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I love your comment. I'm hoping as tech takes over and democratizes the capital allocation schemes, these fat cats will actually have some true competition.

api 13y ago
A more general statement can be made: A central problem in all modern economies -- whether socialistically or capitalistically organized -- is the accumulation of monolithic stores of wealth exceeding the cognitive capacity of small groups of human beings to intelligently allocate it. We might call this the "big dumb money problem." As the original article points out, it's a bigger problem than merely one of waste. Big dumb money often operates in ways that are actively harmful.
- logfromblammo 13y ago
  Combine the big dumb money problem with the agency problem, and you will see that no one capable of allocating a huge pile of capital intelligently could ever be trusted to do it. The logical thing to do is to allocate as much as possible to yourself as quickly as possible, before someone else can come along and do exactly the same thing. The financial sector really needs an ever-aware watchdog standing behind it at all times, pointing a big, scary gun at its skull. When the only consequence to taking everything you can get is having more than you can use, guess what happens. The only alternative is to decentralize completely, which no nation on the planet will attempt, because they benefit from living at the center of the money web almost as much as the banks.
- dkuntz2 13y ago
  Perhaps banks could implement a negative interest rate. Money you don't use goes to science (or something equally "good" for humanity)?
  - skylan_q 13y ago
    a negative interest rate Guess what drives consumption and consumerism. :)
    - dkuntz2 13y ago
      Perhaps. The whole system would need some redoing as well, such as providing everyone with basic necessities. Part of the negative interest could be used to help provide those.
  - breischl 13y ago
    Yeah, but then nobody would ever deposit money in the bank. Much more clever to call it something seemingly unrelated, like "inflation".
  - twic 13y ago
    This is called "tax".
JonFish85 13y ago
You mean like tech has taken over and democratized San Francisco?
deleted 13y ago
[deleted]
michaelochurch 13y ago
I'm hoping as tech takes over and democratizes the capital allocation schemes, these fat cats will actually have some true competition. VC is way worse than Wall Street. I wouldn't trust the Valley to manage a bag of rock salt. Finance is a lot less classist and racist and sexist, by far, than VC-funded tech because it actually respects high-level talent. Once you prove that you're smart, people will take you seriously as, at the least, a quant or quant trader. Those may not be high-status roles (compared to banking and old-style, guts-and-glory, trading) but if you're good in them, you can make more than enough money to have a good life. The VC-funded world, for all its pretenses to the contrary, doesn't really value talent beyond about 2-3 standard deviations because it has no way of recognizing it. There are really smart people in the Valley, but not in king-making roles. That is why mediocrities like Evan Spiegel and Lucas Duplan get their early backers and snowball into serious entities. You just have to be good at social proof arbitrage.
- api 13y ago
  "social proof arbitrage." There is a lot of win in that phrase.

api 13y ago

A more general statement can be made: A central problem in all modern economies -- whether socialistically or capitalistically organized -- is the accumulation of monolithic stores of wealth exceeding the cognitive capacity of small groups of human beings to intelligently allocate it. We might call this the "big dumb money problem." As the original article points out, it's a bigger problem than merely one of waste. Big dumb money often operates in ways that are actively harmful.

logfromblammo 13y ago
Combine the big dumb money problem with the agency problem, and you will see that no one capable of allocating a huge pile of capital intelligently could ever be trusted to do it. The logical thing to do is to allocate as much as possible to yourself as quickly as possible, before someone else can come along and do exactly the same thing. The financial sector really needs an ever-aware watchdog standing behind it at all times, pointing a big, scary gun at its skull. When the only consequence to taking everything you can get is having more than you can use, guess what happens. The only alternative is to decentralize completely, which no nation on the planet will attempt, because they benefit from living at the center of the money web almost as much as the banks.
dkuntz2 13y ago
Perhaps banks could implement a negative interest rate. Money you don't use goes to science (or something equally "good" for humanity)?
- skylan_q 13y ago
  a negative interest rate Guess what drives consumption and consumerism. :)
  - dkuntz2 13y ago
    Perhaps. The whole system would need some redoing as well, such as providing everyone with basic necessities. Part of the negative interest could be used to help provide those.
- breischl 13y ago
  Yeah, but then nobody would ever deposit money in the bank. Much more clever to call it something seemingly unrelated, like "inflation".
- twic 13y ago
  This is called "tax".

JonFish85 13y ago

You mean like tech has taken over and democratized San Francisco?

deleted 13y ago

[deleted]

michaelochurch 13y ago

I'm hoping as tech takes over and democratizes the capital allocation schemes, these fat cats will actually have some true competition. VC is way worse than Wall Street. I wouldn't trust the Valley to manage a bag of rock salt. Finance is a lot less classist and racist and sexist, by far, than VC-funded tech because it actually respects high-level talent. Once you prove that you're smart, people will take you seriously as, at the least, a quant or quant trader. Those may not be high-status roles (compared to banking and old-style, guts-and-glory, trading) but if you're good in them, you can make more than enough money to have a good life. The VC-funded world, for all its pretenses to the contrary, doesn't really value talent beyond about 2-3 standard deviations because it has no way of recognizing it. There are really smart people in the Valley, but not in king-making roles. That is why mediocrities like Evan Spiegel and Lucas Duplan get their early backers and snowball into serious entities. You just have to be good at social proof arbitrage.

api 13y ago
"social proof arbitrage." There is a lot of win in that phrase.