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The OP’s reasoning is based on a popular yet fundamental misunderstanding: an overvaluation of companies with many employees (a.k.a. “big” companies). The key

The OP’s reasoning is based on a popular yet fundamental misunderstanding: an overvaluation of companies with many employees (a.k.a. “big” companies). The key to economic growth is not firms with many employees, it’s firms with highly productive employees. You want a system that kills off unproductive firms, so that better uses can be found for their capital and employees. You don’t want a system that kills off highly productive firms just because they stay relatively small. As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it.

piva00 2y ago
> As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it. Another example is Germany, even though the country has some massive companies there's a lot of quite productive medium/small companies (Mittelstand) doing specialised work.
- fakedang 2y ago
  As a counter example, I see a shit ton of Indian firms in sectors such as pharma or tech, which employ hundreds or even thousands of people, but they collectively make much less in revenue than a similar competitor in the US, even though their business is mostly international.
tormeh 2y ago
310 employees is not very small. Anyway, the sweet spot for company size depends on what the company does, as productivity gains in certain tasks can be bought through capital expenditure. Heavy industry is an obvious outlier on the bigger-is-better side. Software, on the other hand, arguably has very low returns on increased company size.
- bjornsing 2y ago
  And? From the tone of your comment I get the impression that you disagree, but the content is just trivia that I see no issue with.
doctorpangloss 2y ago
> key to economic growth At a national level, there are no single keys, there aren’t even major factors. You’re kind of trading in the same narrative rhetoric of the article you are ackshuallying. The Renaissance Technologies example is funny anyway. My dude, literally nobody but bankers thinks hedge funds are good for the economy, let alone a good use of “productive employees.”
- closeparen 2y ago
  I think it's good that pension funds can get returns.
  - fakedang 2y ago
    Yeah but Renaissance is funny because they have 2 funds. The Medallion fund which only has employee money makes the amazing returns, while the normal fund for pension funds barely outperforms the market.
    - sokoloff 2y ago
      “Barely outperforms the market” over a 50 year period (for a pension fund to cover obligations) is still a pretty big deal.
      - fakedang 2y ago
        Except there are far more funds that already do that (even if their count is in the minority), so their sheen wears off. Oh wait, there have been some years the normie fund actually underperformed the market, while the Medallion fund exceeded its expectations. So much that investors got real pissed (around 2018 iirc), and that's how the separation of funds structure actually came in the financial media spotlight.
  - gottorf 2y ago
    For Renaissance specifically, their signature fund has been closed to outside investors (with all funds returned) for decades, so pension funds aren't able to take advantage of their outperformance. I believe their publicly-available funds don't have nearly the same kind of returns. With all that aside, better liquidity and pricing of risk is the overall systemic value that all speculators in the market provide. You be the judge as to whether the remuneration is commensurate with that value.
deleted 2y ago
[deleted]
DontchaKnowit 2y ago
Can you explain what utility renaissance actually provides? And don't say liquidity in the market cause that's a line of bullshit
- deleted 2y ago
  [deleted]
- actionfromafar 2y ago
  I'm not saying they provide cover. But such a company could provide cover better than most.
- gottorf 2y ago
  > don't say liquidity in the market cause that's a line of bullshit It's not a line of bullshit. For every notable prop shop (that is, attempting to trade one's own money for profit, which you may view as an illegitimate market activity) there is in the market, there are 100x as many portfolio managers (who manage other people's money, such as pension funds, which you may view as a more legitimate use of the market). Every trade that a "legitimate" entity puts on has a counterparty, and the more counterparties there are from speculative activity[0], the more liquidity there is and the more efficiently things can be transacted. Everyone ends up happier. You could argue that the field of managing money in general pays more than it is "worth", but that's kind of an argument of cosmic morality. Who should be paid more, elementary school teachers or firefighters? [0]: https://www.cmegroup.com/education/courses/introduction-to-futures/understanding-the-role-of-speculators.html https://www.cmegroup.com/education/courses/introduction-to-f...
  - DontchaKnowit 2y ago
    I do not view pension funds as a more legitimate use of the market. The market as a whole is completely zero sum in my view. And of course the CME group has a positive view of speculators, because they profit from speculative activity.
    - colonCapitalDee 2y ago
charlie0 2y ago
There has to be a reason why larger companies are valued at their levels and it probably has something to do with economies of scale.

piva00 2y ago

> As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it. Another example is Germany, even though the country has some massive companies there's a lot of quite productive medium/small companies (Mittelstand) doing specialised work.

fakedang 2y ago
As a counter example, I see a shit ton of Indian firms in sectors such as pharma or tech, which employ hundreds or even thousands of people, but they collectively make much less in revenue than a similar competitor in the US, even though their business is mostly international.

tormeh 2y ago

310 employees is not very small. Anyway, the sweet spot for company size depends on what the company does, as productivity gains in certain tasks can be bought through capital expenditure. Heavy industry is an obvious outlier on the bigger-is-better side. Software, on the other hand, arguably has very low returns on increased company size.

bjornsing 2y ago
And? From the tone of your comment I get the impression that you disagree, but the content is just trivia that I see no issue with.

doctorpangloss 2y ago

> key to economic growth At a national level, there are no single keys, there aren’t even major factors. You’re kind of trading in the same narrative rhetoric of the article you are ackshuallying. The Renaissance Technologies example is funny anyway. My dude, literally nobody but bankers thinks hedge funds are good for the economy, let alone a good use of “productive employees.”

closeparen 2y ago
I think it's good that pension funds can get returns.
- fakedang 2y ago
  Yeah but Renaissance is funny because they have 2 funds. The Medallion fund which only has employee money makes the amazing returns, while the normal fund for pension funds barely outperforms the market.
  - sokoloff 2y ago
    “Barely outperforms the market” over a 50 year period (for a pension fund to cover obligations) is still a pretty big deal.
    - fakedang 2y ago
      Except there are far more funds that already do that (even if their count is in the minority), so their sheen wears off. Oh wait, there have been some years the normie fund actually underperformed the market, while the Medallion fund exceeded its expectations. So much that investors got real pissed (around 2018 iirc), and that's how the separation of funds structure actually came in the financial media spotlight.
- gottorf 2y ago
  For Renaissance specifically, their signature fund has been closed to outside investors (with all funds returned) for decades, so pension funds aren't able to take advantage of their outperformance. I believe their publicly-available funds don't have nearly the same kind of returns. With all that aside, better liquidity and pricing of risk is the overall systemic value that all speculators in the market provide. You be the judge as to whether the remuneration is commensurate with that value.

deleted 2y ago

[deleted]

DontchaKnowit 2y ago

Can you explain what utility renaissance actually provides? And don't say liquidity in the market cause that's a line of bullshit

deleted 2y ago
[deleted]
actionfromafar 2y ago
I'm not saying they provide cover. But such a company could provide cover better than most.
gottorf 2y ago
> don't say liquidity in the market cause that's a line of bullshit It's not a line of bullshit. For every notable prop shop (that is, attempting to trade one's own money for profit, which you may view as an illegitimate market activity) there is in the market, there are 100x as many portfolio managers (who manage other people's money, such as pension funds, which you may view as a more legitimate use of the market). Every trade that a "legitimate" entity puts on has a counterparty, and the more counterparties there are from speculative activity[0], the more liquidity there is and the more efficiently things can be transacted. Everyone ends up happier. You could argue that the field of managing money in general pays more than it is "worth", but that's kind of an argument of cosmic morality. Who should be paid more, elementary school teachers or firefighters? [0]: https://www.cmegroup.com/education/courses/introduction-to-futures/understanding-the-role-of-speculators.html https://www.cmegroup.com/education/courses/introduction-to-f...
- DontchaKnowit 2y ago
  I do not view pension funds as a more legitimate use of the market. The market as a whole is completely zero sum in my view. And of course the CME group has a positive view of speculators, because they profit from speculative activity.
  - colonCapitalDee 2y ago

charlie0 2y ago

There has to be a reason why larger companies are valued at their levels and it probably has something to do with economies of scale.