I used to wonder why Midtown Manhattan had so many bank branches, especially the redundant branches a mere block or two away. How could that be the highest and best use of prime commercial store frontage in a competitive market?
I figured out in 2009, when I was working at a hedge fund trying to bid on the assets of bankrupt banks post financial crisis.
Basically, every branch loses money to gain depositors. All the fees on monthly accounts, safety deposit boxes, ATMs, cashiers checks, etc. do not offset the cost of the office and employees. However, if the loss is small compared to the volume of deposit money the branch attracts, then the bank headquarters has "borrowed" money at a very low cost.
I think a typical suburban Countrywide or Washington Mutual branch was losing about $100K/yr but had deposits of $20M; not bad at all considering Fed Funds had been around 5.25% until fall of 2007, and that having the capital was the life blood necessary to do all the profitable operations (originating mortgages, credit cards, student loans, EDIT: meet regulatory capital requirements, etc). In Midtown, those numbers might be multiplied many fold, so very few retail stores can compete and stay profitable.
I thought it was pretty well-known that you're the product of a bank, not the customer. I don't pay any fees to my bank (my balance is high enough that they waive them all), and they actually pay me some miniscule interest rate. But in return they get to use my savings to make loans on high-priced mortgages and credit cards, which earns them literally thousands in interest charges.
Retail banking locations are a market-share grab. They want to make it as convenient as possible to put your savings in a bank, because then they have access to your deposits, which can be loaned out as a lucrative product.
It's much like the Chrome Omnibox or Google Toolbar for Google, or the Facebook mobile app. These derive no revenue, but they make it as convenient as possible to use the company's products. That user attention can then be sold to advertisers for a nice profit.
Ditto Hacker News as well - your comments here don't benefit YCombinator at all, and they have to spend money maintaining & moderating it. However, insightful comments on HN attract intellectual people interested in startups, which are YCombinator's prime customer demographic, and so your contributions here are effectively very cheap advertising for YCombinator.
I've honestly never understood the point of even dealing with large banks. My credit union doesn't charge any fees, regardless of how much I have in my account. Free overdraft protection, extremely low interest car loans and used car loans, etc.
Oh, and they didn't become insolvent handing out crappy mortgages.
I prefer credit unions too and take loans through them when possible.
But my primary checking and money management accounts (business and personal) are with a major national bank. For cash flow, access, and generally moving money around it's hard to beat the convenience.
Well the banking model is to take demand deposits to issue longer term loans. Is that bad? People want loans, people want to deposit cash... Why should banks not operate this way?
Would it be better not to have deposits and loans?
I didn't say anything about good or bad in my post - I'm just commenting about what is.
I suspect that you (and probably other readers) are injecting some of the sentiment around the "You're the product, not the customer" meme that surrounds advertising-supported tech companies. I don't think those are bad things either, but a number of other HN readers do. I'm just pointing out that this business model has existed for centuries.
I think there used to be a balanced trade - like exists in many small banks and credit unions now. For holding your money with FDIC insurance and whatnot, the banks got fractional reserve and the right to lend your money at a particular interest rate - which they then shared a small piece of.
Now, banks are predatory. They charge you fees for everything (including having a deposit account!!), barely if at all share revenues derived from your money, and routinely flirt with disastrous insolvency, propped up only by the largest government on Earth.
That's why people feel like they've gone from customer to Matrix-style energy plant.
I think "supplier" would've been a more accurate term when bank accounts actually paid interest. Savings accounts at my bank pay 0.01%; standard CD rates top out at 0.05% for a 1-year.
(I do have a high-yield online-only savings account that pays significantly more than that, and feel like I'm much more of a supplier to them, although in some way "supplier" connotes that I'm actively doing work to provide a product or service for them, which I don't feel toward my bank. But the article is about retail banks; the bargain with most retail banks these days is "They give you convenience; you give them money, which they can loan out to make more money." That's much more like the bargain that Internet companies and TV make than the one that say AdSense, App Developers, and Uber make.)
Is this really true though? I though that large banke don't really make money on private account but primarily on investing in the market an lending money to really big companies. Seriously interested.
The real reason they want depositors is fractional reserve banking. If you deposit $1, they can go borrow $10 from the federal reserve, loan it out, and be making interest on $10 of created, loaned money.
That's not how the fiat system works out (there's no borrowing from the federal reserve). You deposit $10, they loan out $9, which ultimately ends up back in a bank account to be further loaned out.
You will find no dispute from me as to whether banks actually do restrict themselves to limiting their credit creation to a ratio of their deposits. But that is how it is supposed to work.
According to the Fed's website, commercial banks (including foreign/international banks) can actually create and loan out up to $14,500,000 per loan and not be required to have anything backing it (0% required reserve ratio).
Totally wrong. That document is not about loans. It doesn't even mention the word 'loan', except in the context of 'savings and loan associations'.
The document is about reserve requirements for deposits. Roughly speaking, if a bank takes in $100MM of deposits, it has to keep 10% of that ($10MM) in a way that's easy to access (either as cash in a vault, or as a deposit at the central bank). That way, if a depositor wants their money back, the bank will probably be able to give it to them.
If a bank has total deposits of less than $14.5MM, then the reserve ratio is 0%, instead of 3% or 10%.
Loans are created as deposits/accounts receivables which are included in net transaction accounts. Back that loan with a Credit Default Swap and you cant skirt any reserve requirements which was exactly what ripped the world economy in 2008.
This doesn't make any sense. When a bank creates a loan of $X and disburses the loan into the borrowers account, two things happen:
1) The bank's loan assets go up by $X
2) The bank's deposits go up by $X
Deposits are part of 'net transaction accounts'[0] so the bank would now need to hold 10% of $X in additional cash (e.g. in their vault).
So, it seems like the bank can create a loan of $X with just $0.1X of cash. Hang on, though. This assumes that the borrower just keeps the money in his bank account, which is unlikely. When she withdraws the money to spend it, the bank's reserve requirements go down by $0.1X (good) but they also need to pay out $X of cash (bad). So, it really did cost them $X to make $X of loan.
Now, if they have a CDS related to this loan, then they are insulated from the risk of default. But, how is that relevant to reserve requirements?
[0] "Net transaction accounts are total transaction accounts less amounts due from other depository institutions and less cash items in the process of collection."
I'm confused myself but thanks for debating. I was wrong about the 0% reserve ratio applying per account rather it is the sum total of all accounts held by the bank.
This is fascinating - I had never thought about commercial banks making obfuscated investments in real estate by opening branches in hot markets before.
Whatever money they lose on wages, construction, depreciation, amortization, overhead, etc. they make up on the appreciating underlying value of the land, increased brand presence (read: expensive advertising), and increased ability to secure federal funds due to higher assets as collateral on their balance sheet.
This could make for an interesting leading indicator for a real estate cooldown, and even a recession if extrapolated out:
When commercial banks start closing down commercial branches, we can conclude that either a) value generated by the appreciation of the real estate is slowing down or b) the value of the deposits in the area is not growing fast enough (people are not saving, with banks at least).
Also, it's worrying to see the that the true value of a branch is that of an investment and an asset against which to secure cheap federal loans. That these unprofitable branches exist for these purposes implies a huge misdirection of resources and energy from sustainable demand creation to rent-seeking, speculation, and poor fiscal policy that incentivizes banks to prop up hot real estate markets in order to secure Fed funding.
The Citibank branch that I use will be closing in January...
No reason to obfuscate AFAIK. A bank can just as easily buy a building and rent it out at a profit instead of putting a money-losing branch there.
I don't think banks are generally prohibited from investing in real estate, subject to other risk-based capital and liquidity requirements. If there's some loophole that results in an owned branch being treated differently from investment real estate, I'm not aware of it.
In NYC anyway, banks typically rent branches. They don't want to be in the real estate and property management business, although they often end up in it involuntarily after foreclosures.
The wireless carriers are the other industry that have retail branches of a size seemingly out of all proportion to what they need to transact business. The contrast to many locations overseas, especially in Asia, where cellphones are often sold over a small counter in an electronics store is striking. I assume it's some combination of the big branches acting as advertising and being part of what's effectively a sort of arms race between carriers.
I don't know. Electronics retailers are getting few and far between. Some of that's moved to drugstores or hardware stores, some to office supply stores. But the most obvious place to go for many phone accessories is a phone store, particularly if you need it right now. Otherwise, Amazon seems to be the retailer of choice. I suppose Target and Walmart also carry some items, and of course, Apple.
What surprised me in a recent road trip was the selection of electronics-related items for sale at highway stops, particularly Loves. If it goes with an Android or Apple device, or CB radio, or uses USB power, there's a surprising selection of items. Prices are not unreasonable either.
This is a fairly high-volume market, with specialised interests, and a captive (or at least easily captured) market. The one thing Loves hasn't sorted out is that free WiFi trumps paid, by a long shot. After a few highway stops, you figure this out pretty quickly.
You're right - it's less about obfuscation, and more about figuring out the strange incentive structure behind many bank's decisions to open a ton of branches in hot real estate markets.
I'm not sure how bank investments in real estate work, but as long as a branch is bringing in a steady flow of deposits it would be much more attractive than a standard real estate investment.
Those deposits bolster the bank's reserve requirement [1] and the banks then earn interest (0.25%) on these reserves as of 2008.[2]
In a world of zero and negative interest rates on short-term, safe debt, [3] I would imagine deposits would be an attractive revenue stream for a commercial bank with guaranteed upside and little downside, and that the major cost of leasing/buying the real estate to set up a branch would be negligible, especially if the land was increasing in value.
So branches will be shut down when the land starts decreasing in value, or when the flow of deposits into the banks slows down due to a lower propensity to save (not likely in a recession), or due to people earning less disposable income in the first place (more likely in a recession + stagnant wage growth). Both are very bad signs for the economy.
Branches can also be shut down when the use of physical cash in society tapers off. This is already happening here in Sweden - bank offices here is increasingly only used for managing accounts and lending money.
San Francisco is littered with giant Wells Fargo locations with 30ft+ ceilings, and dozens of employees just hanging around, waiting for a customer to help. In the financial district, it feels like there's one on every block.
This isn't really them "losing money" then, right? Generally, a bank's business model is to borrow money at X% (where X = interest paid to depositors) and lend at Y%, where Y > X, and where that interest revenue exceeds operating costs. I'd be surprised (and appalled) if they actually turned a profit just on fees.
Kind of makes you wonder why there are still so many branches when the bank can borrow for next to nothing and has billions in excess reserves parked at the Fed.
You're not really making any sense. By your own account, they are making money by accepting deposits. They aren't losing money by having branches because they make money on deposits they wouldn't have had without branches. All you've really said is "banks make money off deposits"
The same applies to why there is a McDonald's on the Champs Elysse in Paris, in the heart of Beijing, New York City, etc. It's a loss for the location, but it's really just an investment vehicle where the land itself is not being used for traditional purposes.
McDonalds is very open about investing in real estate. They own all their own locations. The restaurant is basically just to pay the rent on the land they own.
Paris, maybe, but I'd be surprised if McDonald's loses money in Beijing. Their prices are high for that market and yet somehow they're always very busy.
I've recently come to the conclusion that any society where it is easier for the rich become richer than it is for the poor to become richer, regardless of its starting state, will tend toward feudalism over time. While modern day America is starting to look more and more like a data point that supports this conclusion, I'd like to think that there's a certain amount of mathematical certainty involved too:
money => more money ------- (1)
money <=> power ----------- (2)
(1) and (2) over time will result in the bifurcation of society into two groups: the rich and powerful, and the rest. This probably doesn't apply to corporations though.
What I don't get about this argument (and others similar to it) is that the US seems to have a pretty good turnover of money. According to Forbes' billionaires list, "[f]ully 1,191 members of the list are self-made billionaires, while just 230 inherited their wealth"[1]. The top 3 richest people on the planet at this point made their money themselves, and 2 of them (Gates & Buffett) are not going to pass their wealth down the family tree.
We're less than 100 years from one of the richest people of all time, JD Rockefeller (net worth ~$300+bn). His family is essentially dedicated to giving that money away at this point, and I believe the family's net worth at this point is in the $15bn range--not peanuts, but hardly growing.
Money doesn't last, but there are always rich people. Paris Hilton, trust fund baby, has made more money from her own businesses than she'd ever inherit from her grandfather. Same with Julia Louis-Dreyfus. But after a couple of generations, the old money is usually gone. As much as people like to complain about "the rich", there really aren't as many generationally-rich people as some make it seem.
Doesn't your Paris Hilton example prove GPs point, rather than refute it? It's precisely due to her family's considerable wealth that she was able to make more than she'll inherit. Would Julia Louis-Dreyfus have been able to pursue an acting career so easily without family wealth? But I'm not sure it's even useful to consider celebrities when discussing wealth acquisition in our country. I'd consider them outliers, in the grand scheme of things.
She is definitely an outlier. I would venture to guess that the success rate of trust fund babies in business is about on par with the success rate of inner city kids. They both lack the proper incentives to succeed, but in dramatically different ways.
That's just ridiculous. Inner city kids don't lack the proper incentives to succeed (they're poor, after all), they lack the resources needed to succeed.
I grew up poor in the south. People don't need to be handed incentives to succeed. Some people don't mind being poor. Some people will be poor before long even if you give them a million dollars. If success is important to you, you work for it. Success is defined differently for all of us. Lifelong welfare is not helping someone, it is not incentivizing them. That has to some from within.
That's what you get when you focus on the outliers. I doubt that causality plays a big role in determining who becomes a billionaire (Zuckerberg, Gates, Buffett) and who stays a mere doctor, lawyer or congressman (father of Zuckerberg, father of Gates, father of Buffett).
But that is a question of who belongs to the 0.01% and who belongs to the 1%. It's not a very interesting social mobility study and I agree with you that the "rich get richer" argument makes no sense for the super rich outliers.
Unfortunately, things do get a lot more predictable at the lower percentiles.
The good old "Bill Gates the bootstrapped college dropout" argument. These myths never die.
William Henry Gates the Third had a trust fund before he was born. His downside risks for anything he chose to do in life were completely nonexistent. Same with Zuck. Same with Spiegel. Same with 99% of the entrepreneurs HN idolizes.
EDIT: Removed potentially inflammatory line, which went as follows: "Just a bunch of rich kids trying to prove a point to their parents".
This is definitely a personal opinion, but one that has merit if you examine the evolutionary psychology of parent-child relationships. The conversation is a bit in depth, but please understand that I was not trying to simply fire off an ad hominem. I was instead trying to hint at the incentives which drive an already rich child to strive for more wealth. For the vast majority of us who have to work for a living, such behaviors seem confusing. Only upon deeper analysis do the pyschological incentives for such individuals begin to make sense.
> The good old "Bill Gates the bootstrapped college dropout" argument. These myths never die.
You appear to be refuting a claim that was not made in the GP post or in the Forbes article they cited.
Grandparent only said that Gates is among the top 3 riches and is not going to pass on his wealth, they did NOT claim that Gates was born poor or otherwise among the self-made millionaires.
Similarly Forbes lists Gates as the richest person, but makes no claims whatsoever about how he made his fortune. There are two independent claims there and at no time does either source claim that Gates is in the self-made group.
Your QZ article is more responsive, but it boils down to saying that one needs access to capital to start a business. This is not really surprising and ensuring that any capable person can get funding is why we have things like YC. If there's any group out there with good ideas that's being systematically ignored or denied funding, you and anyone else could make big money by investing in them. All you need to do is prove there's an opportunity being ignored and people will jump on it, chasing the money.
A million dollars is rather achievable with a good education, good health and drive, provided you live in a developed part of the world and can keep expenses lower than earnings. Hopefully we someday develop the rest of the world, as well as making sure that everyone can get all the education and healthcare they need, so that this level of success no longer boils down to luck.
That's not at all the argument I'm making, and probably isn't an argument made by anyone. Going from dirt-poor to richest-in-the-world is much harder than any other economic jump. My argument was simply that "the richest don't stay the richest" for very long. If you take $330bn and spend $1m a day (getting no interest on the principle) it would take 1,000 years to spend it all. You'd expect that the money would last the Rockefellers for centuries, but in fact it's pretty quickly been "returned" to the central money pot.
If every tycoon has 2 or 3 heirs, chances are that unless one of them inherits the parent drive (and then goes to amass more wealth), the fortune will spread out. We all know how the exponential function works, it does not take that many generations to level off any finite amount of money.
It's a bunch of rich kids trying to get richer than their parents to prove a point.
You had me until there. Why question their motives? Is it really so hard to believe that Gates really loved computers?
If he was just thinking in terms of outstripping his parents, there were lots of other more-credible avenues available to him. The very idea of a personal computer was scoffed at. Not just by non-techies, but people like DEC founder Ken Olsen.
Professional athletes get caught cheating all the time, but I don't doubt they still love their sports.
I very much doubt that cheating athletes love the sport. They may love the fame and benefits that come with the sport, but if they loved the sport, they would work hard to become better at it rather than cheating.
I love my job. I read up on research, volunteer at conferences, tinker/hack on my own time, and provide lots of free consulting. Heck, the only reason I don't provide more free consulting is, well, because I have bills to pay. I certainly can't imaging expressing my love for the field by engaging in unethical, immoral or illegal activities. I suppose if it was the money I loved foremost, it might be different.
It's a funny way of showing love to a sport when you subvert the rules that make it fair. No doubt if everyone cheated all the time, practically nobody would love the sport.
One may as well think that Hitler eating meat remains a vegetarian.
It's a funny way of showing love to a sport when you subvert the rules that make it fair.
Uber and AirBnB are subverting rules and breaking laws in hundreds of municipalities. Do you think they don't care about what they're building over there? Is it just money-money-money and no serious interest in technology? Does that mean, by proxy, that Paul Graham only cares about money?
Is it really so hard to believe that people can have more than one thing that motivates them? Why did Ray Ozzie join such an evil beast? Surely he's just motivated by greed!
Black and white thinking will be the death of us all.
I don't know where you got black and white thinking from. I wouldn't say Bill Gates doesn't love computers, just that he loves something else more. Something that may very well not be good for computing.
Uber and AirBnB? Do they love the work they do? Maybe. But they love themselves more. They love the idea of being "disruptors" or "innovators" or "rich" more than they care about transportation, housing, or their customers.
And those guys who love sports? Maybe they love winning more.
It's easy to feign passion, after all. Especially when you're already committed to investors.
I like to accept what people say at face value until evidence suggests otherwise.
People go on about Bill Gates and antitrust, but do they really think Steve Jobs or Scott McNealy or even Page & Brin would behave differently?
Bill Gates' biggest fear was not losing the OS monopoly. His fear was of Microsoft turning into IBM -- always having to run everything you do by lawyers.
MS-DOS wouldn't even exist if IBM hadn't had the justice department watching their every move.
The PC revolution owes its greatest debt not to Gates, but to Kildall, in terms of individual contribution.
It may well be that Gates was driven to purposeful action from a love of computers. That he has had no notable productivity since Altair BASIC (other than third-party accounts of him doing code reviews early at Microsoft), nor any research, would nevertheless make his contributions to the field quite little.
"Code reviews" makes it sound like something he did for 15 minutes as part of a standup. He was known to be incredibly sharp, asking extremely detailed questions.
"Bill Gates was amazingly technical. He understood Variants, and COM objects, and IDispatch and why Automation is different than vtables and why this might lead to dual interfaces. He worried about date functions. He didn't meddle in software if he trusted the people who were working on it, but you couldn't bullshit him for a minute because he was a programmer. A real, actual, programmer."
Edit: My point is, one can love computers and be very good at them without making significant contributions to the field. That describes me and probably most of the people on HN.
Of course you can. The fact remains that Bill Gates has not been associated with any directly technical work in decades, so his action in the distant past is of little relevance to his action in the less distant past and the present, and moreover is irrelevant to the GP's assertion of his familial wealth.
Of course not. But if he was more motivated by money than technology, I doubt he would have spent four years building a company trying to sell a product that nobody wanted. (Microsoft basically had zero revenue for its first four years.) He would have been better off going into real estate, and I think he was smart enough to know that even at 19.
I love computers, but I don't start companies just to say I start companies. I expect a financial return.
>"[f]ully 1,191 members of the list are self-made billionaires, while just 230 inherited their wealth"[1]. The top 3 richest people on the planet at this point made their money themselves, and 2 of them (Gates & Buffett) are not going to pass their wealth down the family tree.
@Natsu, my point of contention is the very liberal definition of "self-made" and "made their money themselves". If you give every reader on HN a trust fund, and a few start successful companies, would these individuals be considered "self-made"?
I don't think so. Self made means start with zero net worth. That means no trust funds, no loans at 0% from parents with infinite payback periods, and no parent board members making absurdly lucrative deals that you'd never get otherwise. Just money you've made from your own labor, and loans you've received without nepotism. You'd be surprised how few entrepreneurs fall under this category.
If you don't restrict your definition in this way, then every rich person is self made, because the interest accruing in their trust fund happened during their lifetimes.
> Just money you've made from your own labor, and loans you've received without nepotism. You'd be surprised how few entrepreneurs fall under this category.
Frankly, I'd be surprised if anyone fits under that category. Pretty hard to survive as an infant completely on your own.
I mean, obviously that doesn't count. But where exactly are you drawing the line? It's less black and white than you are implying; it seems like there's enough fuzziness here that you can put anyone in the "not self-made" category, so of course group X has very few members outside that category. Because, you know, Mr. CEO over here was driven to college by his parents once, so he's out, and Ms. Entrepreneur there inherited a few hundred dollars from her grandfather, so that's no good either.
That doesn't really refute gp's point. In medieval times, there were periods where dynasties didn't last, and every generation had new warlords from new families. That doesn't mean it wasn't a feudal society.
The main issue, as I see it, is that going from upper middle class (or even mid-range middle class) to mega rich is easier than it is to go from poor to lower middle class.
Most rags to riches stories we have these days, are really a relatively well off to riches stories when you look at them. The only exceptions are people who won the celebrity lottery.
It's surprisingly hard to accumulate wealth when you're struggling to keep the lights on.
Someone who has more discretionary income can take on more risk than someone who can't keep their lights on, and a failed venture doesn't have the same consequences.
Just by virtue of taking more risk, those in the middle class are expanding their chance of success by orders of magnitude more.
I'd dare say it's impossible for the middle class to not to become "mega rich" at a greater incidence than poor becoming middle class.
I'm just saying that a lot of the people who normally discuss these "But it's not that hard or impossible to become rich, what are you talking about?" stories, are the kind of people who somehow magically were able to go to an ivy league school or similar.
They say they became rich on their own, and that most of the mega rich also became rich on their own, but forget that compared to the vast majority of the population, even confined to the US, they were already born rich and have a massive leg-up in the world from day 1.
edit: As Donald Trump would say "I made all my own money. My dad only gave me a small 1 million dollar loan, and with that I was able to make my own fortune."
The problem with that quote is that no entrepreneur now can say anything less. Any company founder at this point has likely taken over a million dollars in venture capital--are they not to be called self-made if their company does well? Nobody is ever "self made" if you take that argument.
I would assume there is a big difference between your dad giving you a loan and investors who don't have social ties with you since childhood.
The assumption is that the dad will be less stringent on due diligence, more forgiving in what he gets in return, and most importantly, will have brought you up all your life in such a way that you are primed for handling those kinds of money.
The wider point is that someone who grew up in a trailer park, doesn't even have access to investors in the first place. For example: how are you going to get an investment, if you can't afford to to schmooze with investors? What if a $50 dinner is completely out of your price range? What if buying someone a $5 coffee is a big deal financially?
And then there's the issue of safety net. There's a big difference between your venture failing meaning you end up living on the streets, or in your parents' garage.
1. My great grandmother was a homeless woman after getting kicked out of the household because she was the second wife of a husband who had passed, leaving my grandmother in orphanage during WWII when the Japanese invaded China.
2. A couple of years later, her family came back for her. My grandmother worked odd jobs here and there, and my great grandmother gambles it away. My grandmother, fed up, left her to go live in Hong Kong with an uncle.
3. My grandmother's uncle was only employed from time to time. They lived on one meal a day, some rice, flavoured with a few drops of pig fat. My grandmother wanted a better life. She signed up as a labourer to carry tens of kilograms of dirt everyday on her shoulders[1], as part of a project to clear a mountain. Her uncle said she wouldn't last 3 days. It was such painful work she almost went home on the first day. But with such a stark challenge from her uncle and she didn't want to lose face, she stayed for 3 months. She was 14. She went on to work as a servant, but more or less treated as a slave, getting yelled at and beaten, and then finally someone taught her the business of picking up factory fabric scraps, weaving them into clothes to sell them. And that's the business she was in, even until the time I was following her around when I was 5 or 6. She bought factory scraps in bulk, using her sewing machine, made shirts and pants, and in 1995 or so, sold them for HK$10 each. It put my mother through school and nursing school. [2]
4. My mother was a nurse, and it was a well paid profession. However, my parents lost almost everything from their real estate investments in the 1997 Asian financial crisis. Debt can ruin you like that. They sold everything, my mother left her position as chief nurse in a hospital, and using a skilled migration visa, we moved to Australia, starting from zero.
5. Today I'm working as a software engineer in Australia. When I was tempted to slacken for my university exams, when I was tempted to lower my ambitions and stay in an unskilled job, when I was tempted to take an employer's low ball salary offer based on my living expenses, I remember what my grandmother had gone through, to put me here. And I will follow her example, and do the same for my family.
"Stay hungry, stay young, stay foolish, stay curious, and above all, stay humble."
[1] A carrying pole. https://en.wikipedia.org/wiki/Carrying_pole
[2] My grandfather had an accident while fixing a lift, and lose control of his legs. Unable to provide for the family, he killed himself. My uncle, my mum's brother, grew up mentally ill. My mother also had a sister. My grandmother brought up three children and supported my great-grandmother, on her own.
Gates is the son of a wealthy corporate lawyer. He went to one of the only high schools in the US that allowed their students computer access at the time. If you consider his wealth "self-made", I'd like to know what you define as self-made. Bill Gates, Dreyfus, Hilton only prove rich parents can produce even richer kids. Buffet's father was a congressman, not exactly the definition of wealthy (although these days it is), but definitely enfranchised.
The post is about "An investment mentality that hollows out our culture." Even if the folks that profit from the hollowing give the money away, the hole's still there. To be specific to the example in the article, it's not like Rockefeller's heirs are literally giving money to Mom and Pop delis to compete with banks for New York's street corners.
> There’s no doubt that entrepreneurship is thriving globally. Fully 1,191 members of the list are self-made billionaires, while just 230 inherited their wealth. Another 405 inherited at least a portion but are still working to increase their fortunes.
Not sure how "at least a portion" is defined, but I imagine less than half had significant inheritance. That's not to say the self-made billionaires were born middle class, but it does suggest that wealth does not necessarily beget wealth.
Again, 635 out of 1191 started out rich (either for the whole sum, or a portion of it). That's 53% of them.
But even if 1190 of them had gone "rich from zero" and only 1 had inherited his wealth, it wouldn't be that comforting by itself.
What you generally want in a society is: lots of poor people to be able to get out of poverty (into middle class), middle class to have a decent chance to become upper middle class, etc -- and of course most middle class to be stable and not fall into poverty.
That is, things that affect the majority of the population.
A society with a middle class that shrinks and worse prospects for 99% of kids compared to their parents is not absolved if it has 1000 billionaires emerge out of poverty (or middle class). A society with just 10 billionaires but far better social mobility (e.g. like in the 50's) would be much better to live in.
That's just relevant as an opportunity to a mere .0002857% of the population.
I know it's pretty minor, but it's actually 1,826 in total, so it's 35%.
>A society with a middle class that shrinks and worse prospects for 99% of kids compared to their parents is not absolved if it has 1000 billionaires emerge out of poverty (or middle class). A society with just 10 billionaires but far better social mobility (e.g. like in the 50's) would be much better to live in.
I don't follow this logic at all. Does number of billionaires created affect anything else? They seem somewhat unrelated to me, especially in light of what I said before about the rich constantly turning over.
>I know it's pretty minor, but it's actually 1,826 in total, so it's 35%
A, thanks. Missed that, thought 1191 was the total given.
I think the rest of the argument remains unaffected though, so wont change it.
>I don't follow this logic at all. Does number of billionaires created affect anything else?
Yes, I don't see the two things as "unrelated" events, but as the difference between a society set up to sustain and grow a strong middle class, and one that caters to a tiny majority of rich (regardless how they got there, by inheritance or bootstrapping) to the detriment of the middle class.
That is, this outcome is not just the effect of random people going about their life more or less independently and succeeding or not, but of a society (laws, education, etc) that has been rigged towards sustaining and growing (but always to a negligible percentage of the total) the upper classes, and milking the middle class and the poor to oblivion.
> This year, we gave each member of The Forbes 400 a score on a scale from 1 to 10 — a 1 indicating the fortune was completely inherited, while a 10 was for a Horatio Alger-esque journey. We also did the analysis for every 10 years going back to 1984. Looking at the numbers over time, the data lead us to an interesting insight: in 1984, less than half of people on The Forbes 400 were self-made; today, 69% of the 400 created their own fortunes. [0]
If upward mobility to achieve great wealth is your concern, surely this means we're heading in the right direction. I don't think the system is rigged towards benefiting those with already great wealth, but markets have expanded and entrepreneurship has a bigger upside than it has in the past. You don't have to take the analysis I quoted at face value, but just take a look at the richest Americans. No Vanderbilts, Rockefellers or Carnegies.
My opinion may not be popular, but I find it encouraging to think that so few can create such great wealth in today's society, even if the odds are against me creating such wealth. In many cases, that means that a product or service one person creates can benefit a large number of people and make you very wealthy. And I personally benefit from many of the products and services that were created by this generation of the wealthy individuals.
>If upward mobility to achieve great wealth is your concern, surely this means we're heading in the right direction.
No, "upward mobility to achieve great wealth" is not my concern -- I think I made that clear in the comment.
Upward mobility to middle class, middle class stability (to going back to poverty), and upward mobility from middle class to upper middle class are my concerns.
To which "upward mobility to achieve great wealth" could even be working against -- while itself concerning a very tiny majority.
>I don't think the system is rigged towards benefiting those with already great wealth, but markets have expanded and entrepreneurship has a bigger upside than it has in the past. You don't have to take the analysis I quoted at face value, but just take a look at the richest Americans. No Vanderbilts, Rockefellers or Carnegies.
What I'm trying to get at is that there's a difference though between:
"we could only make 10 non-rich people ultra-rich in 1950, whereas we have 1000 non-rich made ultra-rich today".
Which might be all well and good, but this "upward mobility" only concerns a tiny minority, and having a healthy "upward mobility" and social stability for the large masses.
I feel like looking at how the 0.01% got ultra-rich is mostly focusing on the wrong thing. The problem is that the rich and ultra-rich are getting richer while everyone else is stagnating or regressing
> What you generally want in a society is: lots of poor people to be able to get out of poverty (into middle class), middle class to have a decent chance to become upper middle class, etc -- and of course most middle class to be stable and not fall into poverty.
I hear this a lot but I really don't understand the logic. Because the middle class is a subjective and proportionate categorization, your target is always going to be moving. Who cares about joining the middle class if most of their needs already being met.
If, for instance, a replicator was invented that provided food and shelter to anyone who wanted it for free, a hell of a lot of people could live quite happily and comfortably without being middle class. So the goal should be to get to that sort of scenario as fast as possible. That is, a world in which the cost of covering our basic human needs is so small that nobody needs to be middle-class or higher to be happy.
>I hear this a lot but I really don't understand the logic. Because the middle class is a subjective and proportionate categorization, your target is always going to be moving.
Of course the target its moving. That means society is progressing in the aggregate. So why keep "desired standards of living" stuck in the past? In 1840 having no electricity and running water was considered acceptable. Today we think even internet is a kind of necessary good.
So, with progress the definition of rich / middle class / poverty etc should move too. Who said poverty is some absolute measurable state? Obviously you shouldn't consider yourself "rich" or even middle class, if you live in a trailer park with $100/month, just because you have housing, electricity and lots of available food in Walmart, whereas 1200 A.D peasants and 10000 B.C cavemen had neither...
What was the case "in the past" doesn't come into play when people compare their status to other contemporaries -- and the level of the society they live in.
> What was the case "in the past" doesn't come into play when people compare their status to other contemporaries -- and the level of the society they live in.
So then it's all about envying those who have more, no matter how comfortable a life you happen to have.
>So then it's all about envying those who have more, no matter how comfortable a life you happen to have.
You could use the moralistic conception of "envy", and make it sound bad, like telling kids "you should not envy your brother other".
Or you could:
1) see that envy and egoism is considered a primary motivator for advancement (if you like free market theories, e.g. Adam Smith and the "egoism of the butcher", etc.)
2) accept that humanity should progress in tandem, not just let some people get the majority of the benefits of today, just because the vast majority is also "better off compared to people in the past" (if you prefer socialist theories).
If they take away your internet access, will you be fine with that because people in 1850 lived in log cabins without internet, electricity or running water and you still have it so much better than them?
> 1) see that envy and egoism is considered a primary motivator for advancement (if you like free market theories, e.g. Adam Smith and the "egoism of the butcher", etc.)
I agree it's a primary motivator for advancement, but if the government redistributes wealth it destroys that motivation and the benefits that come along with people having it (new businesses, higher productivity, increased education, etc).
> 2) accept that humanity should progress in tandem, not just let some people get the majority of the benefits of today, just because the vast majority is also "better off compared to people in the past" (if you prefer socialist theories).
I think at some point there's little point to everyone increasing their standard of living. We're already reaching a point here in the US where people are simply bored. Would we all be better off as a society if everyone had an extra 500 sq. ft. added to their homes, or a Tesla in their garage, or designer clothes? We are reaching the point of diminishing returns when it comes to material possessions, unless it's all about envy like I suggested in my previous reply.
> If they take away your internet access, will you be fine with that because people in 1850 lived in log cabins without internet, electricity or running water and you still have it so much better than them?
Well, I'm not being "given" my internet access, I pay for it. But yes, if I could no longer afford to pay for my internet access I would still thank my lucky stars I have electricity and running water. Duh?
I've only met, or overheard one wealthy man give proper credit to his families wealth(money, access to power, access to good attorneys, the best schools, the best loans, the best business advisors, etc.), reguarding the fortune they amassed, and that was George Sorows. George said in numerious interviews, 'I owe everything to my father. With out him, and his money, I wouldn't have anything.' I'm paraphrasing. The rest of the rich boys always leave out the inside help they received in critical points in their career, or climb to the top.
I guess what I'm saying is they all want the world to think they made their own money. All are modern day Horiatio Algiers?
So, I don't buy Forbes figures; "There’s no doubt that entrepreneurship is thriving globally. Fully 1,191 members of the list are self-made billionaires, while just 230 inherited their wealth. Another 405 inherited at least a portion but are still working to increase their fortunes."
Exactly how did Forbes come up with these numbers? I quickly looked at the list, and I buy the athletes didn't have much help, but the rest; I wouldn't bet on it. They had a lot of unseen help. Yea, you can always find a few exceptions, but I bet it's less than 10 individuals.
There are some interesting social trends at work here. One of the most interesting to me is the concept of Assortive Mating. This is the idea that 30 years ago a physician, for example, would likely marry a nurse, or an executive would likely marry his secretary. Whereas today, the physician marries the executive and the nurse marries the secretary instead. Rather than pair one high and one low income/wealth/status individual together and reduce overall inequality, the gap (financially, socially, and culturally) is now widened even more. And of course this inequality is very likely to impact the next generation because the well educated, high income parents (now with more uniformly high income extended families) tend to give a higher level of attention, resources, and support to their children compared to the children of the poor, working, and middle classes.
I think part of this is driven by workplace sexual harassment laws, conflict of interest policies and relationship disclosure policies in your examples.
The risks for dating your assistant or a nurse are higher compared to what it was 30-60 years ago for example. Now it's safer to date someone at the same income level. Or someone in the same social group but outside of work, which will tend to be the same income level again compared to a workplace.
The other part is probably driven by how there are more dual income families competing for the same limited resources, such as housing, making the income of your spouse more relevant.
I'm not sure that's really as much of an income gap as you may think. You are taking modern assumptions, that a woman can succeed in any career, and applying it to a society that it was arguably less true in. It's entirely possible the nurse or secretary of twenty years ago might be a physician or executive if brought up twenty years later.
Additionally, I think you are conflating education with social standing, when they are somewhat different, and there have been different levels of social pressure against doing either at different times in history.
I agree that females who would have become nurses and secretaries in the past are now becoming physicians and executives, and without doubt this a good thing. My observation is just that by solving one problem (limited opportunities for women to become professionals) we inadvertently encouraged another (assortive mating on the rise which reinforces inequality).
It's also interesting you mention social pressure at different times in history. I am working my way through Downtown Abbey at the moment and it reminds me that throughout history there have been strong pressures for people to marry within their own class/caste systems. Probably for many reasons, but one of them is certainly the maintenance of wealth and power, which has typically been far less equal throughout those historical periods than the US is today. The post WW1 period in the US has been the exception not the norm.
I won't dispute that there is some level of extra assortive mating going on because of more equal opportunities for women. Even if it was just due to more opportunity and exposure, that makes sense. I do question whether in the past if the physician that married the nurse was really providing any sort of opportunity for status change (in either economic or social standing) in most cases, since I imagine the nurse and physician probably came from similar social standings, and thus likely similar economic standings.
If the nurse or secretary of 20 or more years ago was "from a good family", what change was really spurred by the union?
because the well educated, high income parents (now with more uniformly high income extended families) tend to give a higher level of attention, resources, and support to their children compared to the children of the poor, working, and middle classes.
That's the uncontroversial perspective, yes. The more controversial, but far better-supported-by-evidence perspective is that the estimated 40-80% contribution that genes make to people's intelligence, conscientiousness, and work ethic is much more likely to be at play, here.
> the estimated 40-80% contribution that genes make to people's intelligence, conscientiousness, and work ethic is much more likely to be at play, here.
I don't think you really need to get into genetics to explain anything here. Some people get lucky, their children inherit their wealth and maybe squander it after a few generations, or maybe they don't. Neither the parents nor the children need to be particularly smart; they just need to get lucky.
Using money as a measure of intelligence is very risky. On the one hand, sure, everyone wants to be filthy rich (presumably) so there's a lot of competition. On the other hand, there are large swaths of the whole world population that will find it impossible to be the next Zuckerberg or the next Bill Gates- say, a daughter of a Bangladeshi weaver is probably not going to travel to Silicon Valley and fund the next unicorn startup, sell it for billions and bequeath some of them to her children.
That's not because of a difference in intelligence with someone who will follow that path. It's because we can't fit 7 billion people in Silicon Valley, and a few tens of thousands of jobs in tech.
I guess you can argue that the people who are already in Silicon Valley have some sort of genetic advantage but unfortunately that way lies a whole bunch of very gnarly racial bias that is going to be extremely fiddly to untangle. Therefore, see above: using money as a measure of intelligence is very risky.
It's very well-established science that you could have easily googled, but downvoting unpopular research, pointing and shrieking "eugenics!" is a better argumentation technique, I suppose.
Native language is an almost perfectly heritable trait, but that does not imply it is genetic.
(However, it is true that saying that genes contribute to intelligence isn't eugenics. Eugenics is a methodology where you attempt to selectively breed humankind by broader intent, rather than by emergent properties of human tendencies. A proposed trait to optimize is often intelligence, but similarly frequently it's attractiveness and things like that. Genetic influence on intelligence is simply a hypothesis whose testing would have consequences on the practice of eugenics.)
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I see your reply to the other comment. I think a quote from the article that makes your point far better is "[...] studies have consistently shown that genetic influence on individual differences in intelligence is substantial." I negligently assumed you were specifically talking about heritability.
I can't say for sure, but I think at least in biological sciences, heritability specifically refers to genetics.
From wikipedia (https://en.wikipedia.org/wiki/Heritability): "Heritability is a statistic used in breeding and genetics works that estimates how much variation in a phenotypic trait in a population is due to genetic variation among individuals in that population."
Heritability is a relative measurement. You need to know what environmental factors you are controlling for in order to measure it. Because we live in societies that are highly stratified based on attributes that are genetically linked there can be environmental effects on intelligence that are difficult or impossible to correct for that create a correlation between genetics and intelligence.
I know, that's why I linked to an article written by scientists that understand that, with hundreds of references to actual studies. The article goes into a lot of depth about what they mean by heritability, what genes are involved and how they are involved, what studies have led to these conclusions, etc.
The section titled "Intelligence brings (some) genetics to ‘social’ epidemiology" addresses your concerns about environmental factors.
I don't think it's very controversial to say genes contribute to intelligence. Genes contribute to everything, how could they not affect intelligence? This isn't eugenics, nobody is saying we should (or could) use this information to selectively breed humans, and nobody is saying intelligence can be correlated to race.
I get what you're saying. I don't think it's contentious to say genetics influence intelligence. One thing that I strongly disagree with about the way intelligence research is done is that it seems highly based on tests of individual intelligence. There's no IQ test for groups of people.
We know that selection happens at the level of genes, not individuals. You can't measure the fitness of genes by evaluating their effects solely on individuals because their effects may involve ensembles of individuals. Since humans are highly social beings, I'd expect our genes to be selected for intelligence at the level of cooperating brains as well as individual brains. There doesn't seem to be much research on measuring this aspect of intelligence.
Not everyone has to be a rocket scientist. At least today some manual labor is required (handyman, janitors, construction workers, farmers and the like). The issue the author I think is pointing out is the fact that low wage workers are squeezed out.
there is quite a bit of politically impolite theorizing on the internet these days about the rise of women in the academic and business contributing to the decline of marriage and rise in inequality (as a whole). i.e. women don't marry down, and men are falling further behind.
The cause of this was the vilification of motherhood by society. Girls needed to be "strong independent women" and the concept of women being a kind and nurturing homemaker was seen as old fashioned, even though these skills are absolutely essential to raising a well grounded, sensible self actuated and well adjusted child. The fabric of our society depends on it and somehow this was allowed to happen.
Woa, woa. Wait a second- why is the mother the one that has to stay home and raise the child with her "kind and nurturing" homemaking skills? Why can't the dad stay home with the kids and leave the mom be the "strong independent" woman she wants to be?
Society vilifies motherhood? Then all the dads who want to put the borked society back together again can take up the mantle of the caring parent. Be my guests, eh.
They tried to do this deliberately in the early 20th century, incentivise college professors to breed and so on. Events transpired to make eugenics programmes unacceptable however.
hahaha, really? I'm curious, is there any writings or media on this phenomenon? was it similar to the danish "Do it for mom" campaign (https://www.youtube.com/watch?v=B00grl3K01g)?
Wages lag production so debt is required. The banks in this article are everywhere because they have a monopoly on credit creation and demand interest.
Take 5 minutes to read this, it articulates what the author failed to (and as a result reached a conclusion of little use):
Think of the banks everywhere. They are today's churches. Big spacious lobbies. Stand in awe not at the creativity but at the sheer amount of high value real-estate they can waste.
The guy writing this article doesn't understand the wider dynamics at all. It's about money creation and the use of that to ramp land prices in order to compel everyone to hand over part of their labour.
As you note if you have money you can get more of it because you can leverage it. But that's only part of the picture.
I'd encourage everyone to read the above link and also Henry George "progress and poverty"
It's about money creation and the use of that to ramp land prices in order to compel everyone to hand over part of their labour.
If you could point me to a single bank president who says his goal is to "compel everyone to hand over part of their labour," I might find this believable. Otherwise it reads like an Us vs. Them Marxist diatribe. Red meat for the proletariat, no different than the Tea Party.
I agree that there are systemic forces at work, and that they should be changed, but it's silly to impute dark intentions.
It's not very fair to say "I'll only believe that an esoteric motivation exists if the party motivated by it explicitly states that publicly."
(By esoteric motivation, I mean either an "underlying" motivation or an "epiphenomenon" that feeds back onto itself.)
It is not necessary to acknowledge or even to know that you are behaving as part of some esoteric motivation, for it to be either a true or at least useful model. For example, think of "selfish gene" type explanation of reproductive / behavioral biology. That is a useful model for thinking about behavior even if the parties themselves talk about courtly love, religious morality, etc.
Particularly in the case of a highly developed financial economy, there are lots of decisions that have effects, which effects tend to reinforce making those decisions, without anyone explicitly talking about those effects.
For example, the political decision to create and maintain the tax-deferral advantages of e.g. 401k accounts, is bipartisan and widely touted as helping to advance the cause of retirement security and broad prosperity. However, in a very real way, it's also about shunting vast quantities of "dumb money" into a relatively high-fee intermediary industry of 401k administration, mutual fund management, and etc. In turn, those intermediaries employ vast numbers of well paid personnel, as well as enjoy concentrated financial returns to their ownership -- and the owners and workers of the intermediaries lend massive poltiical support to perpetuating and extending those types of program (see e.g. the successive creation of more and more favored account types: Roth IRAs, 529s, Coverdell ESAs,
HSAs, FSAs, etc. etc.). This means that Congress is compelling the nation at large to turn over a higher % of GDP to financial intermediaries.
It would be disingenuous to claim to disbelieve this unless a Senator stood up and said his goal is to "turn over a higher % of GDP to financial intermediaries." That is certainly not his exoteric goal and probably not even something that he thinks about. But it is a very real consequence, and the feedback loop from the beneficiaries (lobbying, jobs, contributions) most certainly influences him and makes it "about" that.
> It is not necessary to acknowledge or even to know that you are behaving as part of some esoteric motivation, for it to be either a true or at least useful model. For example, think of "selfish gene" type explanation of reproductive / behavioral biology. That is a useful model for thinking about behavior even if the parties themselves talk about courtly love, religious morality, etc.
Very good point.
To give an example- oil companies advocate for the continued use of fossil fuels, because it is in their financial interest to do so. At the same time the employees of those companies have an interest to not screw up the planet completely for their own children and grandchildren. It's not as if those people are part of some dark conspiracy to destroy the environment, but they do seem to be trapped by the forces of the economy into which they have to participate.
Basically, you don't really need an "esoteric motivation" to have totally evil behaviour. You just need to be at the wrong position in the wrong organisation.
I agree that systemic forces are at work, but implying that people at oil companies or banks or other big institutions want "compel everyone to hand over part of their labour" adds more heat than light.
And if you actually want to change things, yelling "evil!" at the people you want to change is a terrible strategy.
> It's not very fair to say "I'll only believe that an esoteric motivation exists if the party motivated by it explicitly states that publicly."
Who said it has to be explicitly stated publicly? There are thousands of lawsuits every year and millions of pages of testimony. That's why you can point to Jeffrey Skilling or Bernie Ebbers or George Madoff and say "those guys are frauds." But you can't just point at bankers and CEOs as a class, and with no evidence, claim to know what they believe in their hearts.
> If you could point me to a single bank president who says
Why do you think they would say what their true goals are to you? People in positions of power are extremely judicious and strategic about what they say and to whom. They get daily exercise in this and only the best survive. The most effective are excellent at pursuing their goals while maintaining a socially credible exterior. The less effective use coded language (corpspeak or political rhetoric) to try to hedge through via indirection.
Is it dark intentions when the nature of a company is to make as much money as possible? The banks want house/land prices to go up so that they can charge one as much in interest as they can get from one's income, whilst making money on any land/property capital appreciation that they have. This is just capitalism surely.
My solution - nationalise the mortgage lenders and cap the mortgage to a 3 * multiplier of annual earnings.
Thank you for having a brain. You'd also need to have a new way of issuing money as mortgage lending is how we currently add fresh money as debt. I'd recommend something like social credit.
This isn't what social credit is about. Even if you add up all the wages that go to the rich it's still less than the value of the goods produced, hence the need for debt to fill the gap.
The ideas of social credit definitely have some merit, though I think it's important to flesh out how it would be implemented, as there are clearly risks if it's implemented poorly. For example, how would you guard against over-consumption?
Would be interested to hear your thoughts on the Positive Money campaign, I believe you'll be interested in it.
In the current system, you have to get money by convincing other people to give it to you. There are plenty of flaws in that which we know all too well, but I couldn't find any description of how "positivemoney" was actually supposed to work, only lists of problems and appeals for donations. There were no descriptions of what it would do to actually solve the issues in the text.
Their description of the problems with debt is particularly confusing because it's not clear how they intend to avoid any of those things. There seems to be a lot of concern about numbers shown in bank accounts and no concern for what happens to production of and access to goods and services, which is what's really important. The comments there are more interesting than the main article: http://positivemoney.org/issues/debt/
> "I couldn't find any description of how "positivemoney" was actually supposed to work, only lists of problems and appeals for donations. There were no descriptions of what it would do to actually solve the issues in the text."
Thank you for the feedback about the website. I've been attending Positive Money meetings close to where I live, I'll be sure to raise those points at the next meeting I attend.
With regards to the plan, I'll try to give a short summary. I would say there are three central ideas, the rest of the details follow on from these ideas:
1. Control over how much money is created would be moved away from those with the power to spend it.
2. The group in charge of creating money would base their decisions on how much new money to make on economic data, for example keeping unemployment low.
3. The money that was created would be debt-free. Interest would not need to be paid back to the creators of new money.
I can go into some of the implications, but before then do you have any questions about the three points above?
1) Money is created by giving out loans (fractional reserve banking), so I assume you're talking about some other way of creating money. What, exactly, would you do to the Fed to change governance?
2) I believe that's already a goal, though there are certainly perverse incentives. How does this plan correct those incentives, specifically? I'm looking less for goals and more for action plans.
3) This sounds like bitcoin, but I don't see how you can abolish the idea of debt entirely or even why that's desirable. Say I don't have enough money for food (or whatever). If I don't even have the option of going into debt, I starve?
I could see more use for something like debt horizons or forgiveness (i.e. debt expires after a time), but we more or less have this already with bankruptcy, though obviously there are plenty of flaws in that. And then it's hard to get anyone to give you more money because, well, you've already shown that you probably won't be able to pay it back.
I do find some fundamental disconnects on what money is, though. It seems like the idea conveyed there is a simple number in a bank account, but in actuality it's far more complex than that. Ultimately the numbers on your account aren't what's important: access to goods and services is. There are also issues with the idea of trying to rate limit everyone from becoming "too rich." You might prevent future Rockafellers, but you'll also get rid of future Elon Musks.
It seems more useful to prevent people from falling off the bottom than trying to shave off the peaks at the top.
Though I see you're talking about the UK now (something you may want to make clear on the site), just to provide a cite on #2 with respect to the US, I find that's explicitly the case for the US Federal Reserve:
"The U.S. Congress established three key objectives for monetary policy in the Federal Reserve Act: Maximum employment, stable prices, and moderate long-term interest rates.[10] The first two objectives are sometimes referred to as the Federal Reserve's dual mandate."
Given that it seems you want to recreate something like the Federal Reserve for the UK, I'm curious about which parts of the system you want to reuse vs. change.
There are similar monetary reform movements in the US, the one I linked to just happened to be driving for change in the UK.
With regards to recreating the Federal Reserve, you could argue that any central bank has a similar role to play, and the UK already has a central bank (the Bank of England). In some ways, you're right, that is similar to what is being proposed, but there are some key differences. Let's use the US system as an example again.
The money in the new system would be debt-free. This is a very important part of the system. Central banks like the Federal Reserve would not be accruing more debt just to do their job (for those that may be thinking having that debt is good, a decent chunk of US taxes goes into servicing that debt, effectively paying off the interest on a loan you didn't need to take out in the first place).
Not only does it take the debt burden away, it also allows greater flexibility with economic strategy. For example, in the current global economic system we go through cycles of activity. When the economy is booming, more money is created, facilitating easier trades. However, in times of recession, the money supply shrinks (or rather the flow of available currency shrinks), making trades harder just at the time when more money would be useful to help the economy recover. Instead what you want is a money supply that can expand even during a recession, and that's easier to arrange by using debt-free money guided by a central authority.
Transparency is another key difference. It should be possible to follow most/all of the debates shaping monetary policy. Correct me of I'm wrong, but we don't seem to have this level of insight into the inner workings of the Federal Reserve.
What does "debt free" mean exactly? I see a few options, but I'm not sure what you're trying to forbid:
* I can never promise to pay someone back in the future?
* I can never draw on more resources than I have?
* I can borrow money and never pay it back?
This first is doubtful, because you mentioned loans earlier. The last is the case currently, via bankruptcy, but there are serious limits on it. Otherwise no one would ever want to lend money--someone could always just abscond with it.
Please note that although there are a couple of subtle hints in the video about returning to the gold standard, the video can still be of use as a general introduction into the US money system even if you don't think that's a good idea (I don't think it's a good idea to go back to the gold standard).
Hope the video can be useful for you, I know I found it useful. Feel free to ask me any questions about debt-free money (and how it could be implemented) after watching the video.
> "1) Money is created by giving out loans (fractional reserve banking), so I assume you're talking about some other way of creating money. What, exactly, would you do to the Fed to change governance?"
Let's look at this in more detail, as it's clear I haven't explained the plan well enough yet.
First, I should clarify the Positive Money campaign I linked to is about money reform in the UK banking sector, but the general ideas can apply equally to the US, even if the implementation details would be different.
Okay, so let's look at the situation in the US. Money in the US is generated in two different ways:
1. Federal Reserve generates money for the US government to spend through the sale of government bonds.
2. Banking system generates money through making loans.
I'm going to leave the problems with the current systems for the time being, so let's skip to what we would change if we wanted to have a single central body in charge of new money.
Firstly, you would take the power to create money away from the banks. Banks could only lend money they had available to lend. This could work through lending out the savings of other bank customers, with customers able to choose how much or little of their money they wanted to invest, and what risk/reward ratio they wanted to have with their investments.
Secondly, you would want to change how money reached into the economy. If banks couldn't create new money, who can? Should government take on this role? The risk with giving governments this power is they might end up printing more money than is needed in order to fund extravagant government projects. How do you get around this?
If the Positive Money ideas were applied in the US, you wouldn't have the Fed selling bonds. In some sense the Fed wouldn't exist. What you'd have instead is one central, transparently-run group controlling how much new money was created, which sets the budget for the government to spend. All new money would be spent into the economy through government programs. There would be no need to sell bonds, the money would be created without debt (i.e. without the need to pay interest to groups willing to buy government bonds), it would simply be new units of exchange available for use in the economy.
Who is the transparent group? How are they held accountable? Aren't they a de facto part of the government by virtue of being able to govern the flow of money, whether or not they're a de jure part of the government?
What is the incentive structure and how does it penalize gamesmanship? How is the group ruled and why can't 51% of it say that we want to create all of the money for ourselves?
Aren't people already paid for using their money as loans in the form of interest rates and being able to structure how and when the money can be withdrawn (money market vs. savings, etc.)? What advantages are there to this? How do you get banks to offer that and what does the average guy like me even know about trying to control the money supply?
And even in that case, don't you still run contrary to the goal in that those with larger amounts of money still manipulate the money supply by choosing investments?
> "Who is the transparent group? How are they held accountable? Aren't they a de facto part of the government by virtue of being able to govern the flow of money, whether or not they're a de jure part of the government?
What is the incentive structure and how does it penalize gamesmanship? How is the group ruled and why can't 51% of it say that we want to create all of the money for ourselves?"
The group may be appointed in a number of different ways, though I suspect it'd be mostly down to standard job hiring, with some key positions appointed by government. If it helps, I imagine it'd be similar process to how judges are appointed.
However, it's important that the money creation group not be part of government. Furthermore, they do not dictate the flow of money, but rather the amount of new money. Any attempt for a non-elected body to control how money is spent opens up a whole host of potential problems. Instead, it is the government that would decide how new money would flow into the economy, i.e. what that new money was spent on.
In terms of gaming the system, there's always a risk of gaming any system, but it's important to be clear that the decisions on how much new money is available and how that money is spent are being made by two different groups of people. Let's put it like this, if you wanted to game this particular system, how would you do it?
> The group may be appointed in a number of different ways, though I suspect it'd be mostly down to standard job hiring, with some key positions appointed by government. If it helps, I imagine it'd be similar process to how judges are appointed.
Also, it's not clear what "not being part of the government" means if some positions are politically appointed. I suppose you're saying new ones can be appointed but old ones cannot be removed, but then that either makes it a lifelong post (which sounds worrisome as they'd be a prime target of corruption) or someone else decides their removal (based on what?).
> Any attempt for a non-elected body to control how money is spent opens up a whole host of potential problems. Instead, it is the government that would decide how new money would flow into the economy, i.e. what that new money was spent on.
I'm having trouble understanding this because the sentences appear to contradict each other in part.
> Let's put it like this, if you wanted to game this particular system, how would you do it?
I'd have to understand it better, first. But in general, a corrupt person would divert the supply of money to flow to them or people who would give them kickbacks (buy their stuff, hire their friends, etc.). They'd divert money away from whatever groups they did not like (political, religious/atheist, minorities, you name it). They'd use control of supply to direct flow to favored media outlets and away from those critical of them. I'm sure there are plenty more evil things to do that I haven't thought of, as well.
Yes, they're part of the Judicial branch, established by Article III of the US Constitution [1]. Not all judges are Article III judges with the protections mentioned therein, but all judges are part of the government on some level. You can see some measures to establish independence from the other branches as well as accountability if you read the section. For the subset of judges that are Article III judges, their wages cannot be reduced and they have a lifetime appointment "in good behavior" (which means they can be impeached for misconduct). What you won't find in the text is anything about judicial review of laws. The court came up with that doctrine on its own in Marbury v. Madison. [2]
Also: Any economic system that can be modeled as a random walk of dollars between nodes representing human/corporations who come out unequal winners on transactions, will generate a distribution curve of inequality, and your rules one and two will automatically amplify this into feudalism. That's just what money does on its own (and this laughs in the face of "meritocracy").
Redistribution through tax can be seen as "baling the water back out of the boat" in this context: it pulls money away from the rich, but doesn't prevent it continuing to rush back to them. It's a thankless never-ending job and politically motivated interruptions in "baling" will immediately result in inequality growing again.
I'm with the Zeitgeist Movement on this: money as a Thing needs to go away. It's intrinsically harmful.
Simple: just outlaw trade and exchange worldwide. You might find it tricky after a while to police the state of affairs, if only because there won't be a system of accounting costs to figure out resource distribution for the police force.
You run the scutwork of the economy with automation, robots, etc, which provides a basic living for nothing, and let people pursue their vocations.
The process for handling large allocations of resources is left as an exercise, but I'd favour direct democracy via recursive vote delegation ("liquid democracy"), at the most local possible scope (following the principle of subsidiarity).
You kind of need an AI God to bootstrap that. At least, that's the easiest way to get from here (needing a money concept) to there (not needing a money concept).
You are severely underestimating the need for people to interact. People love to have subordinates (i.e. someone to boss around), and people love to be subordinates (i.e. have someone tell them what to do).
Being free to do what you want is great, but most people don't know what they want, yet they have a natural disposition/desire/urge to lead or follow, and most definitely interact.
I don't think cynicism is true. People play hierarchical control games because they live in a society where both starvation and hoarding are possible. Basic income would eliminate starvation; deleting money would eliminate hoarding. People do have vocations. They are just suppressed by the 9-5 grind. It would take a bit, but they'd pick them up.
This is one of the arguments in favor of inheritance/estate taxes - they should have a distributive effect that prevents the formation of a nobility or royal class. Of course, no-one with enough foresight actually ens up paying a significant amount these days.
Unless you fundamentally alter the way trust funds shelter wealth and income across generations, then all raising the inheritance tax does is widen the gap between the 1% (who you will tax) and the .1% (who will remain out of reach and become relatively more entrenched).
Second is the fact that we live in a global economy now and taxes that are not applied globally will encourage human and capital flight. If, for example, you gutted trust funds or raised inheritance taxes to 75% in the US, you would likely find many wealthy families relocating (and expatriating if necessary) to more favorable jurisdictions. For a few generations now the US enjoyed unrivaled status as the best/safest/most desirable place in the world to live (for most people), but this is already lessening as the world becomes smaller and more connected. It's already much easier for me to imagine raising my kids in London or Singapore (especially if I'm worth tens of millions) than it was for my parents.
Personally I would be in favor of a globally applied inheritance tax set at a high level but the devil is in the details and I don't think we'll get there in our lifetimes.
In comparison to what? And exactly what income-levels paid what percentage of that? Did the poor & middle class paid 98% of of that? Did the rich & powerful use all kinds of crazy tax-loop-holes to avoid paying trillions? Cost of living/retirement in what parts of America?....maybe 19 billion is a drop in the ocean, maybe not.
There's no way you can believe otherwise, a millionaire can afford all kinds of financial experts to work 40hrs/week to move money all over the place to avoid taxes. It's unreasonable to think they don't (ab)use that ability.
Buffet doesn't pay lower taxes because of fancy lawyers and accountants though. He pays lower taxes because capital gains are taxed at a lower rate than ordinary income.
We can certainly debate whether that is good policy or not, but it has absolutely nothing to do with any sort of fancy tricks.
I wonder which group of people lobbied for capital gains to be taxed lower than ordinary income? Is it coincidence that since the law (one of Reagan's tax cuts) was passed a lot of executives are paid a lower base salary and tons of stock options?
I'd consider that a fancy trick :)
EDIT: To answer harryh: Yes and it has been steadily decreasing [1]. And your point is?
I think we can agree this mainly benefits the rich; I don't see someone in the middle class would have the discretionary income (not 401k, I'm talking about leftover income after expenses) to put his/her money in massive amounts stocks.
The rate was much higher pre-Reagan, nearly double what it is today.
Also, the rise of finance means a lot of Wall Street hedge fund managers who should be paying ordinary income tax are paying cap gains rates through the carried interest exception. Venture capitalists too.
Reagan lowered max cap gains rates from 39% down to 20% but then back up to 28%. At the same time he lowered the max rate on ordinary income from 70% down to 50% then down to 28%. So ya, at the end their they were briefly the same (which is why I used the word almost). But in general my point stands. Capital gains rates are generally lower than ordinary income rates as a matter of public policy.
A similar point holds for the carried interest rule. Those taking advantage of it aren't doing so because they've hired amazing accountants to file their taxes. They're just following relatively straight forward tax law.
Adjacently, while I generally agree with you on the topic of carried interest I did find this column thought provoking. You might enjoy it.
My understanding is that the carried interest rule was originally created as an incentive for mining exploration. It wasn't until the 80s that Wall Street hedged funds started taking off, and that they really started making use of it.
My feeling is, if you don't have actual capital at risk, you shouldn't get a break. Or put another way, if it's not possible for you to experience a capital loss, then it's not possible to experience a capital gain. Most VCs and hedge funds also invest a substantial amount of their own capital in the funds they manage, so it's not like it would be a radical change.
A few years ago I went to the Aspen Ideas Festival. One of the speakers was David Rubinstein of the Carlyle Group. Someone cheekily asked him what the tax on carried interest should be. He said "It should be zero. But politicians 'earn' so much money in donations by by threatening to repeal it, I predict it will always come up as an issue every three or four years, and will always stay about what it is now."
I generally agree with you about risk, though the counter argument is that they are putting capital at risk. They are taking some portion of their compensation as equity that may or may not turn out to have any value. It might not be actual dollars coming out of a bank account but the risk is still there.
Incidentally, since this is HN, one might ask if startup employees are doing the same thing to which I would generally nod and agree with you.
But Buffett does make his capital gains exclusively through Berkshire who absolutely does make money through fancy lawyers and tax loopholes.. See the pointless Burger King / Tim Horton's inversion they shepherded through last year;
Shares of BRK.B are available to anyone who wants to buy them. So they can participate in those gains as well.
What you're really getting at is tax incidence. Ultimately corporate taxes are still taxes on people. It's a complicated question to figure out which people. Sometimes it's shareholders like buffet, but it's also often employees or customers.
I do generally agree with you though that corporate taxes probably fall disproportionately on rich shareholders so to whatever degree there are shenanigans it's probably benefiting those rich shareholders.
Personally this makes me question the value of corporate taxes entirely. Just get rid of them and tax people directly. It would save a lot of paperwork and be easier for everyone to understand. Most people disagree with me on this point (though I would say that's because they don't think about tax incidence!).
This is why I actually favor doing away with the corporate income tax. Hundreds of thousands, maybe millions, of accountants and tax lawyers would be out of work, but on the flip side companies would have no incentive to play all these games and keep money offshore. Just pay a dividend, or don't, and let the investors figure it out.
No, you'd still tax distributions to investors. Basically, once money touches a personal bank account, it becomes taxable. The difference is that corporations would have much less incentive to hide their earnings.
How much one "should" pay in property/income forfeiture is, of course, a matter of political policy.
Just think how much money goes into the economy to preserve income...if we simplified the tax code in any way, so many people would be out of work in both the private and public sectors.
From 2003 to 2013, the top marginal and capital gains tax rates were 35% and 15% respectively, and the top 0.01% of taxpayers faced an average tax rate of effectively 25%. The last time rates were that low was before WW2, leading up to a period we remember as the Great Depression. During the nation's most prosperous decades, those rates were consistently above 40%, and leading up to them, ranged between 60% and 40%.
The issue isn't that the mega-wealthy pay no taxes, but that the value of the taxable income of a handful of people vastly supersedes that of most of that of the rest of the population. In essence, lower tax rates didn't fix anything about the economy unless you thought taxes were the problem and provided no overall boost to the economic security or general prosperity of the public.
So when GE Capital pays no corporate taxes and someone points that out, you're likely to hear that they pay those taxes through the number of people they employ. This is deceptive, since a legitimate small business would be paying both taxes. That entities like GE Capital exist is the trope that you need to dispel. Or did those estate taxes not come from the earnings of mom and pop shop owners and people who put in their 40 quarters with a little wise investing?
Taxes are for the 99% The 1% can and do pay lawyers to get out of paying much. Check out this loophole - it is complicated but basically if you can afford to set up one of these trusts you can give money to your kids tax free:
Short explanation: capital gains, dividend income is taxed less than normal (wage, salary, etc) income. And I believe Buffett means that he pays a lower effective tax rate than his secretary, not fewer taxes in absolute terms.
Rather than comparing to GDP it's probably better to compare to net worth which is about 70 trillion dollars. With an expected lifespan of ~80 years that's roughly 875 billion passed on in any given year.
Let's assume that all inheritance taxes are paid by the top 1%. They own about a third of total assets. So that's about 290 billion being passed on.
19 / 290 = 6.5% being paid in inheritance taxes. To high? To low? I dunno, but that's my best guess back of the envelope math.
Nice estimates. The nominal US estate tax rate for estates $1M over the exclusion is 40% so I would say your estimate of 6.5% shows how effective the 1% have been at sheltering their wealth from estate tax. The GRAT was invented (and patented[1]) as a way to transfer money tax free after congress closed the GRIT loophole in 1990:
Another thing you could do is a logarithmic flat tax, where everyone pays the same amount of relative resources. The value of money as people get richer is roughly logarithmic. The simplest plan I've seen along these lines is:
Figure your year's revenue. Find out how many times the poverty level that is, for your family size. (Twice the poverty level, 10x the poverty level, etc.) Take the log base 10. Multiply that by some constant that is the same for every tax payer in the nation (both people and businesses). Currently, that "flat" constant would be about 9. The resultant number is your tax rate.
(Hint: this would be a massive tax cut for pretty much everyone short of billionaires.)
What distributive effect are you talking about? Almost every free market economy today is an equal opportunity space. And that is only thing that should count.
If people can't even keep their own money earned for themselves, you are just killing the incentive to even earn it at the first place. You seem to suggesting we must periodically make the rich, poor. This kind of equality is more dangerous than inequality. Look up the failure of socialist/communist set ups in past century that will tell you why this is such a bad idea.
The whole scheme over time feels like punishing people for working hard and generating wealth, while remainder free loads on the assumption they are entitled to free money.
What follow next is exodus of smart, hard working people to better countries.
Well, are his ideas/comments/arguments valid or invalid? Or are you simply dismissing it because it's too-similar to a line of thinking that is often popularized by a single book?
Lots and lots and LOTs of sectors are heavily regulated, which leads to rent seeking which leads to protectionism, either via foreign trade barriers or just making it bureaucratically difficult for competitors to enter (i.e. Uber getting flack from municipalities).
For a long time the rent-seeking was done by unions, but these days its more commonly done by corporations.
Money is just a proxy for power, and there has literally never been a society where it is easier for the powerless to become powerful than it is for the powerful to accrue more power. The "best" you can do to prevent the powerful from accruing power is consolidate all meaningful power as tightly as possible, which history teaches us is a recipe for misery.
Umm, every revolution in history is an example of the powerless becoming more powerful. We (in the U.S. at least) are not still subjects of the English Crown, and indeed many people look at the monarchy as a joke these days. If you look at which families are powerful now vs. who was powerful 150 years ago, there's a huge disparity.
I think that when people say "It's impossible for the powerless to become powerful", they really mean "It's very unlikely for me to become powerful", which is statistically true. Powerful people are rare - that's what it means to be powerful - and so no matter how much mobility there is at the top, the odds of any one person making it there are quite slim.
And yet the irony is that some of the freest countries around with high HDI and GDP are constitutional/ceremonial monarchies. And then you have luxurious and prosperous microstates like Monaco and Liechtenstein which are both democratic yet retaining monarchs who actively exercise their executive powers.
Then there's the controversial question of whether a monarchy's efficacy may in fact be greater than that of a republic, a topic that authors such as Erik von Kuehnelt-Leddihn and Hans-Hermann Hoppe have explored.
There are a lot of ironies when it comes to power. Another big one, relating to the article under discussion, is that it's by the CEO of a company dedicated to taking money from the poor and giving it to startup founders so that they may become rich.
I think a lot of the confusion is because power operates as a hierarchy (or oftentimes, a graph), and each layer of the hierarchy tends to oppress the layer below it while itself being oppressed by the layer above. Hence you had poor blacks in Reconstruction being oppressed by the KKK (largely composed of poor white sharecroppers), who were being oppressed by the Northern bourgeoisie, who were being oppressed by Gilded Age industrialists who were being oppressed by populist politicians who were allied with the poor white sharecroppers. That's why you may have a monarchy with strong support from the common people: the monarchy keeps wealthy business owners in line, which keeps them from oppressing ordinary citizens. It also explains the current political situation in the U.S, where the Republican party is an uneasy coalition of wealthy plutocrats, small business owners, and poor rural religious whites, while the Democratic party is an uneasy coalition of academics, white Yuppies, unionized black factory workers, and immigrant Hispanics. The plutocrats oppress the yuppies, who offend the small business owners, who oppress the immigrants, who take jobs away from the rural poor, who discriminate against blacks.
Who benefitted most from the US revolution: sharecroppers or land owners?
It was an enormous risk for Thomas Jefferson, Ben Franklin & company, but the upside was huge. The average worker not so much. Non-landowners weren't even allowed to vote!
That's what I'm saying about it being virtually impossible, by definition, to raise a class of people into power. What would it even look like for the proletariat to be in power? This was the promise of the Russian Revolution, but instead, what happened was that a small group of elites (the Communist Party Central Committee) was formed to do the actual governing, and then the proletariat remained the proletariat.
There are certainly examples of individual sharecroppers who attained power as a result of revolution, eg. William Few. [1]
Well, you've made a powerful argument against a position I didn't articulate. Thank you for starting out your comment with the snotty "Umm" of seeming disagreement that never materialized, I appreciate it.
History tends to support your conclusion, but most of the time high concentration of wealth leads to social instability and then (bloody) revolt, overthrow of whichever 1% runs the show at the time. Then the (+/- 70-100 year) cycle starts again. It seems it's best to be born about 10-20 years after each of these crises (see Baby Boomers). It's worst to be born just before / during such societal quakes and unfortunately, we seem to be on the cusp of a new one now. I would add that that before the change occurs, there is inevitably a long period of oppression first as the privileged try to defend their positions, with increasing amounts of suppressive behaviour. We see that already with the surveillance society in which anybody who might challenge the current powers will be branded a terrorist, and even in the economic policy of QE which has the main effect of supporting the financial interests of the wealthy incumbents.
I wonder whether people these days don't receive a definition and education about "capitalism" akin to that I which I and my contemporaries received -- average though it may have been and dim as it is in my mind, these many years later.
"Capitalism" emphasizes (take this as a principle, or principal -- regardless of truth) the primacy of capital in production -- and, by extension, ownership. Labor, et al. are not capital. Land, factories, machinery: Those are capital.
What happens when capitalism becomes unmitigated and ownership concentrated? Only those who have the capital, can produce. And the more capital they control, the more production they control -- the more power they have.
And for some, that power, and being at the pinnacle of the hierarchy, are more important than the absolute progress of the community.
(Understand, too, that this is not simply some cartoon-esque "power for power's sake" quest. It leads, overall, to better life, greater health, and better outcomes for one's offspring and friends.)
There are many people with much potential and many good ideas, who are not allowed the resources with which to pursue them.
This is where that community needs to curtail unbridled capitalism.
(The "rising tide that lifts all boats" may lead to a better collective outcome. To greater absolute progress. But also, perhaps, to less control, advantage, and security at the top.)
And this is why you never want all of your resources, production, and knowledge to reside under the control of a single authority, nor anything overly approaching such.
We aren't all equivalent (i.e. the same, as opposed to some qualitative assessment of "equal"). And we do enhance our abilities by forming organized structures. But no absolute hierarchy has demonstrated the ability to maximize potential -- neither in us nor in biology.
This is an interesting book. It gives a different angle on the ideia in Yanis Varoufakis' book The Global Minotaur which is that money has to circulate in order for the economy to function with stability. You just can't let it pile up too much in one place.
Most of the wealth held by the rich isn't money failing to circulate. It's productive capacity producing goods for others. Elon Musk's wealth isn't a vault full of gold coins. It's a factory producing cars that other people get to drive.
Piketty's book describes this phenomenon as well - his book is fundamentally about the world moving from a situation of having a $1M factory producing $100k in income to a situation of a $2M factory producing $150k in income. (I.e., r=2, g=1.5.)
It's Paris Hilton, the self-made millionaire you are referring to, right? The one disowned by her family, but who leveraged an entertaining personality into her own brand of fashion and and entertainment products? From what I can tell, most of her wealth is in the form of jewelry production and sales.
Had she kept her inherited wealth it would be mostly in the form of hotels rather than money.
The parent I think is clearly going down the wrong road. Almost by definition, if you've heard of the person to cite then they have an outsized impact on wealth circulation.
The people to look at are, say, Peter Oppenheimer, former CFO of Apple (picked at random). I'm sure his net worth is in the hundreds of millions and he has a few very nice houses -- but what's the likelihood that a significant portion of his wealth is reintroduced into the economy? I really know nothing about him, so maybe I'm being unfair and he spends lavishly on yachts and mansions, or is an angel investor in 100s of startups, but I think the prototypical Fortune 500 C-level is probably someone who lives very well, but not lavishly and not up to their very generous means.
I should also note I'm excluding passive investment in mutual or hedge funds for the sake of argument, but I'm not sure whether they produce sufficient results to count as "reintroducing" money into the market.
It's highly unlikely that Oppenheimer is sitting on large piles of cash. Most likely his wealth is again in productive assets - e.g. shares of SPY.
As an owner of shares of SPY, he then owns small percentages of factories, airplanes, hotels, logistics and similar things. Virtually no one is actually sitting on money because that's a really dumb thing to do. Investing in productive capacity just provides a lot more money.
You speak as if he's playing any role in that money doing useful work. He's not, he's sipping drinks by the pool, while millions are doing all the actual work. He just happens to have his name written on the paper. That money would do the same work no matter what the name is - or indeed, without any name on the label. That's what differentiates someone doing useful work (e.g. Elon Musk) from all the fancy-drink-sippers no matter what their names are.
Beyond a certain limit, ownership is bullshit. It's really stewardship, but it's forgotten its true limits and purpose.
When you're touching so many people and resources, you're a steward, not an owner, period. What's lacking now is a mechanism for the bad stewards to undergo corrective action.
I didn't claim he was playing a role in the management of any company, I merely claimed he wasn't holding money.
If you believe Piketty that the wealthy are better investors than the rest of us then the wealthy are actually doing useful work: directing resources towards their most productive use.
I specifically excluded SPY in the last paragraph as a "productive" investment, but only for the sake of argument -- I admit I'm inclined to agree with you that even passive investment of this type is productive.
I think the problem pointed out by the original article is that they don't like this because it tends to produce oligopolies (i.e., "chains"). Unfortunately, I think that's just because non-colluding oligopolies are efficient.
So the market is "working," some just don't like the outcome.
Buying someone else's shares of a public company isn't super productive. You're buying a stake in future cash flows at companies, not investing in growth. Especially the way buybacks have been going lately,
The cash one exchanges for shares of a public company is usually spent on paying wages, buying equipment, funding R&D etc, thus enabling future growth.
If one happens to invest into the inefficient company in a long term it is going to be bust along with investor.
When you buy a share of SPY you're not paying that cash to all the S&P 500 companies, you're paying it to another party that already has a share of SPY. IPOs give money to companies, but trading shares between parties does nothing for the company and contributes $0 to wages, equipment, R&D, etc.
I own shares of SPY, if I sell them to you what exactly changes?
Not to mention Capital itself. Whether or not you agree with it, and its historiography is mostly proved bunk by now, its analysis has value. The linked article is kind of boring because it explicitly does not analyze the structural conditions of capitalism which make the phenomena it criticizes inevitable. You can't fight these trends within the framework of capitalism.
I don't think history has proven Das Kapital to be complete bunk - it's kind of like Freud - often said to be bunk but many of his ideas were revolutionary at the time and are considered to be mostly mainstream now. Things like the subconcious, ego, the importance of childhood development on adult psyche - even if not completely scientifically rigorous are useful tools for understanding our reality. But it was his more loony ideas that stick out now and for which he is remembered. So that's why people think that firstly rather than take note of the other stuff.
And so it goes with Marx, the first volume certainly is hugely prescient and correctly predicts much of the economic progress that has come since. Workers as stakeholders in a business is considered fairly mainstream in many modern economies as is the role of the state.
But as with Freud it was the later stuff particularly in Volume 2 that got him his reputation as a looney. Sadly he formulated the manifesto as a precursor to writing the book and this bound him to a particular conclusion even if his research in the meantime didn't match up. Volume 2 was never finished and what was eventually published was the unfinished manuscript as well as some notes, post humous.
It is unfortunate that Marx couldn't have just left it at Volume 1, and put aside the fanatical fervour of his younger years. Had he done so it could have formed the basis of a more humane society and he would not have been associated with some of the more attrocious implementations of communism, and a reputation which he doesn't wholly deserve.
I tend to rely ( probably too much ) on Adam Smith for my ideas about capitalism, and so far as they go these phenomena are not that.
Specifically land leads to Ricardian rents, and historical examples of taxing land rents abound. Japan went from medeviel backwater to industrial giant in ... decades through the use of land taxation.
At some point, they decided the classical Japanese values were more important and that is when the industrialists took over as an update to the Samurai and the rest is history. I don't blame them - classical/medieval Japanese culture is extraordinarily beautiful. But the Bushido Code does not mix with machine guns.
Generally, capitalism if practiced by ... Vulcans or robots would not result in most of what we attribute to it as ills. But humans love to cheat, and the cost of prosecuting all that cheating is probably too high.
We also seem unable to develop a media culture that does not fawn all over the rich and powerful.
Actual Capitalist ethics emphasize consumer surplus most of all. Whether the externalities are what we think they are is a much richer discussion. Quite difficult. It is important to realistically believe you are serving your fellow man in this way.
>"We also seem unable to develop a media culture that does not fawn all over the rich and powerful."
They get the opposite as well. I've seen so much sheer, unreasoned hatred of the rich, simply for being rich. Almost as if it is assumed that they only got that way by some illegal/immoral means.
Then, you get the other half of that side of the coin. That even if the rich did earn their money using legal/ethical means, they don't deserve it (or to keep/use it). It's inherent in all discussions of wealth inequality. Really, it's not enough to just let it be, but everyone wants to play social-engineer with progressively richer individuals.
One additional thing, that you can see running in this discussion. That legality is not somehow an indicator of fairness/justice. A few commentators here have noted that rich people use tax "holes" and legal financial constructs to "evade" tax, as if it's a bad thing, and as if it's not something that was put in place by legal, democratic means. At this point, I'm inclined to believe that these individuals are content with circular reasoning because none of these points can be proven by themselves, and rather always rely on some other piece of the landscape to deflect critique.
Our media culture seems to have two modes - aspiration and spite. Either we aspire to be like more "successful" people or we spite them for being more "successful" than us.
I suspect this maps well to an ingroup/outgroup divide.
Except the US is rolling in wealth and has real class mobility. Countries with top-level hoarding like many in South America countries or oligarchies like Russia are better examples.
I know HN is US-centric and all its criticisms centered on the US, but its asinine to use the US as an example of "feudalism" when we're seeing much, much worse elswhere. With a 5.5% unemployment rate and median household income of $55k, there's a lot of opportunity.
France, and other Euro states, has twice the unemployment rate and almost half the household income. Yet it always gets a free pass in these discussions.
In Russia 111 people control 19 percent of all wealth. This is a country with a $1.5T GDP and 145m people! One fifth of it controlled by a mere 111 men? Yes somehow Russia also gets a free pass during these discussions. Hell, in Brazil the bottom 10% of the population lives on about $1 a day and the top 10% owns almost half of the wealth!
Yeah, a lot of countries have fallen into near feudalism, but the US isn't one of them. At least its not the best example for breathless exposes of wealth inequility.
The US hasn't fallen into feudalism, but it is increasingly much harder for people with interest and capabilities to get to college because of the cost - unless their own parents "gifted them" with a good edu & economic background. I went to a moderately good southern university but was able to get a phd in cs, and then was able to work for many of the leading tech companies in the world (like facebook, google, microsoft or amazon). I followed in the footsteps of my parents, both of whom had college degrees. If instead I was the first person in my family to make it to college, and my parents had been uneducated or suffered from being drug addicted, or I had gone to a terrible public school, it would have been tremendously harder for me to succeed. And I can help my own kids to succeed.
Your parent's educational and economic background is a huge factor in your personal success. We should strive to make it so that intelligent people with interest can succeed (educationally and personally), and strive to make it so that people see this is an opportunity not preserved for the rich. We should not (as someone suggested) make it society work such that wealth is randomly moved between people, as then there would be no benefit to learning and trying to better the world; somehow this has to be balanced with a good and decent life for everyone, people shouldn't just die if they don't happen to have health care (or their parents are poor).
My parents were poor immigrants. We didn't die when we got sick, we went to the public hospital and/or went to a cheap doctor who specialized in the immigrant community and had pricing to reflect that. We were taught a certain work ethic by seeing the people around us try to improve themselves and their situation.
We didn't go to good schools, but they were good enough and student loans go us into decent state colleges (and later private school via the same loan system). So yeah, your hypothetical hopeless sob story kinda pisses on the many people who rose above economic hardships. Many immigrants rise ahead in the US due to all the opportunity here. Ironically, the minorities we coddle with welfare, political correctness, and never-ending social programs that do next to nothing but drain tax dollars tend to be the ones who don't thrive and degenerate into multi-generation poverty. Maybe the white liberal mid/upper class political thought should focus on jobs and incentives and not-hand wringing about how hopeless everything is.
>wealth is randomly moved between people,
Everyone I know has a job/wealth via some level of meritocracy. I don't know anyone who randomly ran into money. If money was this easy to get then we wouldn't be having this conversation.
The anti-US bias on sites like Reddit and HN is just ignorant. I don't think people appreciate what they have and the praise of places like Russia or China as being better or more free or more economically viable is hilariously ignorant. Or the masive ignorance of how bad Europe's finances and employment situation is in many of its countries, especially places like Italy, Spain, France, and of course Greece. Life is a lot more complex than "omg the US is the worst country ever." Seriously, if you guys want a conversation about oligarchies and inequality then Russia or Brazil are probably the best examples around. The US is very far from those levels of inequality. Pointing this out, sadly, gets you mega downvotes here. I'm curious why this forum needs to have this hysterical and furious anti-US bias all the time? Why are you being socially rewarded by this narrative? Have you ever questioned this narrative the types of people who are constantly selling it to you? Or their motivations?
You're never addressing anything, only diverting by baiting about Russia and China and how all criticism of the U.S. is unfounded because "What about country X?" and some rants about the Protestant work ethic. That's not an argument, it's tu quoque.
I'm skeptical as to your characterization of Italy, Spain and France. It sounds like you're just observing some macroeconomic forecasts without taking into account societal microfoundations like mobility, legislation and culture. These can make immense differences in ensuring a greater subjective feeling of freedom or a greater real resilience against cyclical factors.
Pretty sure France and most EU states have higher class mobility than the US most entirely due to much more accessible education and larger welfare states.
I think about this quite a bit and haven't come to a solution. In a truly equal society every person would have equal opportunity and achievement. For example, if x% of the population are in college then a child should have x% probability of going to college regardless of his parent's income and other factors. In modern day America it's probably something like the below (using made up numbers):
Upper class: 95% probability of child going to college
Middle class: 65% probability of child going to college
Lower Class: 30% probability of child going to college
This is just one example but I believe the same concept can be used for myriad situations. This is going to create a huge cycle of inequality that will widen as the economy grows and those with money can exert power and influence to maintain their power and influence, create a feedback cycle.
From reading other comments it sounds like the new "Capital" book is some interesting reading on this subject.
Of the 30% of lower class kids who go to college, how many are successful in the ways they want to be? A lower class kid who wants to become a doctor should have the same opportunities as anyone else and we should work hard to support them. But I see kids all the time who majored in communications or social studies (not kidding) and came out with $40k in student debt (half of which was spent on inflated rent and social activities). They had no guidance from their typically lower class parents beyond ''go to college'' because that is what society has been drilling into their collective heads for 30 years. We need to fundamentally rethink how to set up vocational pathways and training for young people, not try to push more of them into a system that is increasingly failing.
Story of my life.. sadly my parents just had no real concept of professional jobs, let alone connections or the experience to guide me into such a world. Eventually I wised up and took the IT path, but it was after I wasted college getting a worthless BA.
On the bright side, I grew up just before the internet got big and kids today seem much sharper, so I hold out hope for the next generation.
In absolute terms the poor get richer by doing absolutely nothing. Being poor today is objectively superior than being poor 25, 50, 100, or 200 years ago.
So I suppose your conclusion is we're doing it right? Well alrighty then.
Why? Why is it better to compare yourself to the guy down the street than to compare yourself to your past self of 10 years ago?
I've usually tried to compare myself vs. who I was 10 years ago, not to the people around me, and I suspect I've ended up significantly happier (and quite possibly wealthier) because of it.
We don't determine "poverty" by living conditions but income. As someone who tries to "earn" as little as possible for tax-protest reasons, I can vouch for the parent commenter's statement. By picking the right location and work, I'm able to support a family on $20K (AGI) per year. The used cars I buy in cash get better every time I need to get another one. As people in my area moved to bigger houses in the perimeter of the city, I was able to buy a nice Victorian-era home with plenty of room for just north of the annual median U.S. income. (And I don't have a mortgage.) The home's location is easily walkable to schools, stores, shops, doctors, etc. My "living conditions" are really pretty great just making do with the castoff affluence around me. Yet my income level is considered by the federal government to be below the "poverty level". And compared to my great-grandparents, who were successful subsistence farmers, I'd say I have it pretty damn great as my "living conditions" are far superior to theirs, even though my "relative" poverty is greater.
This is what Piketty's "r > g" is about: if the return on capital is greater than overall growth, then the returns of that growth are going disproportionately to the richest.
I see evidence that inequality is rising, however do you have evidence that "the rich" is a consistent group over time and not subject to change?
As a counter example, it's incredible to compare the abject poverty of, e.g. Asian immigrants to the US with the relative wealth of their first-generation American children. That's happening alongside rising inequality, but it's definitely not "the rich getting richer."
The Great Gatsby curve [1] suggests that increasing inequality may lead to lower social mobility. The further apart the rungs are on the ladder, the harder it is to climb.
Totally applies to corporations. Applies to any entity capable of pooling and growing wealth. People, families, institutions, social groups...
Let's call it "super-critical" and "sub-critical". Super-critical is always-positive wealth growth rates, no matter quantity of wealth. This will then always occur (or, according to theory, should always occur).
If it's always sub-critical, then you don't have wealth growth, because it never makes sense. I think maybe.
So what you want is a transition point at which in order to "grow personal wealth" what you actually have to do is grow /other/ people's wealth (who are below that point)... but then it becomes growing power (social connections and allegiances) rather than monetary power (wealth).
And because monetary wealth is actually possible to quantify and thus measure, account for, examine, track, etc - it's arguably better, as we call use of that power "corruption".
In which case the only known solution is the periodic upheaval.
Applies to any entity capable of pooling and growing wealth. People, families, institutions, social groups...
Yes, but not to an absolute degree. Go back and look at a list of the "Fortune 500" (or something equivalent) from, say, 1900. I believe you'll find that most of those companies no longer even exist at all. Likewise if you enumerate a list of the richest people in the world from that era, their grand-children (or great grand children, whatever) aren't necessarily in corresponding positions in the modern "richest people in the world" list.
One thing that the discussions often seem to neglect to consider, is the impact of disruptive (sorry, it's the only word that made sense here) technological change. New technologies come along and create a sort of "upheaval" (something like Schumpeterian "creative destruction") that "resets" things periodically.
There are also "dis-economies" of scale where size works against a firm's ability to grow larger and more profitable.
Families are interesting because you have the generational laziness issue - All you need is one person in the chain to lose the wealth, and it's gone.
Disruptive technologies, social changes, and legal changes could be considered forms of "periodic, non-violent revolution".
Dis-economies would then be built-in inflection points where you don't need an out-of-context solution (aka, laws) to create a sub-critical point for wealth growth. Interesting, didn't know that happened. Can you point me at some examples?
Re: Disruptive - It may have become startup corporate jargon, but it still makes sense. Look up something called the OODA loop, and note that according to it, a "good maneuver" doesn't have to be one that's successful or further your goals, it can just be one that changes the playing field faster than your opponents can react.
Dis-economies would then be built-in inflection points where you don't need an out-of-context solution (aka, laws) to create a sub-critical point for wealth growth. Interesting, didn't know that happened. Can you point me at some examples?
The idea of a "dis-economy of scale as inflection point" is probably valid, but I'm not actually sure that I know of a specific example. It's also muddled up with the technological change issue, as a new technology comes along, and a smaller, nimbler company is more able to adopt and commercialize that technology than a larger, more bureaucracy bound company.
Look up something called the OODA loop, and note that according to it, a "good maneuver" doesn't have to be one that's successful or further your goals, it can just be one that changes the playing field faster than your opponents can react.
Hmm. Which then leads me to think - Is there a way to institutionalize the periodic upheaval? Or at least prevent the violence and/or civilizational collapse?
But, wasn't that part of the point of the US system - getting closer to a periodic / on-going non-violent revolution?
I dont think that is true at all. This sort of extrapolation is mostly based on our mental heuristics which turn out to be false because we fail to account for several other factors that might be affecting poor and rich.
For example I would love to be a poor person in today's American which rich are richer than a poor person 30 years ago. The fact that rich people get rich basically suggest accelerated pace of development that brings down cost of living for everyone including the poor. Even though the average income of a poor family in United states might not have grown substantially in last 30 years, what they can afford for that money has changed a lot.
Money <=> Power is not true unless government interferes too much in Economy. In USA however that is happening in the name of helping poor.
Isn't your premise only true if it's impossible or very hard (in absolute terms, not relative to rich people) for poor people to get richer? "Feudalism," while not being very well-defined as far as I know, implies that the lower class has a low quality of life.
" 'I might delete Facebook today.', 'I’ll go back to my Razr phone.', 'Maybe I’ll try homesteading.' But to do any of these means becoming a ghost to your community."
As someone who has deleted Facebook and moved to our own small homestead, this is totally untrue. On the contrary, I live in a much more vibrant community now, as I barter with the neighbors, trading our eggs, dairy, and honey, for whatever they have/do. I know almost every single person who lives near me. We hire their kids to help in the summers. A few women hang out at our place every Tuesday and knit. We have friends come crash with us for weeks or months at a time, exchanging room and board for helping around the homestead. And I work from home, ironically making more money than I did when working in an office. (Although I actually save less because I keep building chicken coops and solar arrays, etc.).
In any case, I feel far more connected to my local community now than I ever did before we started this lifestyle.
* There are only 250 Duane Reade's total (according to Wikipedia), there can't possibly be 400 in Manhattan.
* Duane Reade as a chain is intricately associated with the city of New York, at least from the point of view of a San Franciscan. It is the local culture.
* What's wrong with not having to walk a mile to go to a drug store? Having more locations helps build smaller neighborhoods.
Nobody grows up wanting to own and operate their own drug store anymore. So chains do it instead.
And I don't see how this is different than 50 people opening their own boutiques and destroying neighborhoods through gentrification. But I'm guessing the author would have a different opinion on that.
also: this is the CEO of kickstarter? Isn't it slightly self-serving for him to say "people should be trying their own crazy things that they could never get money for before kickstarter"?
And don't forget the hypocrisy of bashing money-worshipping, when Kickstarter (which is now a for-profit corporation, by the way) is run by profit-maximizing algorithms. Strickler sounds like the typical caviar socialist.
We want Kickstarter to be similarly in sync with society. Earlier this year we became a Public Benefit Corporation. This means we are legally obligated to consider the impact of our decisions on society, not just our shareholders. It’s very different from the expectation that for profit companies maximize shareholder value above all. It acknowledges and embraces that you are a part of a larger community.
"In the United States, a benefit corporation is a type of for-profit corporate entity, authorized by 30 U.S. states and the District of Columbia[1] that includes positive impact on society and the environment in addition to profit as its legally defined goals. Benefit corporations differ from traditional C corporations in purpose, accountability, and transparency, but not in taxation."
there are more than 400 duane reades in nyc. after a merger/acquisition, walgreens and duane reades are cobranded in nyc (and i believe all will soon be duane reades). they're also in the process of buying rite aide too, so that number will greatly increase v soon
I guess that funnily enough, the big irony of the text is that to do this: "people should be trying their own crazy things" a lot of this is only possible because the cost of certain things have been brought down by consolidations
There's nothing special in a pharmacy. It's a cookie-cutter business.
Build something truly new and innovative, don't try to compete for profit shavings and established markets unless you have 5 aces up your sleeve (like, drone delivery of prescription or something)
Pharmacies might be cookie-cutter businesses in your experience, but in a place with the density of NY, why should they be? Why can't there be a compounding pharmacy that specializes in pre-natal care, so the pharmacists and technicians are exceptionally well versed in various remedies for things like morning sickness, swelling, any sort of ailment that pregnancy can bring, who know pregnancy better than any doctor in terms of what products work best and in what combinations, in addition to stocking an assortment of complementary non-prescription items, all chosen because they are uniquely suited for the kinds of issues pregnant women specifically have.
Ditto cancer. Ditto orthopedics. Ditto MS and musculoskeletal problems. Ditto pediatrics. Communities exist around all of these things because people need a place to find that information and get their questions answered. Why couldn't that place be the exact type of business that exists to address people's health needs?
It could be a business built around serving the needs of a minority (yet significant) population exceptionally well, instead of being a bland cookie-cutter store that serves everyone pretty much okay, unless something goes wrong and the 22 year old pharmacy tech who has never even had a conversation with someone with your particular health concern remarkably doesn't know how to help you.
hey look, an appearance from the amazing mr. strawman, capable of ignoring an argument's essence in favor of contradicting lesser points to appear correct, yet totally out of context! Amazing!
Well, I'm claiming that it's fundamentally a self-serving and dishonest narrative, so I kind of have to contradict the lesser points to prove the narrative wrong.
As a different narrative, I don't see drug-store chains as a sign of communities dying, I see it as a sign of communities getting bigger. In a big city, there are lots of different chains, and in the small city that might have one drug store, they have a chain drug store and the community can focus on other things. Having a "local drug store" doesn't make a community. And having people raise millions of dollars for new episodes of a TV show from the 90s (MST3K) doesn't do anything for local communities.
OK, so to be nice and avoid haha jokes about logical flaws, I'm reading that your argument is this --> that the article is "fundamentally a self-serving and dishonest narrative".
The only point you offer that relates to your actual argument is the author of the article is the CEO of kickstarter, so his promotion of less monolithic industries is ultimately self serving given that he profits off them - which is an interesting one but I'd contest that with the history and focus of kickstarter and their lack of employing any monopoly strategy.
By limiting entries to simple projects, not allowing anything purely political / fundraising driven, Kickstarter allowed for a vast sea of other crowdfunding sites to exist without ever threatening to take them or their market share over, despite Kickstarter being the site that popularized the crowfunding concept. The opposite of say, Uber's domination strategy, or a lot of other companies for that matter.
So... if I trust any company to express themselves without being self serving, it would be Kickstarter, for the reason that they had an opportunity to be the only major crowdfunding site, and chose not to based on what the founders wanted the company to be about.
Well, let's forget about Strickler's caviar socialist hypocrisy for a moment, then: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest". That's what the ignorant KS CEO doesn't get.
“having people raise millions of dollars for new episodes of a TV show from the 90s (MST3K) doesn't do anything for local communities” dude you just strawman’ed again
I like the message, but I also think it cuts both ways.
Take Chicago for example. When I moved to Chicago five years ago, Wicker Park was the "hipster" neighborhood, where many of the exciting cultural events (at least for people in my age group, young 20 somethings) were happening. By the next year, Wicker Park had become too trendy and gentrified, and all the hipsters moved further west to Logan Square. Today Logan Square is too upscale, and the hipsters have moved south into Pilsen, forcing many of the local hispanic families out of the neighborhood because of rising prices. Now there are organic juice bars sprouting up in Pilsen and the gentrification process is starting anew.
This is almost exactly the pattern described in the article, except it's the people who want authentic communities that are causing the problem! It's a catch-22: if you don't like your community you can try to go elsewhere, but a few years after you do you will hate your vapid community again. In this case it's the drive for culture that causes monoculture. Once something is seen as authentic people flock to it and it becomes trite. How can you deal with that?
> In this case it's the drive for culture that causes monoculture.
It's the drive for a culture that can be commodified and packaged up that causes monoculture.
I was passing through times square the other week. One of the 10-story tall LED billboards had a girl in underwear with the tagline "No retouching on this girl! The real you is sexy." We seem to be disillusioned, and that makes authenticity in advertising hot. So find the hottest authentic girl, package her up, and mass-produce her authenticity.
The way out is to build your cultural values around that which cannot be commodified. Value authentic authenticity, and value the things that can't be measured in dollars and economic efficiency. We've known what that is: self-expression, creativity, friendship, family, and love.
What we struggle with is recognizing fake authenticity. For some reason we value hallmark love more than a handwritten note because the hallmark typeset is more refined or it has a more clever tagline or the art on the cover will supposedly evoke a deeper emotion than any stick figure I'm capable of drawing.
We've been conditioned to think the best expression of our love is something that can be bought in the card isle, and we've forgotten that our love is actually ours to give freely.
The only way out of the catch-22 is to decondition your way out of the value and belief system that perpetuates the catch-22. What's the old adage? Do not try and bend the spoon. That's impossible. Instead, only try to realize the truth: there is no spoon.
Maybe the question that should be asked is why a large part of the population can't afford to live in a hip place in town, so what's left at the end is only rich people and banks. I think there's two aspects to this: (1) Income inequality and (2) smart zoning laws. I think (1) has been discussed ad nauseam but for (2) see Japan as an example: http://urbankchoze.blogspot.jp/2014/04/japanese-zoning.html.
I live in Tokyo and I have to say - while there is still the business district that noone can afford and the gentrification process is somewhat visible in some places (however IMO slower than elsewhere), it's really not too hard to live in a place with lots of small business, shops, nice restaurants and locals to talk to. We pay <1000$ rent and have a three small supermarkets, ~15 good restaurants, 2 train stations, a recreational park with big pond and all kinds of small shops do get whatever supply you need, all within 10min walking distance. And this place is far from exceptional in Tokyo, this city is basically a huge spread of small towns grown together and connected with a train system on steroids. And I think zoning laws is probably one of the most important influences on why this happens - basically you can build an expensive house, a cheap apartment building, a restaurant, a medium sized supermarket, an estate agency and a fish tank supply shop all in the same block here - and that's also what actually happens. I've never seen this sort of chaotic mix in Europe or the US, but I think this is exactly what you need for a thriving community that stays this way.
Well the problem starts right after the hipsters move in, because they displace the local families. At least this is the current concern being voiced by those in Pilsen.
This message is unlikely to reach the people it most needs to reach. It's hard enough to change anyone's religion; harder still when their religion is money.
It causes weird effects. In my area -- and in a number of other more rural communities I've visited over the last year -- there are still tons and tons of empty commercial spaces, staying empty for months (or years), all with "For Lease" signs in the window ... and all of them with absurdly inflated asking rates. For those whose god is "the market", there's a failure happening here that's directly affecting the ability of smaller businesses to start up or grow.
David Graeber's Debt, The First 5,000 Years ideas on this can be summarized that around 1500 or so, money gained autonomy from the leviathan. Where it once mattered that you could use money to get things and use things to get money, but when money is used only to get money, things go berserk.
The result was someone like Cortez could conquer Mexico, gathering all the gold there was to be had, even enslaving thousands to work in mines, murdering thousands more by working them to death, and still be completely broke. Cortez was capitalized at a rate point where he could never break even.
Wait what is this about Cortez not being able to break even due to overcapitalization? It sounds really interesting. Would love if you could point me to a source where I can read more about this.
The poster you're replying to specifically referenced a book that discusses this and related topics, with tons of citations. You should read it, it's an amazing, important book.
I strongly suspect the guy didn't actually read it, in spite of over-explaining that he did. Graeber stops in several places and carefully recaps in outline form the past several hundred pages to make sure you're following along.
I appreciate the analysis and sentiment but when looking at graphs of extreme net worth inequality it seems pretty pointless to just advise sympathetic people to "not sell out."
People who will take that advice to heart will just end up not being the extremely rich people, and other people will end up there instead.
It's good to increase the number of CEOs and powerful people who remain committed to values that benefit everyone. Still, without systemic change, the extremely rich and sociopathic will continue doing what they do, and extremely powerful corporations and banks will stay extremely powerful.
I totally agree "do the right thing" is a special case of "just try harder". And "Try harder" is the solution to nothing. You have to change the system to make what-you-want-to-see the natural output of the system.
Before that, you have to make sure that a system where what-you-want-to-see is the natural output is a system you're willing to accept. For any given thing, there are lots of truly abhorrent ways to produce it. There are a lot fewer morally acceptable ways.
Sometimes none at all, subject to local moral conditions.
... and I think you'll find that "changing the system" is pretty much impossible. The world is not created, the world evolves. The best you can do is try and apply a selection pressure
Your best bet isn't to 'change the system' if dramatic change is needed, your best bet is to create a parallel system that people can buy into gradually.
That's applicable 99% of the time, but discontinuities happen too. French and American revolutions, for example. On a smaller scale, think of key pieces of legislation, landmark supreme court cases, and so on.
No doubt that big ships turn slower, but this rule also applies to small groups and even individuals. If you aren't brushing your teeth as often as you'd like, "try harder" will not help. You need to re-architecture your space and habits. If a lot of sales leads aren't being followed up on, "try harder" will not help. You need to change the systems and processes that the sales team is using. Those changes can be much faster.
> In New York City, many of the businesses that move in are banks. There are more than 1,800 bank branches in New York — 60% more than there were a decade ago.
There was an article about this in the Wall Street Journal last year[1]. Excerpt:
> But why open a branch on every corner? The blame, it turns out, lies with us. We're asking for it.
> TD, which has more than 1,300 branches in cities up and down the East Coast, conducted a customer survey and discovered that, compared to the rest of the nation, New Yorkers are obsessed with branch convenience. While folks in other towns value frivolities like friendly service, New Yorkers more often rank convenient ATMs and branches a top priority. They want locations near their homes, their offices and the offices of their spouses, says Mr. Giamo. They want to see their bank everywhere they go.
When it comes to the subject of community, a lot of people don't want to accept that communities are dynamic. The ways in which they change are almost always driven by the needs and wants of the people in those communities, even though you will always find vocal people in those communities who swear that can't be the case.
I guess I wonder though... Physical locations are pretty large expenses so do New Yorkers pay more for their banking services per capita than other bank customers to support this psychological need to see their bank everywhere or is this psychological want just something being underwritten by the rest of the bank customers.
Interesting to read that the number of bank branches is actually increasing in New York. In the UK the opposite is happening as more and more consumers are doing their banking online: "the UK has lost a quarter of its retail bank branches over the past ten years" (650 estimated closures in 2015, 500 in 2014 and 222 in 2013) [0]. Many of the closed banks are turned into bars, see [1] for some nice examples.
I have a hard time believing any conclusion based on the premise that banks listen to their customers (depositors), given a long-standing behavior of anti-customer behavior like a plethora of fees, minimum deposit, and in general, sagging interest rates.
The "sagging interest rates" are a product of Fed monetary policy, and much of the fee-generating behavior you describe has been motivated in some part by the Fed's monetary policy too. But please don't let that stop you from blaming the banks.
If you're suggesting that the member banks of the twelve regional Federal Reserve Banks have banded together to manipulate Fed policy so they can stick it to retail banking customers, please do yourself a favor and research how the Federal Reserve System operates. The policy decisions we're discussing are made by the Federal Open Market Committee and Federal Reserve Board. If you educate yourself as to their composition, you will quickly see that member banks, let alone a handful of large member banks, are not calling the shots.
"The U.S. Government does not own shares in the Federal Reserve System or its component banks, but does receive all of the system's annual profits after a statutory dividend of 6% on their capital investment is paid to member banks and a capital account surplus is maintained."
So part of their profits go to member banks. Who are the member banks that profit from these dividends?
If your money does not make you money, you are losing money. This article neglects inflation and monetary policy completely.
There are more banks then ever, because it's more profitable to be a bank than ever before. We have had almost an entire decade of 0% interests rates allowing banks to make incredible sums of money.
I'm disputing the "culture" claim. The vast majority of people don't behave this way. Most people have a day job and live life on the weekend. Inflation forces people to invest (usually in the stock market) to avoid losing the value of their money in the future. Whomever manages their money is going to try to get the best return. This cycle makes available vast amounts of capital to be invested in something.
This is a market reaction to inflation, with very little to do with culture.
I guess I'm not talking so much about the culture of everyday people, but rather the culture of companies and the people who run them. The "culture" aspect is that companies want growth for the sake of growth. Companies reinvest all their money so they can be bigger and get more money for their top stakeholders.
What would an alternate culture look like? Maybe one where companies use their profits to enrich their existing employees lives, rather than use it to expand at a rate that keeps employee quality of life at the bare minimum, and executives at a maximum. Also maybe a culture where money is reinvested in the community, so the people and place you live in is enriched, rather than use that money to spread out like a virus and stamp your chain store in the middle of communities around the world (so that you can make more chains).
"Quantitative Easing" has created an enormous amount of value out of thin air. Well, not actually created - more like "teleports" value from all other existing earned money and imputed it upon the QE-created currency. This currency (being nothing more than a $0=-$1+$1 accounting trick) takes on value which wasn't earned, and is then given to the banks to do with as they will. Now with US$trillions being supplied from sources devoid of actual value creation (just imputation), there's a huge pile of money to get at without that pesky problem of actually earning it; banks and their well-connected cohorts proceed to route it into their bank accounts, making a few people fabulously wealthy under the current federal administration's cronyism. Meanwhile, people who actually earn their money see the associated value evaporate.
Not substantively different from straight-up classic inflation via over-printing of currency, other than more accounting tricks to replace physical media with digital ledger entries tracking valueless debt.
Weirdly enough banks don't seem to like 0% interest rates. We'll see if this is true when the bank driven FED raises interest rates with the next session.
Inflation is driven by monetary policy and both are symptoms of the exact same systemic problem he is describing. Inflation is a side-effect of increasing the money supply in order to generate more trade. More trade does not equate to more wealth or more goods or a higher standard of living.
According to the view generally accepted in economics, more trade absolutely equates to more wealth.
"In every voluntary exchange we give up something we value less than what we receive... and so does the person we are trading with. Trade benefits both parties and this benefit is an increase in wealth for both."
1.) There are a whole lot of involuntary transactions in real economies.
2.) The argument only applies to perceived value, not wealth. Wealth is objective and measurable, e.g. the number of houses or cars or widgets in existence.
3.) Not all trades are created equal. Producing durable goods which last longer than nondurable goods creates more long-term wealth. E.g. the difference between a dozen disposable razors versus one high-quality razor blade.
A superset of the trade creates more wealth. That is, for two otherwise equal societies, A and B, where B trades does all the trade that A does, and some extra trade, then B is richer.
But merely "more trade" as in a bigger amount of money changing hands does not let one conclude anything.
Not sure we are in disagreement. The cause is monetary policy. More money equals growth in the economy it also causes inflation, forcing people to protect their money by investing.
This was not mentioned in the article. The need to make more money is a symptom not the cause.
Within the last year multiple bank branches has opened with in a 5-10 block radius of my apartment in Brooklyn. I never see people in them, literally I have never seen anyone besides the employees gazing out forlornly at people on the street. They take up huge amounts of space and and are extremely bright which makes them oddly depressing at night.
Gentrification arguments aside, I'm confused because they don't seem to have customers (and again there are multiple) and certainly that will only be more true as younger people have less and less connection to the physical bank branch.
Just was in a bank in a nice neighborhood in Indianapolis. Asked the banker how it stayed open with little traffic. His answer is that the branch was an asset it could be leveraged to allow the bank to loan more money.
Can someone in the retail financial services industry familiar with their regulation please clarify this assertion?
It almost sounds as if there is some rule that allows a bank to open a retail branch, declare that branch an asset and simultaneously expand its loaning capacity, then use that loaning capacity elsewhere (like its trading arm). This is a variation on the old 80-90's Japanese corporations using real-estate-as-asset-securing-loans bookkeeping: at some point someone notice that they could pledge real estate the company owned as collateral to secure loans that could be leveraged into more real estate for more loans, and then churn the real estate holdings in a up-trend market and rinse-repeat for even bigger loan packages.
Even in a post-Gramm–Leach–Bliley world that repealed Glass–Steagall, it stretches my credulity to believe that even lax bank regulation would allow branch openings at a completely speculative stage (with no proven loan activity yet) to partly drive bank loanable reserve levels. I'm more inclined to believe that these branches don't see a lot of foot traffic in the Net era, but that they justify their cost by sporadically serving customers in a local market who already hold loan products serviced by the bank, and need an occasional in-person visit to the bank.
I thought of that possibility, and discounted it while posting, because I thought the bank would make more ROI, and have more loanable reserves under that assertion, if it straight commercially leased the space instead of putting a branch on it. Or land banking the land instead of putting a relatively specific-purpose improvement on the land. Branch buildings in the US commonly have drive-thrus, which are not easily re-purposed for other kinds of businesses, thus subtracting some profitability on the back end of the land banking for demolition or modifications. I'm not in the business or anywhere close to that kind of business though, so I'm hoping someone familiar with what goes into these branch building decisions pipes up here.
If the branch is on valuable enough land it will show up on the bank's balance sheet as an appreciating asset with a net gain in value even after subtracting out wages, depreciation, amortization, taxes, etc.
Yes, it seems there should be diminishing returns on opening extra branches. And if the bank just wants to own the real estate, they should be able to find more profitable tenants.
I'd be happy to go an extra few blocks if a branch was open outside of regular business hours!
> literally I have never seen anyone besides the employees gazing out forlornly at people on the street
The bank branches should start selling coffee, food, or knick knacks on the side to keep them busy. I can see it now: Citicorp Coffee, Chase Bagels, 5th 3rd Home Furnishings.
_For Profit_ doesn't cut it and is buggy. The side-effects are the waste due to consumerism, unsustainability and potential application crash (climate & earth).
The variables in the model needs to be tweaked so a new system evolves.
We are very experimental at the moment, but my startup[1] is doing something along those lines: we a trying to create a toolkit for building cooperative organizations.
It's not very clever to just post a picture, as if that makes a very compelling argument for whatever you presumably are trying to make. It's nice that less people are living off the equivalent of $1.25 a day, but according to this:
50% of the world's population live off the equivalent of $2.50 a day. I guess we can cheer that 30% of the world's inhabitants have doubled their income and call it a day.
Woah! You're coming from the right direction I guess, but..
Yes, we can very much cheer for people living off $1.25 to be living off $2.50 now. The numbers might look stupid if you're living in luxury, but it quite literally means going to bed with a full stomach instead of going to bed hungry. It's a far bigger change for them and their lives than for your income to be increased by 10x (assuming $100k to $1m).
If you're all about increasing the well-being of the most people possible on the planet, then it is something to cheer for. Having that increase to $5 might be the biggest humanitarian change for the future that we could cheer for too.
Ugh. Don't post things that you haven't read as if they proved your point. You'll find that the word "capitalism" is used 3 times in that PDF. Let's grab those paragraphs, shall we?
"Privatization has been a major part of Mongolia’s transition to capitalism. Its move to a market economy has been accompanied by increases in poverty and income inequality. More than 10 years after it began its transition, Mongolia remains one of the poorest countries in the world."
This being an example cutout within the following quote:
"After reviewing the distributional impact of privatization activities involving utilities in a wide range of developing economies, principally in Africa and Latin America, Bayliss (2002) concluded that privatization had demonstrably harmed the poor, either through loss of employment and income, or through exclusion from, or reduced access to, basic services, as the result of private firms’ principal concern with profits, prices and costs. At the same time, weak governance and regulatory capacity in many developing countries led to poor control of market abuses by private utility companies."
The next two usages of the word capitalism is in the bibliography:
"de Soto, Hernando (2000). The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books."
"Robbins, Richard H. (1999). Global Problems and the Culture of Capitalism. Boston: Allyn and Bacon, chap. 5 (“The problem of population growth”), pp. 147-178."
I'm not sure how the second citation feels about capitalism, but the first one certainly isn't positive.
So no, your link doesn't say much about capitalism, and what it does say is that capitalism is not pulling people out of poverty; on the contrary, it sounds like that document thinks capitalism is causing some poverty.
Doubling income is not the same as improving quality of life.
Capitalism suffers from a plague number of social ailments, including epidemic levels of stress and mental illness, that aren't present in "poor" cultures.
Besides, terraforming our planet to make it less, not more, inhabitable, hardly counts as a big win.
> Doubling income is not the same as improving quality of life.
LOL. Easy for you to say rich man. Go tell that to someone in Mozambique or Haiti or Nepal who is using their newfound wealth to finally be able to feed their kids a healthy diet.
And many subsistence fishermen were able to feed their kids a healthy diet, until commercial fishing came along.
Capitalism is pulling people out of poverty, but it is also destroying natural ecosystems. Is the reduction in poverty sustainable, or will it come back when the resources are gone?
Overall, things are getting better for sure, but it's going in a trajectory that will settle into a shitty local minimum where poor people survive but are stuck with low quality of life. Getting people out of extreme poverty in the world is high priority, and we've been doing a pretty good job at that, as your graph shows. But there's a big rut after that that we need to work on removing too.
> it's going in a trajectory that will settle into a shitty local minimum
It's very hard to find evidence to support this point of view. You might hypothesize some future change in trajectory sure. But looking at the current trajectory? Pretty hard.
You're correct that doubling income is not the same as improving quality of life, but I don't think stress and mental illness are particularly good examples of this.
A better example might be African countries where increased income has not led to better access to healthcare, but has instead fed a growing market for fake HIV/AIDS medications.
Having worked in a nonprofit that works on obtaining foreign aid, it's my opinion that these improvements have occurred despite capitalism due to the hard work of people like me, not because of capitalism.
Even assuming that the money your spending is being put to good use (and there is at least some evidence that makes people skeptical), where do you think the money you're obtaining comes from?
> Even assuming that the money your spending is being put to good use (and there is at least some evidence that makes people skeptical)
This is a legitimate criticism of NGOs, but it's also one of the ways in which capitalism is counterproductive to reducing poverty. Many of the cases in which aid spending is misused result from corporate interests determining where the money is spent instead of the people who need aid. An ongoing example of this is the milk lobby pushing for milk in food drops in areas where nearly everyone is genetically lactose-intolerant, or water aid going to buy Coca Cola's bottled water instead of building sustainable water utilities and infrastructure. One of the reasons I left the NGO I worked at was that I felt they didn't do a good job of decoupling the aid programs they supported from corporate interests.
> where do you think the money you're obtaining comes from?
Governments, who in turn get it from taxpayers. The exact system that free market capitalists rail against. And if capitalist corporations didn't evade taxes so deftly, maybe I'd have obtained more. Certainly democratic-socialist governments give more aid per-capita than more capitalistic ones.
Instead of asking leading questions as if they proved your point, why don't you try actually making an argument? Yes, much of the revenue I've obtained is indirectly generated within a capitalist system. But if you want to argue that capitalism produces more aid than the alternatives would, that's ridiculous.
That trend started long before our society's current pillaging by the rich and their big businesses. The global elimination of poverty has more to do with grassroots technological and industrial development than it does with concentrating as much capital in as few hands as possible.
It doesn't seem like this chart takes inflation of the $ into account either, making it irrelevant over time. $1.25 was a lot more valuable even 30 years ago than it is today.
Yeah I see "PPP" in the picture but nowhere is there an explanation of how they accounted and adjusted for inflation on a yearly basis. A link to the actual study would be a lot more informative. At any rate it doesn't address the moral concerns brought up in the article.
no mention of inflation in your link, only PPP. The article author also goes on to state that this isn't enough / as meaningful as you're making it out to be...
"And making sure everyone's making at least $1.25 a day isn't the end of the fight either. The world's median income is still only $3 to $4 a day. By comparison, the poverty line in the US for a family of four is $16.61 per person per day. Once under-$1.25-a-day poverty is eradicated, the world needs to set about eradicating under-$15-a-day poverty, which will be a substantially harder task."
>The free-market is the most effective way to distribute resources in an environment
What happens when a child would rather work for food now than go to school and improve future income potential? Government ensuring that children have food and can't work so that they will focus on increasing future earning potential results in a better society than one where there is no government intervention, and thus some number of children have to work now instead of focusing on future earning potential, meaning that throughout their lifetime they will contribute less to society than they could have.
This is one example where pure capitalism is not the most effective.
Your use of the example "going to school and improving future income potential" is a very externality caused by intervention, i.e. the modern public schooling system and licensing requirements. A more voluntary society where autodidacticism, guilds, apprenticeships and decentralized democratic schooling are practical options for advancement (that a hypothetical laissez-faire arrangement would make easier to emerge) would therefore mitigate the effects of time preference, in that self-advancement would have less legislative barriers and the opportunity for market signaling would be more unfettered now that the principal-agent inefficiencies caused by formal credentialism are lowered. That is to say, employers would rely more on real signals rather than the nominal signals emitted from credentials and licensing that do not account for time and skills corrected after their acquirement, and don't suffer from disequilibrium caused by poorly thought out credential requirements.
Why would we see people expecting to train children in tasks when even today you see adults who need only a fraction of the training a child would not being trained on the job as hiring managers look for already qualified candidates?
Even if this is what society would revert to once it ran out of already trained individuals, it would be cyclic and would cause entire generations to be lost as it would always be preferable to hire some adult who has basic training over a child who needs to be built from the ground up in basics.
Consider the simple case of a programmer. Who would hire a child who would take years to train (as they would need to learn not only programming, but math and reading and writing, among other fields of knowledge)? Even if the child would work for free for those years of training (which would be problematic for other reasons, but assuming they would anyways), it is still not worth it because the cost of training other than salary would make hiring no one a far better choice.
It costs a lot to train a child from scratch and they offer no benefits except in the longest of terms, so people would always hire from elsewhere, such as children who had parents rich enough to afford them basic education costs out of pocket.
Apprenticeship would work well in today's world if you start after the basic education has been completed before specialized education begins, so that it would be quick enough to turn apprentices into employees who could produce value. But this would be later high school or early college; maybe earlier for simpler trades. It will not (and historically did not) work well for younger children with more educationally demanding jobs.
Except it was American courts in the early 19th century which deviated from the Anglo-Saxon common law tradition of property rights which viewed air pollution was a tort.
Soviet rivers were some of the most polluted in the world.
A free-market has much stricter limits on pollution than any crony government agency.
What are these limits if not government regulations? Are you aware of any country that doesn't have regulations to prevent pollution of rivers or air in which free-market prevents such pollution all by itself?
I'm not aware of any countries where there exists a "pure" free market. While there is plenty written on the theory of enforcing laws and property rights sans government, I think it a stretch even with a government run court system, to refer to a court's ruling in behalf of property rights as "central planning". Even calling such a ruling "government regulation" seems pretty far from what most would consider "regulation".
> I'm not aware of any countries where there exists a "pure" free market.
Unicorns are also pretty awesome - unfortunately, they seem to suffer from the fatal defect of there not being even a single instance of such a thing in consensual reality.
By definition everything was once a "unicorn" before the resources, demand and labor were mixed into developing it. Everything must originate as a idea before it can become praxis. Modern capitalism itself was a unicorn as recently as the 18th century, but it emerged nevertheless.
I agree whole-heartedly that the free market is an awesome, powerful, often-counterintuitively-effective thing.
But isn't there something to be said for some forms of central planning? Theory of the firm, multicellular organisms sending themselves to the moon, the empirical adaptive fitness of lumbering nation-states over freemen upon the land, etc.
I'm pretty far right, but I see a lot of problems with the free market.
None of this is to imply that capitalism has not been hacked. It is to imply that it is sometimes hard to distinguish the hacking from guardrails.
That free markets ensure a Pareto optimal allocation of resources is the first fundamental theorem of welfare economics. It does not imply any normative statement on whether the distribution is "just", as that is very difficult to qualify.
There's quite a bit of difference between pareto optimal and "most effective". In many situations, pareto optimality is actually among the worst of all possible outcomes (see the prisoner's dilemma, also local maxima). If you had used the former term in your comment it would have been more clear. As it is, it reads like a deliberate attempt to invoke poe's law.
I come from a formerly socialist economy(India). Central planning is a scheme to create bullshit jobs which don't have to exist at the first place. This distract funds and human resources from other competing higher priority work.
Every thing is state planned starting from detergent to air planes. All services are mediocre and everything is in a state of stagnation and slow decay.
Well, not all problems. Market failures like monopolies, negative externalities, and free ridership that leads to underinvestment in public goods are all problems inherent to unchecked capitalism that lead to an inefficient allocation of resources. Even Adam Smith was an ardent opponent of monopolies.
It's pretty well established that capitalism works best with a regulatory state that can correct market failures and enforce private property laws.
A market is "free" when the economic agents in the market are free. Capitalism enslaves most men, and therefore capitalism and the free market are in contradiction.
Not every firm in a capitalist / free market system is "for profit". There are already a wide variety of non-profit corporations, collectives and cooperatives, and a relatively recent trend is the rise of the "benefit corporation". All of these represent ways that operate within the context of our existing economic system, without necessarily having to obsess about "profit first".
Coops can earn a profit, but that's not their primary purpose, at least not the kind of coops I'm thinking of. The coops I'm familiar with exist to provide a service first and foremost (utility coops like electricity and phone service come to mind), and making a profit is secondary.
Having worked at a well know worker coop in the UK I do know what one is. And consumer coops where the ones that came historically after worker coops - originally to provide a retail outlet for worker coops goods.
but don't they normally pay a dividend in the USA?
And you are not going to run a high capital coop like a telco or electricity company with out making a decent excess of income over expenditure to service you capital needs
Sure, and I'm not here to argue the fine details of how coops are organized. My point is only that there are elements of a market economy that differ from the traditional "profits first, maximize shareholder value, evil corporation". Cooperatives are just one example of a somewhat different model. Actual "non profit" corporations, and "public benefit corporations" are also examples of that.
The sad thing about changes brought by money and for money is that we don't have a community anymore. We don't even know what it looks and feel like. I honestly want to find such a place to live and raise my kids haven't found an example of it anywhere (in US)
Note that I'm not an expert in the field nor do I consider myself part of a community. I'm just giving an example where you've asked. I'm sure there are many more examples out there.
Money is actually a very powerful technology. I hope people will start to think of this as a high-tech problem. We can improve the concept of money. Seems like a lot of people think the answer is just to give it up. But that is simplistic and discounting the power of a universal trading system.
I think the answer is to really understand how money functions in our society and the parts that work and the parts that don't and come up with an evolution of the concept that incorporates technology into society and works better.
For example: bitcoin, Ethereum, some kind of holistic schema for tracking resources which would make us less dependent upon money and make it easier to plan. Maybe have a few categories of money for different things.
If we can insert better technology (than basic money) to mediate society, maybe we can create an opt-in society that is more fair, efficient, and still evolves freely.
But don't just say "money sucks" and throw it out, and unthinkingly resort to technocommunism.
Its kind of like when people will give up their Christian faith and then decide they should become hedonists. We need to think through things more and really synthesize ideas. Integrating technology into society can make things like universal point systems (money) more practical and more fair.
The author seems to think this wealth accumulation dynamic is somehow unique to free market capitalism, produced by a capitalist culture that explicitly values money, economic efficiency, and wealth accumulation.
It's not. Every culture and economic system that has ever been put into practice in all of human history has produced the exact same wealth accumulation dynamic.
The main difference is that in the systems other than free-market capitalism, significant wealth accumulation is not merely "difficult" for ordinary people, but actually "impossible" if you're not a member of the tiny ruling circle.
At least under free market capitalism, as an ordinary person you do have a shot, however unlikely it may be.
Blaming negative societal effects on people wanting to make money is akin to blaming gravity for airplane crashes. Moreover, the people that would listen to these pleas for putting society before the dollar aren't the type that are investing large sums, and those that are investing probably don't care to listen.
The idea of 'selling out' itself is an artifact of Romanticism, combined with the social idealisms of the 60s. It's not thinking very deeply to advise people not to sell out, there are more intricate things going on than the romantic idealization of "let's be poor and happy".
I also want to point out that it's a bit irritating to be told to not strive harder by someone who's already got "FU" money.
As a DC kid I love that Fugazi gets a mention. It's true too: Ian MacKaye and crew ran a completely different kind of band than most others. It's the first time I realize how that distinction is analogous with DHH and Basecamp.
They still owe me a new left eardrum. Paradiso, Amsterdam, long long long ago, I fixed one of the cables running from the stage to the sound pit (soldering is a handy skill, re-splicing a 20 conductor multi cable under a stage after someone cut it by wheeling a trolley over it is no fun) and got to stay for free afterwards.
If you consider a profit-maximizing corporation a paper-clip maximizing AI, it's a hostile AI that's bad for people.
Then you take a look at Public Benefit Corporation, and what you could say goes on, is that instead of using "profit" as a measurement of success, it's a binary answer to sustainability. If a public benefit operation is profitable, it can continue - but it doesn't matter how profitable it is, because that's not the success criteria.
Another interesting place to think about this is "profit as A/B testing metric". Are user signups really what you want, or do you simply require user signups to sustain, but what you want are, say, user-submitted content?
Minor counterargument: Banks, Walgreens, Duane Reed have done much to improve previously seedy neighborhoods by being able to invest in security and general upkeep of their storefront.
In music, 80% of the concert industry is owned by Ticketmaster. A diverse universe of record labels is steadily consolidating down. A shocking percentage of Top 40 hits are written by four Scandinavian men.
Yup, love that he included this tidbit. A little dramatic, but practical. They figured out the formula, so they're a sound investment. Even Adele has a track with Max Martin on her new album.
If there's a really cogent indicator of 'wealth disparity' there's nothing quite like looking into the "Top 1%" of music acts versus the rest. Not that music has, you know, traditionally been a great way to make a living, but the numbers are really exploitative in a lot of ways. It's quite indicative of the money first mentality I think, for music (and venues) to be consolidated (or allowed to do so) in such a racketeering fashion.
Number 1: Don’t sell out...Do something because you believe it’s wonderful and beneficial, not to get rich.
Oh, wow. I needed this. Mostly because it's such a futile thing to try and be independent as a musician and make a living...or really any money...but it's a personal decision, one based on principles. Glad he at least mentioned this concept for consideration.
I think customers have much more influence here than business owners do. If more customers prefer shopping at local stores than at chains, local stores will flourish. For better or for worse, most customers today prefer the lower prices and consistent experience of shopping at big chains. It's the same in other areas. More people seem to prefer blockbuster movie sequels than original indie films: whether you're a profit-motivated studio exec or a struggling artist, you want your work to be seen by an audience.
A minority of customers chooses local/eclectic/independent: not sure whether this minority is growing or shrinking.
Some good points in here, but the points about chains/franchises is misguided.
I've been to many countries. If you go to China, Vietnam, Colombia, Eastern Europe, you can find plenty of places without mainstream chains and lots of local shops.
You know what? Most of them suck.
Bad selections, overpriced, trying to cheat you on change, rat droppings or layers of dust on top of a variety of food products...
... I know if I go to Duane Reade or Chipotle, the food or medicine I buy will be legit, unexpired, and without any egregious violation.
If I buy a pair of jeans at Walmart or Target and they rip in the first week I own them, I can take them back.
Chain banks mostly suck, and credit unions or online banks are far better. But for food, clothing, and medicine, chains are a godsend. You don't get cheated, everything is decent quality, and clean. If you buy something and it's broken, you can take it back. Not so in most of the world.
(And also, many of the small shops locally owned aren't owned by local people just getting by -- they're owned by local bosses, who are just as callous as the archetypical big corporation, but much less effective at delivering to customers and much less accountable.)
Liked the rest of the article, and do admire companies that operate differently like REI. But lionizing small disorganized ineffective dirty shops is a miss; Chipotle and Duane Reade are godsends compared to what you'd get otherwise. If you don't believe it, check out any developing country before chain stores move in. It's not a better state of affairs.
There's a fundamental unsolved (or, poorly solved, or, we don't like the solution enough) civilizational problem: I have a new society. Where do I put it?
And a longer comment:
I read at thing that suggested that companies with "noble purpose" make hand over fist more money than companies with a sole profit motive.
One way to take this is that, by operating under different goals, you become unpredictable to the established power, and the "OODA loop" concept teaches us that's a solid way to win. Arguably, against a better positioned opponent who can absorb you, playing by different rules is the only way to win.
Another way to take this is to pull the idea that "money" is only a measurement of "debt", and is thus inherently unsustainable because it measures a non-finite thing in a world of finite things. And so if you make decisions by maximizing an unsustainable sense of depletion, it stands to reason you'll end up making a depleted place.
---
Of course, you can also read all this as "convincing you not to play our game, so we don't have to compete with you"... akin to "stability is good because I'm on top!"... but that just goes back to "need to play by different rules if I'm to win".
Isn't unrestrained profit seeking what modernity is all about? Pre-modern societies had all sorts of customary/institutional restraints on profit seeking.
* The classical Greek had their notions of temperance
* Romans had the notion that a proper aristocrat needs to own an agricultural estate, idea of civil virtues (these cost a lot of money) and that one has to spend the money on a huge estate with a court of slaves (familia urbana)
* China had their Imperial bureaucracy
* the European middle ages had corporatism/guilds in the cities
Once these restraints were gone we entered modernity.
(here is an article why China didn't do modernity, despite having had all the big inventions that supposedly brought us capitalism - like the printing press, gun powder, paper money, big advances in materials, a fleet that discovered America. The authors say the structure of institutions was restraining entrepreneurship and progress :
It's also been said the best way to build 100M company is to start with 1B company and run it on intuition.
MC Hammer, 50cent (?), so many multi-millionaire athletes are bankrupt. The fact that the basic institutions we require to exist - banks, convenience stores - stay financially viable is something we take for granted. I'm not sure tne new-kickstarter-economy can exist without the persistence of the old boring economy of scarce resources.
I don't really follow the logic of the article. Humans have optimized for "money" for a long time, and it's produced a lot of good and a lot of bad. Overall, though, I'd say we're very much headed in the right direction.
In the meantime, though, just try to be happy (as the article suggests).
>>Behind this dynamic is a monoculture of money optimizing for more money.
That's capitalism, what's the fuss about it? It's not possible to have only the good of capitalism and the good of communism. The bad parts will come in soon or later.
The "don't be evil" approach has already proved to be BS so we must choose what do we really want.
An interesting experiment is East Europe, a capitalist society that uses some good communist laws. E.g. Student used to have a large discount everywhere, allowing everybody to study. Discounts are getting smaller and smaller till the day that they will disapeer. Or people that couldn't be fired after some age. Even if people don't want to loose these policies, it's a matter of time. It's very hard to have the best of both worlds.
Some day, everything will belong to only a few people and the rest of us will be their slaves. But maybe at this time or some day before, some might recognize, that living on profits alone is not possible.
There is an Indian restaurant near my home and a bookshop - I really like both of them but I've been going there less and less. The restaurant added more tables, so during the buffet, it is impossible to walk 10 steps to your table. People give death stares, spill food etc. The bookshop added more shelves with books and now only one person can walk between shelves instead of two. What used to be a pleasant experience has now turned into an annoying one at both places. Result is I get my books from Amazon.
This might be a trivial and stupid example, but when everything is optimized for revenues and profits it really is demoralizing.
Sounds like they aren't properly optimizing if they're alienating loyal customers.
Or maybe it's worth risking the business of loyal customers in order to attract more marginal customers. Btw, is this Indian restaurant called "Twitter"?
In political ponerology (study of evil in politics, coming from the works of Polish psychiatrist Andrzej Łobaczewski), a pathocracy is defined to be a government where a small minority of psychopaths through the machinations of the system gain vast amounts of power and use normal people to their benefit.
Homo-economicus is a psychopath. He values profit over people, uses people as resources, measures his own worth in money, harms the environment, has no deeper values, and so on. Insofar as our (capitalist) society rewards homo-economicus instead of shunning this miserable being, we are going to be ruled by a pathocracy.
> Homo-economicus is a psychopath. He values profit over people, uses people as resources, measures his own worth in money, harms the environment, has no deeper values, and so on.
This is known as a "rational agent" in some circles, lol. Just shows to what extremes people self-justify their actions and ideologies.
Capitalism is an extension of evolution. They have both created great things through competition. They have even created altruism where it is mutually beneficial.
I don't think that running a chain of businesses makes you evil. Changing government policy to make it impossible for others to compete is evil though, since it ruins the game.
It's a shame that we have such an impact on the environment. It is a tragedy of the commons. If a person could be made to feel their environmental impact more strongly on a personal financial level maybe things would be better.
Funny, coming from a guy who has made millions of dollars in his career. I agree, once I make a billion dollars I'm all for not being so focused on money anymore ;) I think his argument would be a lot more convincing if he was not rich.
It's sort of like when Stanford/Harvard graduates say that we should abolish elite universities and that the degrees are worthless. Easy to say for the guy who already graduated from there. I totally agree, as soon as I graduate from Stanford, I will go around saying how it's not worth much. But until then, I'll try like crazy to get in.
>No matter their importance to their community, they can’t stay if they can’t pay
>Investors make money, franchises notch a new location, and the neighborhood suffers a significant death.
What are these businesses that are so great to the community yet don't make any money? If everyone's taking their business to franchises it's because they (the customers) prefer them and franchises provider a better service.
Seems like the author just longs for independent stores and the like simply because he dislikes corporate culture, and would rather pay more to avoid it.
Money is the most powerful mechanism for influencing human behavior that mankind has ever devised. The phenomena this article describes (banks in New York, chain outlets, etc.) are emergent - they arise from the aggregate behavior of lots of ordinary people working (at least in part) for money. If the goal is to change the emergent phenomena, then it's necessary to give the average individual an incentive that's more powerful than money. I don't see that here.
About not selling out: usually we make business decisions without knowing how things will turn out. We get advice. Market research is done. Even so, lots of business decisions are gambles -- especially entrepreneurial decisions. As long as you don't know which will work out better, selling out or not selling out, the estimated future benefit is greater for behaving well: if your project fails, you don't have to deal with shame on top of the failure.
I love this article. It definitely hits on a bunch of really important points with regard to the tendency for capital to accumulate more capital, and for capital to remain in place rather than flow once it has established a large bolus. I would prefer things discussed in these terms rather than "banks on every corner in Manhattan" because it strikes at the heart of the issue rather than a symptom of the issue. The heart of the issue is that our society has been warped to accept capital as its only philosophical value, and, as a result, we have come to worship large accumulations of capital despite their extremely deleterious effect on many other aspects of society. The mitigation and eventual mending of the wounds caused by late capitalism is probably going to be the work of an entire generation of people. Thankfully, people have begun to recognize the problems of capital accumulation and stagnation, so we have perhaps only twenty or fourty years before we can make meaningful headway on this issue-- maybe even only five to ten years if there's some major rattling of the cage, but it hasn't materialized yet.
"At some point in the past ten years, selling out lost its stigma. I come from the Kurt Cobain/“corporate rock still sucks” school where selling out was the worst thing you could ever do. We should return to that. Don’t sell out your values, don’t sell out your community, don’t sell out the long term for the short term. Do something because you believe it’s wonderful and beneficial, not to get rich."
In the past ten years, the tension between "not selling out" and "feeding myself and paying my student loans" has reached a breaking point where increasingly few people can maintain an acceptable standard of living and not take lucrative opportunities. In other words: the opportunity cost of "not selling out" has skyrocketed to unsustainable levels. This is caused by many factors, and will not reverse itself until we have some form of major scale resource redistribution. The realistic summary is that doing wonderful and beneficial things leads to the poorhouse, and "selling out" for most people leads to a middling barely-financially-secure existence that falls far short of getting rich and still doesn't have enough resources to plan for the long term.
"Don’t sink into the morass of “industry standards.” Don’t succumb to the inertia of the status quo. Don’t stop exploring new ideas. A small number of people can change how society works. It’s happened before and it will happen again."
I doubt that many of us want to sink to the median, but the status quo has a way of smashing down people who try to explore new perspectives, and the economics of this fact are especially fierce right now. This is part of the problem, of course: the accumulated capital has an overwhelming interest to maintain the status quo of their wealth, and has many resources to kneecap change. Then (because this is related to Kickstarter, I am obligated to write this) there's the fallacy that inventing a new toy or app will change society-- sometimes it's possible, but on average it doesn't happen. I'd like an app for social change, but even something as simple as an app which lists what companies to boycott on a given day would probably run into legal trouble very quickly.
"Look at the language on that cover: “be paranoid,” “go to war.” Its violence suggests that being ruthless is the only way to survive. We all hear this tone all around us."
Yes, I have noticed the terms of violence / natural selection being pushed in order to make people more vicious toward each other in their pursuit of making a living. Largely, this language-shifting effort has worked, and people view each other as competitors for resources rather than potential allies to increase the wealth of the community. I will state that this kind of anarchistic worldview benefits employers and corporations a tremendous amount, and benefits the public not at all. I suspect this is one of the contributing factors to reduced mental health in the US, and also one of the contributing factors toward people shunning union work. And yes, the prioritization of money above all other considerations is one of the major problems that has almost always existed in America. The people with the most money have lived here through the modern era, and have shaped the USA to funnel money into their coffers. Rather than lament about how we can't kill these people and take their cash, I think it's more productive to think about the policies we can specifically ask for which would prevent radical wealth accumulation in the first place.
Right now I think the best path forward is to come up with a scheme which redistributes capital downward and breaks up the largest clumps of stagnant money. I have no idea how the math on this is going to work out, but the sooner we get the political wheels in motion (Bernie Sanders is a good start, but we need about 300 more of his type before we can make headway) the sooner we can start to undo the damage caused by the crony-capitalism economic policy of the last 40 years. Rather than prioritizing the ability for people to make vast sums of money (and make no mistake, we have prioritized this), we should prioritize raising the standard of living of the median citizen and ensuring equality of opportunity. I guess this means either a negative income tax or UBI.
> the opportunity cost of "not selling out" has skyrocketed to unsustainable levels
That's phrased perfectly, and exactly what I came here to say. For the 'marginal careerist', one with just enough opportunity to get ahead, but not enough to float by (e.g., possessing rich relatives) there isn't an easy choice. Staying ahead of a changing job market, increasing barriers to entry (credentialism and other funnel-narrowing HR filters), ageism, and the knowledge that the tattered safety net isn't going to help them very much if they fall out means they won't necessarily have the luxury of saying 'no' to every dubious opportunity presented to them.
It's no longer just about winning the rat race. For many of today's rats, it's now about staying on the ship at all.
The original article is one of those feel-good articles that I want to agree with. It's earnest and idealistic, and brings up several important points. For those who are able to do what Mr. Kickstarter is able to do (to make those socially responsible choices that maximize for self-interest AND social good [i.e, enlightened self-interest] instead of maximizing for selfishness) that's actually all great and beneficial. I like it. Many of his observations, too, are spot on. His recommendation however, that tells people to 'do that' reveals a lack of perspective on the actual lived experience of many people functioning within the modern reality. Collective action problems can't be solved by individuals, nor by socially conscious companies (as nice as those may be.)
Your comments on the marginal careerist's increasing struggles are exactly what I was getting at, and I appreciate that you crystallized the finer points. I agree with your comments on the rat race as well.
The trouble is getting people to talk about this stuff. Sure, if you follow the media, there's drips and bits of chatter about how incomes are stagnant and cost of living is rising, but there's not really enough data on decisions that people made as a result of decreasing opportunity. How many people are forgoing college in favor of skills training? How many people are turning down offers to join new art galleries or other conventionally not-super-profitable ventures? I think the danger here is that 20 years from now we have a cultural lost era because we didn't have enough money to fund people to just sit around and be creative. It doesn't sound so bad, but it'd be quite empty.
it really is phrased perfectly, and i agree completely about the challenging tension of that question. i feel it distinctly, especially as i am expecting my first child in just a couple of months and i do not come from money.
i feel like the moment selling out became okay culturally coincided w/ file-sharing decimating the music industry and we all unconsciously thought, "well shit musicians have to make a living somehow" and then pop/indie/classic rock was in commercials and everyone was generally cool with it. and i don't have a big issue with it, and absolutely want to live in a world where artists can have sustainable lives through their craft and don't want certain avenues to be off-limits because they seem cheaper than others
but played out to the nth degree it just all becomes overwhelming and dispiriting. anyway, just wanted to say i really appreciated reading these two thoughts. i very much agree
It is overwhelming and dispiriting, and I certainly don't pretend to like it. On the one hand, there is still a good amount of quality music coming out on places like Soundcloud/Bandcamp. On the other hand, many/most of those artists are likely not making much of a living off of it, and that's sad because it means that they produce less music that we might want to listen to because they have to spend their time on other things (http://www.nytimes.com/2012/09/22/business/to-stay-relevant-...) like working/studying/retraining (my own extremely-niche music is/was something I chose to only do in my spare time, knowing the reality.) It also may be dissuading would-be artists from creating something in the first place, which means we're deprived of those potentially great works. Definitely a negative.
Relatedly, I sometimes wonder about how much of the compromised musical vision (AKA selling out) is actually a myth in terms of pop music itself. The counterfactual is something like: artist X, who is making some kind of music, would have made some other kind of music that they would have preferred to make (because it was more in line with their vision) if they had the economic freedom to do so. Is that really right, or are they 'making' what they would have made anyway? I quote 'making' because of the number of non-music writing pop stars (the aforementioned four guys with all the top 40 hits who are the ones actually writing the songs) is larger than many might imagine. Are those pop stars really just 'celebrities who specialized in music', rather than 'musicians who compromised their visions'? Tool managed to break through the niche->pop barrier in the 1990s despite their decidedly non-mainstream, aurally challenging (and compelling) sound, but does anyone believe there are little Tools just hiding inside of Justin Timberlake, let's say? If someone like that becomes elevator muzak, is that really a 'sellout' when it's designed that way from the outset? This one is hard to disentangle.
Maybe there's another way to frame it. Maybe the problem isn't 'selling out', per se, but that niche audiences, unless you are somehow able to get to the "100 really super duper true fans" or its equivalent, just don't pay the bills very well. We have your Kickstarter and we have Patreon, and we have all that, but does that sustain the number of potential artists - some of whom may create incredible works - in the modern economy? Did it ever? (I'm sure some would-be musicians starved during the actual patron eras, too.)
The Superstar effect (http://www.nytimes.com/2014/02/23/business/winners-take-all-..., http://marginalrevolution.com/marginalrevolution/2010/09/win...) is real and cross-cuts industries; an economy-wide phenomenon. I think it's going to be difficult for these platforms to serve as a real counterweight to that, as much as I'd really like them to, because they're swamped by much larger forces. We've democratized distribution, and some of the platforms /have/ widened the economic net a bit, and I'm glad about that, but the forces are larger than I think they'll ever be able to handle, at least in the US.
That brings us to the next question: is the story the same in still relatively-low-cost-of-living Berlin (where a Kickstarter/Patreon might actually be able
to replace serving coffee, giving the artist the ability to work on art full time), for example? This is especially important for collaborative styles of music. We can tell a starving artist "just live go somewhere cheap", but rural Minnesota is probably not going to have the kind of music scene necessary to engender the collaborative creativity / connections that you're going to get in Berlin (or once upon a time, on the Lower East Side/East Village in New York), and also have a receptive local audience interested in things like live music.
So maybe we add another qualifier: "enough to live in a collaborative, musically vibrant place." Can these platforms ever do that? I don't think by themselves they can really solve that problem. Not all, gloom, though, as I think there might be external solutions worth entertaining:
1) Artist subsidies or tax credits. Hate this one, and lots of other people like do too, as incentives and administration are mess, but worth mentioning since I've seen it proffered before.
2) GBI. Possible superb fix, not going to happen any time soon.
3) Massive development leading to lower rents in desirable areas, so the next wave of those to be pushed out could stay (Ridgewood, Queens is a good example of cheap and artist friendly now, but possibly at risk in 5-10 years.) I wrote a whole post on this (https://medium.com/@opirmusic/fixing-the-nyc-rent-crisis-or-...) Most powerful one, in my opinion.
4) Artist housing: something that has been tried before, and I think is worth considering again. Administration would be the tricky part, but it at least seems possible.
5) Generalized cheap co-housing with shared amenities. I know some companies are working on this, but it remains to be seen if they can make the numbers work in an NYC or an SF. I really like this one, and I hope someone makes it work.
Finally, I'd also add that my original reply was generalized to the job market as a whole; it applies just as much to your C++ hacker who would rather be making interactive art rather than writing device drivers, or to a marketer that is actually good at what they do and would rather being working in politics or something, but takes a job at an ad agency helping to advertise soft drinks to keep their little rat body from going overboard.
To use an example in technology: I understand the appeal of working on complicated distributed setups, using cool algorithms at scale, etc., but how many people really want to work on "thinking about how to make people click ads", and how many are there because that's how you make good money (and by extension, achieve financial safety and independence)?
The songwriter point is a strange one. I don't think its a feature or result of today's commercialism. For example, see Doc Pomus and Mort Shuman -- the "Every song you love was written by the same two guys" of the 1950s/1960s.
I don't understand why deleting Facebook is difficult. It may be the easiest way to opt out. It's no more difficult than abandoning corporate media. You don't need it. Connect with real people who you care about in the real world.
Some hipster jest rediscovered capitalism. A system built on constrained mutual greed. It tends to make the big get bigger. Not only old style industries like farming and banking but new ones like sftware too.
In the past 30 years, downtowns everywhere have been hollowed out by strip malls, chains, and real estate development. Local businesses that serve their communities are going extinct.
This is just generic "appeal to nostalgia", romanticizing a bygone era that probably never existed "as such" in the first place, and desperately scraping for a way to attack modern capitalism.
When chains displace "local businesses" they do so for a reason: they offer a combination of price/service/value/whatever, that the residents of the region favor to an extent that it makes the other businesses no longer viable. If people want "friendly neighborhood druggist who has lived and worked in the same spot for 70 years" they don't appear to be willing to pay for that.
As for "the need for money to make more money"... yes, that's a real phenomenon, no doubt. There's a reason Pareto distributions occur and it probably has to do with "preferential attachment" and path dependence. And to be fair, pretty much nobody wants a world of deep economic inequality. BUT... you have to look at the flip-side... in many ways, it is easier and cheaper today to start a new enterprise and begin the path of "making more money" than it's ever been. It's been cheap to start a web-based SaaS offering for a while, and even though enterprises making physical goods are still expensive, the emergence of things like Kickstarter, Indie-go-go, etc. have made that world more accessible as well.
If you want to argue that it's unfair that Joe Random Guy can't start a new oil refinery or steel mill or a nuclear power plant, then OK... you have a point. But has it ever been the case that just anybody could start something like that? And is it necessary for that to be the case?
A diverse universe of record labels is steadily consolidating down. A shocking percentage of Top 40 hits are written by four Scandinavian men.
And yet the universe of music that I have access to has been constantly expanding, thanks to the Internet, open source software, and advances in technology which make powerful tools for creating and recording music cheaper and cheaper.
Don’t sell out your values, don’t sell out your community, don’t sell out the long term for the short term. Do something because you believe it’s wonderful and beneficial, not to get rich.
Now this we can agree on. This is one reason we haven't tried to raise outside capital at Fogbeam. We want to build the kind of company we want to build, not necessarily the kind of company that VC's want to build.
Always act with integrity. Really be clear about the things that drive you. Remember the lessons your parents and grandparents taught you about how to treat people and make sure your business lives up to that.
Agreed.
Earlier this year we became a Public Benefit Corporation. This means we are legally obligated to consider the impact of our decisions on society, not just our shareholders. It’s very different from the expectation that for profit companies maximize shareholder value above all. It acknowledges and embraces that you are a part of a larger community.
Benefit Corporations are a great idea, and I hope North Carolina adopts a "B Corp" law eventually. We don't have the notion here currently, not as a legal form acknowledged by the State anyway. If any fellow North Carolinians are reading and want to work together on B corp advocacy here, ping me and let's get started.
Money is a medium of exchange. The more you produce the more you exchange value for value. The problem is not money and it has never been. The problem is power. Power to leech and mooch from the producers.
Better than Scandinavian social democracy? Better than German social market economy? Better than East Asian Tiger hypergrowth-capitalism-but-with-strong-government-intervention?
Go back and analyze how Scandinavia got the capital to launch its massive social welfare programs. Same for Germany. Who did China trade with in order to become wealthy?
Well, Norway has a massive sovereign trust fund derived from North Sea oil, so it's an outlier. The other Scandinavian nations began creating their social welfare systems since at least the 1930s, if not earlier.
BTW, this very style of writing - shallow meme-juggling is also very telling.
There are guys like Sartre and Camous or even Henry V. Miller and his immitators, who have wrote volumes on this timeless theme - how the world is dominated by money-chasing mediocrity and absolute futility of this endless struggling and caused by it suffering. A few very good books has been written about realization of this futility and suffering.
So called social responsibility is also as old as humanity. Big Tibetan sects, which in fact were feudal landlords, used a concept of socially oriented Bodhisattvas, invented by pundits in Nalanda, in order to justify why every village should feed them, so they exist to benefit the whole society, which is just another Utopia, because each member of society is optimizing for very selfish, biological goals of survival and reproduction and protection of progeny.
In the context of a CEO blog post such populism is just the same kind of hypocrisy - socially responsible money making is no different from socially responsible authoritarian regime.
There is no need to protect or nurse a society. Just following of some evolved social laws, which could be found in the basis of every religion, and not intervening or abusing free (self-balancing) markets, which is, by the way, is idea as old as kicking speculators and money lenders out of the church, is enough. Society would take care of itself, as most of rural societies still do.
The 'cure' for society, as it have been found millenia ago, is to behave yourself according to the natural laws, and everything else would follow. No amount of governing or policing will help. Behavior of each actor is what society is.
This, BTW, is exactly what America before corporations and big government used to be - a self-balancing society of free people with Constitution as the definition of its structure.
If KickStarter truly reflects these ideals, they should decentralize their crowdfunding platform on the blockchain (eg Ethereum) and only charge the bare minimum fee required to maintain/grow that platform...
I figured out in 2009, when I was working at a hedge fund trying to bid on the assets of bankrupt banks post financial crisis.
Basically, every branch loses money to gain depositors. All the fees on monthly accounts, safety deposit boxes, ATMs, cashiers checks, etc. do not offset the cost of the office and employees. However, if the loss is small compared to the volume of deposit money the branch attracts, then the bank headquarters has "borrowed" money at a very low cost.
I think a typical suburban Countrywide or Washington Mutual branch was losing about $100K/yr but had deposits of $20M; not bad at all considering Fed Funds had been around 5.25% until fall of 2007, and that having the capital was the life blood necessary to do all the profitable operations (originating mortgages, credit cards, student loans, EDIT: meet regulatory capital requirements, etc). In Midtown, those numbers might be multiplied many fold, so very few retail stores can compete and stay profitable.