5 ms·

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,

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.
- JSavageOne 6y ago
  She was talking about an investment property, so yes a rental property. Of course hindsight is always 20-20 - anyone can say "I wish I had invested in Apple in 2003". I really don't understand the point of your comment. The point of my story was that our system incentives the wrong things, not that we're all investment geniuses. I could elaborate on how the choosing of the coffee shop location itself was an investment in the location after a ton of research and a lifetime of growing up in that city and knowing it inside and out, all of which worked out beyond expectations, but really that's totally missing the point here.
  - an_opabinia 6y ago
    Another interpretation is that the system clearly incentivized the right things, because she decided to start a cafe and not do something unproductive and buy property?
    - 6510 6y ago
      The concept we are doing is to incentivize education so that people see the point of it. If real estate investments work much better and/or education is bad enough the formula stops working.
    - JSavageOne 6y ago
      She couldn't afford to buy an apartment at the time, opening the coffee shop was way cheaper (about 1/6 the cost). In the country she's in, it's big news that rich people and celebrities are buying expensive real estate and flipping it shortly after making millions without doing any actual work.
perl4ever 6y ago
I see so many contradictions in this. You're saying management isn't real work, but you're also decrying the work ethic of someone who considers management too much work compared to passive ownership. You're implying that society would be better with more sacrifices to keep coffee shops running, but doesn't this take away from improving healthcare and education? Don't we have enough coffee shops and neighborhood restaurants, in the big picture? And the basic human factors of greed and laziness are not caused by an -ism, they're things that any -ism has to deal with. What would you think if someone claimed that a major problem in society is small business owners who are not lazy enough? People like your friend are making it harder for all of the competitors and their employees by working long hours for little money, so it becomes a "tragedy of the commons". It's not a result of ideal free markets and things inherent in capitalism, but a result of people not being ideal economically rational actors because they value fuzzy things like "independence" and "self-determination" too much.
- JSavageOne 6y ago
  Wow you're taking the story way too literally if your takeaway from my story is that you think I was saying that the world needs more coffee shops. The whole point is that our society rewards financial speculation and rentiership / wealth-extraction over labor, the topic of the book in this thread. I never said that management isn't work. I'm saying that society overly glorifies managers and underappreciates workers, as evidenced by CEOs getting paid 271x the average worker. Everyone can't be a manager, financier, or passive business owner, someone has to do the actual work. > What would you think if someone claimed that a major problem in society is small business owners who are not lazy enough? People like your friend are making it harder for all of the competitors and their employees by working long hours for little money, so it becomes a "tragedy of the commons" Sounds like you're blaming a systemic problem on individuals. Sad that people are misinterpreting my little story to think my takeaway is that everyone needs to work harder. If it were up to me, we'd have a universal basic income and anybody could do as they please without having the threat of destitution constantly looming under them.
  - perl4ever 6y ago
divbzero 6y ago
> my point is that our system incentivizes the wrong things - namely financial asset speculation and wealth extraction over real work The actions of the Federal Reserve over the past three decades have contributed to these incentives. We’ve experienced plentiful supply of money during a period when productivity gains have kept consumer prices low, so money has flowed toward a steady upward pressure on asset prices and a golden age for asset owners.
6510 6y ago
Now that we've mapped crucial occupations we should double the minimum wage for those imho.

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.

JSavageOne 6y ago
She was talking about an investment property, so yes a rental property. Of course hindsight is always 20-20 - anyone can say "I wish I had invested in Apple in 2003". I really don't understand the point of your comment. The point of my story was that our system incentives the wrong things, not that we're all investment geniuses. I could elaborate on how the choosing of the coffee shop location itself was an investment in the location after a ton of research and a lifetime of growing up in that city and knowing it inside and out, all of which worked out beyond expectations, but really that's totally missing the point here.
- an_opabinia 6y ago
  Another interpretation is that the system clearly incentivized the right things, because she decided to start a cafe and not do something unproductive and buy property?
  - 6510 6y ago
    The concept we are doing is to incentivize education so that people see the point of it. If real estate investments work much better and/or education is bad enough the formula stops working.
  - JSavageOne 6y ago
    She couldn't afford to buy an apartment at the time, opening the coffee shop was way cheaper (about 1/6 the cost). In the country she's in, it's big news that rich people and celebrities are buying expensive real estate and flipping it shortly after making millions without doing any actual work.

perl4ever 6y ago

I see so many contradictions in this. You're saying management isn't real work, but you're also decrying the work ethic of someone who considers management too much work compared to passive ownership. You're implying that society would be better with more sacrifices to keep coffee shops running, but doesn't this take away from improving healthcare and education? Don't we have enough coffee shops and neighborhood restaurants, in the big picture? And the basic human factors of greed and laziness are not caused by an -ism, they're things that any -ism has to deal with. What would you think if someone claimed that a major problem in society is small business owners who are not lazy enough? People like your friend are making it harder for all of the competitors and their employees by working long hours for little money, so it becomes a "tragedy of the commons". It's not a result of ideal free markets and things inherent in capitalism, but a result of people not being ideal economically rational actors because they value fuzzy things like "independence" and "self-determination" too much.

JSavageOne 6y ago
Wow you're taking the story way too literally if your takeaway from my story is that you think I was saying that the world needs more coffee shops. The whole point is that our society rewards financial speculation and rentiership / wealth-extraction over labor, the topic of the book in this thread. I never said that management isn't work. I'm saying that society overly glorifies managers and underappreciates workers, as evidenced by CEOs getting paid 271x the average worker. Everyone can't be a manager, financier, or passive business owner, someone has to do the actual work. > What would you think if someone claimed that a major problem in society is small business owners who are not lazy enough? People like your friend are making it harder for all of the competitors and their employees by working long hours for little money, so it becomes a "tragedy of the commons" Sounds like you're blaming a systemic problem on individuals. Sad that people are misinterpreting my little story to think my takeaway is that everyone needs to work harder. If it were up to me, we'd have a universal basic income and anybody could do as they please without having the threat of destitution constantly looming under them.
- perl4ever 6y ago

divbzero 6y ago

> my point is that our system incentivizes the wrong things - namely financial asset speculation and wealth extraction over real work The actions of the Federal Reserve over the past three decades have contributed to these incentives. We’ve experienced plentiful supply of money during a period when productivity gains have kept consumer prices low, so money has flowed toward a steady upward pressure on asset prices and a golden age for asset owners.

6510 6y ago

Now that we've mapped crucial occupations we should double the minimum wage for those imho.