y ago

This reminds me of the Ferenghi lore of "The Great Material Continuum" https://stt.wiki/wiki/Great_Material_Continuum_Texts https://stt.wiki/wiki/Great_Material_Continuum_Texts

hogFeast 6y ago

I love how the author complains about wealth extraction but the author's last book opined about the brilliant entrepreneurial ability of govts. Just a guess but I never got the impression that the author understood anything about capitalism or what companies in the private sector do. You can complain about finance and make all kinds of statements with horrible historical parallels...the fact remains: this isn't like law, if something isn't valuable in some way then you don't get paid for it. The definition of value is what someone else will pay. The govt, by contrast, is the ultimate wealth extraction vehicle.

amelius 6y ago
> The definition of value is what someone else will pay. Never heard of extortionate pricing? Sometimes a large part of the price we pay for a good is actually the price of the system, not the price of the good.
- hogFeast 6y ago
  Yes, which is why I said it wasn't like law. Law is the price of the system, the price to train lawyers, the intentional complexity of law so that there is more work, time, and complexity. Saying that there is extortionate pricing in finance is hard to prove given the level of competition. The areas of lowest competition, like deposit banking, are generally not "high finance", big salary stuff. And most of the barriers to entry in those areas are imposed by govt, not some natural consequence of finance (again, the author has an amazing ability to pick and choose what facts are relevant). Indeed, the main reason why the industry has consolidated was govt intervention after the GFC. I think what people mean is: oh, this person makes more money than I THINK they should have (pretty much inevitable with academics). But that is something else. Empirically, this line of thought also found no success in the 20th century. Lots of people have thought that another group of people make too much money. I am not aware of any instance where they were able to take that money costlessly (i.e. they were wrong). The point of capitalism is these decisions being decentralised, and we don't need to rely on the self-appointed geniuses to tell us who is making too much money (spoiler: they will think anyone who has more money is an evil extractor, and that they should have some for pointless work...quite why the author doesn't think they are an extractor is worth examining).

benjohnson1707 6y ago

The problem eventually seems to boil down to this: 'if you don't make stuff, then there is no stuff' (E. Musk) And there are less and less incentives to contribute in making / selling things vs. just making more money out of money for a living. It's an important debate that the MM is trying to facilitate. And actually quite a good historic recap of the term value over time. But while the finance economy 'feels morally wrong' (especially when being on the loser side), that doesn't make for a convincing argument yet.

amiga_500 6y ago
Finance is subject to the same dichotomy. Some activities, like identifying lending to productive endeavours, are of some value. As are derivatives for producers looking to lock in prices. Then there is also the rentier side, such as lending to non-productive enterprises. People will say, as they do with everything now, "who can make the distinction". Adam Smith could. I think we can. Not trying in case we accidentally inhibit a few rich financiers from become even more rich, where the prize of extricating ourselves from what is fast becoming a nightmare mess is left untouched, is a mistake.
- twblalock 6y ago
  > People will say, as they do with everything now, "who can make the distinction". Adam Smith could. I think we can. We already do. Finance is an extremely heavily regulated industry. The regulations make all kinds of distinctions. The hard part is deciding what the regulations should be. What, specifically, would you change?
  - amiga_500 6y ago
    Regulations are legal vs illegal, they do not attempt to disambiguate wealth creation vs wealth appropriation. I'd encourage banks to lend into productive industries by taxing land, not labour (and properly tax externalities like pollution) , capturing publicly created location value and allowing wealth creators to retain more (all?) of the value they create. --- Replying to the sibling comment as yet again after typing "rent seeking" => "you're submitting too fast". Surprise! --- I think we should tax things that have an opportunity cost or externality. If you keep gold in a vault, assuming there is enough for industrial production (if not you have a lot of gold!), then please continue to do so. It doesn't impact me. If you hold land I and others cannot use it. You did not create it, society should be compensated via a tax, as the land itself has value due to society at large. A square plot in the middle of nowhere is worth considerably less than a square plot in NY. If you dump sewage into a river or burn lots of coal, you are also damaging the common wealth.

JSavageOne 6y ago

I have a friend who opened a coffee shop a year ago. It's gone really well, she's been profitable beyond expectations, etc (this is not in the U.S. by the way, if it were I'd imagine there's a good chance COVID lockdown would've killed the business, but I digress). I said "wow you're doing really well, have you thought about opening a second location?" Her response? "I thought about it, but it's a lot of work. I actually wish that instead of opening this coffee shop, I had used that money instead to buy an apartment. I would've made more money on the price appreciation doing nothing than what I've made so far on this coffee shop." I was so shocked and disappointed to hear this, but at the same time I couldn't blame her. And to me this basically sums up the problem with modern capitalism. The incentives are all wrong. Our top university graduates overwhelmingly want to work in finance and consulting. Living the "dream" is owning 15 rental properties and living off "passive" income. Nobody wants to do actual work, and even worse, there's often even a negative stigma with doing real work, as if managers and executives are "above" labor. When "making money" is equated to "providing value", it incentives and morally rationalizes the vain pursuit of money, even if at society's expense. I'm guessing this mental gymnastics rationalizing and even glorifying money making and price gouging is a big reason why in the U.S. we still haven't fixed the skyrocketing cost of healthcare and higher education. EDIT: Since apparently people are misconstruing the point of the story, my point is not that the world needs more coffee shops and worker bees doing busy work, my point is that our system incentivizes the wrong things - namely financial asset speculation and wealth extraction over real work (the whole point of the book in this thread). Flipping a condo contributes nothing to society.

an_opabinia 6y ago
She'd have to sell the apartment to get the cash from that appreciation. If she liked where she is living, is she going to sell that apartment at the "right time?" And then move? Maybe she's talking about an apartment she wouldn't live in. If she wanted to buy to rent, and it's in an attractive neighborhood, isn't the price going to reflect its attractiveness? And then, are neighborhoods always going to get more attractive in the future? Isn't a coffee shop going to be successful in the same neighborhood rented property would? Wouldn't it fail in a correlated way to property? If it's so easy and obvious, haven't all the good deals in buy-to-rent been bought? Are you going to do a better job than someone marginally more effective a land lord? What about the #1 landlord? What if the neighborhood gets less attractive, and you must sell below what you paid for? What if it's the same attractive, but everyone sells at the same time so prices go down anyway? This happened a lot recently in markets like Miami. No of course what she's saying makes no sense. It's got this... low-information Robinhood Reddit level of finance knowledge that just doesn't reflect how few rags-to-riches landlord millionaires there are. They conflate hindsight with insight. There's the extremely narrow group of people, who won lottery tickets by living in houses in shitty neighborhoods that suddenly gentrified and yes, now they can sell their homes and move and become very wealthy. In California this is enshrined in Prop 13 and it is the single most important reason your friend could never achieve what she's saying here: she would be outcompeted by lotto ticket winners who pay basically no taxes and therefore enjoy margins on rent radically higher than she ever could. In places around the world things like Prop 13 are the actual economic advantages that make capital intensive businesses like property ownership effective.

noch 6y ago

It's worth revisiting Thiel's, "You are not a lottery ticket" (2013) https://www.youtube.com/watch?v=iZM_JmZdqCw https://www.youtube.com/watch?v=iZM_JmZdqCw, in which he outlines a compelling model for reasoning about the present world and the future: Outlook can be located on a grid where: - y-axis: optimistic/pessimistic - x-axis determinate/indeterminate The key point is that we could interpret the US in 1982-2007 as an historical moment where the general mindset was optimistic-indeterminate i.e. we assumed the future will be better but we had no idea exactly what concrete steps to take to make it better. In such an environment, finance and law are the dominant industries (while engineering and art decline). After 2008, there was a shift in mindset to pessimistic-indeterminate in which there is a large increase in discretionary expenditure on insurance/savings (with education being a form of insurance, thus the education bubble: "I don't know what my degree is for, but I had better get it anyway to avoid falling through the ever larger cracks in society."), while real investment in novel/radical projects declines.

LatteLazy 6y ago

It really worries me that people try to understand economics or society by starting with how things should be and labeling anything else "wrong". We've had 1000s of cults and ideologies on this basis. Today we get weird long diatribes and books pushing conspiracy theories. The truth is humans are an efficient market: if someone finds a better way of doing things, it spreads and takes over, this are the way they are because we tried other ways and they were worse. If something is bad, its either because we can't get rid of it without making other things worse or because people themselves are bad and like it this way. This theory is very boring, but overwhelmingly accurate imho.