5 ms·

> If it were completely inconsequential to the outside world, then others would not value it, and it wouldn't be considered wealth. That makes no sense. Just b

by bhupy 6y ago

> If it were completely inconsequential to the outside world, then others would not value it, and it wouldn't be considered wealth. That makes no sense. Just because the fair market value of Elon Musk's holdings in SpaceX and Tesla is some collectively decided amount, doesn't mean that Elon Musk actually possesses that money and can do anything meaningful with it. If he wants to do anything meaningful at all with that theoretical value, he will have to liquidate some of it and turn it into non-theoretical money, and that is taxed already. If he just lets it wither away, then it's of no use to anyone else. > Where it really matters is when the wealth distribution becomes more unequal, resulting in less ability to initiate new economic ventures But this just hasn't been true at all. Just because Bezos is a 100 billionaire on paper, doesn't mean that I will have a harder time raising venture capital for my startup. Wealth isn't zero-sum. And the paper value of one's wealth isn't backed by liquid money, I.e. Bezos's 100+ billion in wealth doesn't actually lock 100 billion dollars in cash from other investments. If you're making the argument that it's difficult to initiate a new economic venture in the same space as Amazon, that's just because Amazon is a strong company — there is nothing wrong with that.

epistasis 6y ago
There's a huge difference between wealth and money; having massive wealth and valuing it in dollars may seem nonsensical, and at some level it is, yet it is the way that everybody operates. The "Fair market value" is not inconsequential even if wealth is not liquid. Regarding going to a VC to get capital: think about how this process works in one very tiny slice of the economy. You build trust with a small set of people that are the arbiters of capital and who gets the resources to start a new venture. If there was only one VC firm in the valley, it would be disastrous because they would hold all the power. It is only through the agglomeration of many potential sources of capital that really makes the system run well. In the rest of the economy, there are few VCs, and for a lot of profitable, but smaller businesses, capital is super hard to come by. A person who sees a future in, for example, electrification retrofits of homes and has several good ideas about how to make it cheaper and more economically efficient, is going to have a really hard tome getting going. However, if their own community knew about this person's ability to scale a small business, and knew of the intelligence and grit of a person through their own personal relationship, and if that community had small amounts of capital to throw in to get the newcomer off the ground, overall wealth is increased as the new venture starts serving the needs of people. But this requires more equal distribution of capital, and to change the arbiters of capital from a few hundred people to everybody. I don't really hear many people talking about friends, family, and fools rounds these days because the game has changed. However if we had more people that could use their knowledge of the local lay of the land to invest more wisely, we'd have far greater wealth generation. IMHO, the problem with inequality isn't the person with $100B, the problem is all the talented and skilled people whose ideas go to waste because they can't get the attention of the very few people that have been entrusted with the ability to allocate capital. The more inequality there is, the closer we get to central planning, and erasure of the talents of so many people.
- bhupy 6y ago
  > having massive wealth and valuing it in dollars may seem nonsensical, and at some level it is, yet it is the way that everybody operates. If this was true, then why is nobody talking about imposing a tax on the market capitalization of corporations? Think about how much revenue you can raise by levying a 1% tax on Microsoft's market cap. But this is absurd, because the market cap doesn't represent actual money, it represents the theoretical value on all shares outstanding. > In the rest of the economy, there are few VCs, and for a lot of profitable, but smaller businesses, capital is super hard to come by. This is manifestly untrue. In the last 10 years of near-negative interest rates and quantitative easing, capital has been almost too easy to come by. Everyone and their mother is lending money. > A person who sees a future in, for example, electrification retrofits of homes and has several good ideas about how to make it cheaper and more economically efficient, is going to have a really hard tome getting going. Not true at all. Most banks and credit unions would extend dirt cheap loans. We are arguably over-leveraged on these kinds of loans. > I don't really hear many people talking about friends, family, and fools rounds these days because the game has changed. However if we had more people that could use their knowledge of the local lay of the land to invest more wisely, we'd have far greater wealth generation. The reason for this has everything to do with globalization and 21st century communications technology. It is no longer sufficient to be the best electrician in your neighborhood, you now need to be the best electrician in the country or perhaps even the world, given how easy it is to reach consumers today. To give you a sense for how the scale of globalization has made it difficult to compete locally, consider how easy it is for a new business to reach every American today. There are 330 million people in America. You just need to provide $3 of value ONE TIME to every American, and you become a billionaire. Likewise, on a global scale, there are 7.8 billion people in the world. If you can get 1% of them to pay you a penny once a year, you're making $780k/year. "Inequality" is inevitable in this world, but again the wealth isn't zero-sum. We're not remotely close to "central planning", because the wealthiest person on the planet (on paper) only represents ~0.5% of the annual GDP of the US alone. And that's not even an apples-to-apples comparison because the paper wealth is accumulated over years, whereas the GDP occurs every year. The accumulation of Bezos' wealth over the last 20 years is about 0.05% of the accumulated gross-product of the US, alone.
  - 6y ago

by bhupy 6y ago

epistasis 6y ago

There's a huge difference between wealth and money; having massive wealth and valuing it in dollars may seem nonsensical, and at some level it is, yet it is the way that everybody operates. The "Fair market value" is not inconsequential even if wealth is not liquid. Regarding going to a VC to get capital: think about how this process works in one very tiny slice of the economy. You build trust with a small set of people that are the arbiters of capital and who gets the resources to start a new venture. If there was only one VC firm in the valley, it would be disastrous because they would hold all the power. It is only through the agglomeration of many potential sources of capital that really makes the system run well. In the rest of the economy, there are few VCs, and for a lot of profitable, but smaller businesses, capital is super hard to come by. A person who sees a future in, for example, electrification retrofits of homes and has several good ideas about how to make it cheaper and more economically efficient, is going to have a really hard tome getting going. However, if their own community knew about this person's ability to scale a small business, and knew of the intelligence and grit of a person through their own personal relationship, and if that community had small amounts of capital to throw in to get the newcomer off the ground, overall wealth is increased as the new venture starts serving the needs of people. But this requires more equal distribution of capital, and to change the arbiters of capital from a few hundred people to everybody. I don't really hear many people talking about friends, family, and fools rounds these days because the game has changed. However if we had more people that could use their knowledge of the local lay of the land to invest more wisely, we'd have far greater wealth generation. IMHO, the problem with inequality isn't the person with $100B, the problem is all the talented and skilled people whose ideas go to waste because they can't get the attention of the very few people that have been entrusted with the ability to allocate capital. The more inequality there is, the closer we get to central planning, and erasure of the talents of so many people.

bhupy 6y ago
> having massive wealth and valuing it in dollars may seem nonsensical, and at some level it is, yet it is the way that everybody operates. If this was true, then why is nobody talking about imposing a tax on the market capitalization of corporations? Think about how much revenue you can raise by levying a 1% tax on Microsoft's market cap. But this is absurd, because the market cap doesn't represent actual money, it represents the theoretical value on all shares outstanding. > In the rest of the economy, there are few VCs, and for a lot of profitable, but smaller businesses, capital is super hard to come by. This is manifestly untrue. In the last 10 years of near-negative interest rates and quantitative easing, capital has been almost too easy to come by. Everyone and their mother is lending money. > A person who sees a future in, for example, electrification retrofits of homes and has several good ideas about how to make it cheaper and more economically efficient, is going to have a really hard tome getting going. Not true at all. Most banks and credit unions would extend dirt cheap loans. We are arguably over-leveraged on these kinds of loans. > I don't really hear many people talking about friends, family, and fools rounds these days because the game has changed. However if we had more people that could use their knowledge of the local lay of the land to invest more wisely, we'd have far greater wealth generation. The reason for this has everything to do with globalization and 21st century communications technology. It is no longer sufficient to be the best electrician in your neighborhood, you now need to be the best electrician in the country or perhaps even the world, given how easy it is to reach consumers today. To give you a sense for how the scale of globalization has made it difficult to compete locally, consider how easy it is for a new business to reach every American today. There are 330 million people in America. You just need to provide $3 of value ONE TIME to every American, and you become a billionaire. Likewise, on a global scale, there are 7.8 billion people in the world. If you can get 1% of them to pay you a penny once a year, you're making $780k/year. "Inequality" is inevitable in this world, but again the wealth isn't zero-sum. We're not remotely close to "central planning", because the wealthiest person on the planet (on paper) only represents ~0.5% of the annual GDP of the US alone. And that's not even an apples-to-apples comparison because the paper wealth is accumulated over years, whereas the GDP occurs every year. The accumulation of Bezos' wealth over the last 20 years is about 0.05% of the accumulated gross-product of the US, alone.
- 6y ago