Comment by cryptica | Hacker News Reader

Comment by cryptica | Hacker News Reader

Money printing and the Cantillion effects associated with it have created asymmetric playing fields which are fundamentally unfair.

The injustice of modern markets can be explained with an analogy:

Imagine that you don't have much money and you open a coffee shop; assume that it's your only stream of income... Now imagine that a few years later, a multi-millionaire opens up a coffee shop right next to yours as a passion project. The multi-millionaire has many other streams of passive income. They see your coffee shop is doing well and they feel hurt by this. So the multi-millionaire decides to start buying even higher quality coffee beans, buying more expensive coffee machines, they start dropping the prices too and advertising all over social media; now they make a loss but it doesn't matter to them, their net worth is still increasingly rapidly thanks to their other sources of income; now all the customers are going to his coffee shop instead of yours. You are forced to close your coffee shop. The multi-millionaire is pleased with himself; all his friends congratulate him. Is there anything this guy can't do? no wonder he is a multi-millionaire! Once you're out of business, he can start dropping coffee quality to even lower than before and raising prices, you're now forced to work for one of his companies as corporate livestock; as corporate livestock you add negative value to society (you're now a cog in the money laundering machine) but you're getting paid more than what you did when you were adding value to society.

Many of the multi-millionaire's other businesses benefit from government contracts, grants, 0% interest loans, reserve bank bailouts, international capital flight, undetected money laundering schemes, market manipulation by political insiders, etc... The multi-millionaire's edge in the coffee business was founded entirely on them having an unfair advantage in other industries. If there are enough multi-millionaires and wealth inequality is high, all industries will be smothered out of existence by big finance who will always have the upper hand thanks to their access to easy money; all industries and society will be worse off. It's no different from feudalism.

I've seen this dynamic play out in my small city with breweries. The wealthy class opened breweries in order to revitalize neighborhoods they had bought large amounts of property in, and they ended up making profits on the scale off $100 million. The breweries were never intended to be profitable on their own, they were only intended to be window dressing on an industrial area. It's no coincidence that the owners of the breweries have the same last names as many of the wealthiest and most influential families in the area, and it's no coincidence that some of those same names show up on a number of plantations that were here 200 years ago.

This is what happened with real estate in the west. It is for example, not worth owning property in some major cities as a retiree vs selling it for a fortune and moving to somewhere warmer in many major western cities.

Hence we see the explosion of corp/concentrated ownership of real estate and exploding rents (just up to the level you can afford to live with the rest of your income but not much else). Money printing means it’s a great time as a millionaire to buy lots of property, and as an average person to sell whatever excess non-residential property you have for huge amounts. Hence cities slowly become unaffordable/within the very limits of affordability for most citizens.

Selling at a loss in order to beat the competition is (in theory at least) an antitrust violation. But, to your point, it’s unlikely anything would be done about it.

> as corporate livestock you add negative value to society (you're now a cog in the money laundering machine) but you're getting paid more than what you did when you were adding value to society.

Can you explain this bit more? Why are you adding negative value?

Let's take two examples.

First Pepsi Vs Coke. Both Pepsi and Coke make a product that takes no more than 10 cents to create, ship, and put into stores. And yet their prices are many times more than that. Capitalism says that a perfectly free market will eventually reach a point to where there are no profits. Why is it that in a very mature field such as soda, there is still massive profits?

In order to get where they are they had to make deals, certain restaurants are only allowed to have one of them. They need logistics agreements. They need massive billion dollar factories. Those factories are working at way below capacity. Most of their value derives from these political aspects.

In every market there are only 2 things you need to keep track of. Costs and Values. Values - Costs are the surplus. Who gets the surplus is negotiated between the average participants. In a buyer's market, where there are many suppliers all fighting to sell, the price is close to the costs, and most of the surplus goes to customers. In a seller's market, the price is close to the value. Soda is a seller's market.

What if it were a buyer's market? What would happen if Pepsi dropped their prices to $0.10? Coke would have to follow suit, and they would end up with no profits. They know they can't bankrupt Coke doing so, as they each have equivalent infrastructure, so there is no need for them to slash their prices. Same deal with Coke. They are in a stable equilibrium. It is in the best interest of each company to split the market and reap the margins.

Now let's take Uber and Lyft. We just saw the war phase explained through coffee shops above happen with them, and they are now solidifying into a relationship similar to Coke and Pepsi. Let's take a look at Uber

1. Uber is losing money.

2. Their drivers are making less than minimum wage after taking into account car depreciation.

3. Their investors are losing money.

4. Their customers are mad at the rising prices.

What the heck is going on?! Everyone is losing! Just because you win a market does not mean that the market is worth having. Taxis in big cities makes sense. Taxis occasionally but you know will be expensive makes sense. Uber tried to push this low cost system where you use their system much more than we should be relying on. And it simply doesn't make sense. Costs - Values is negative! In 5 years we will be back to where we started, exact same use cases of Taxis, except with Uber and Lyft with near monopoly Coke and Pepsi margins.

Thank you for taking the time to explain what you meant. I appreciate it and don’t want to discount the time and effort you put into it. That being said, I vehemently disagree:

> First Pepsi Vs Coke. Both Pepsi and Coke make a product that takes no more than 10 cents to create, ship, and put into stores.

I’m sorry this is so patently false on it’s face that the rest of your argument doesn’t make any sense. It also fundamentally misunderstands how a market works and especially what the current system is.

The 2nd example is a little better but also just fails the sniff test, where I live right now, taxis are battling Uber/Lyft exactly because there were real pain points with taxis and the old system (that btw was also a monopoly, only blessed by the gov) that weren’t being addressed and the taxi companies in my city got their act together and decided to compete instead of attempting to hold us hostage to a broken gov-enforced monopoly system.

I also don’t think you really explained how it’s negative value, unless you’re simply making a personal subjective value judgement. If that’s the case, please don’t present it as objective fact, it’s dishonest.

> what you meant

I wasn't the original poster.

It's not very constructive to post that someone is wrong, and not explain why they are wrong. How wrong are they? Nope, just "sniff test". Working from first principles is the only way to get across to someone your mental model, but doing so in a comment is impossible. It would take an entire series of books to fully explain. There are skipped steps, and conversations are about narrowing exactly where we have a mental model difference.

Switching from one government granted monopoly to a duopoly is not progress. We need competition to force buyer's markets.

> I wasn't the original poster.

Yea I saw that after I replied but left it bec you seem to agree with them but didn’t actually explain what they meant.

> It's not very constructive to post that someone is wrong, and not explain why they are wrong. How wrong are they

You’re right. I should have been clearer. You told an substantiated lie, that’s why you are wrong. Not asking for first principles, just honesty.

> Switching from one government granted monopoly to a duopoly is not progress. We need competition to force buyer's markets.

Agreed. But the previous model was neither accurate nor a free market so using it as an example of a free market doesn’t work, and is dishonest.

But really we’re getting way off track. I’d like to know how starting a new job where you’re getting paid more and ostensibly are productive is adding negative value.

Let's say before this large coffee with investment money came in, there was 25 individual coffee shops in the city. Let's call them Starbucks. Then this company comes in with economies of scale and is able to sell coffee for 10% cheaper. Their product is more consistent. But there are individual coffee shops that produce higher quality coffee, and others who produce lower quality coffee, and both are more expensive.

If this is your first time in the city, and you don't have any information from friends about the quality of random shops, your going to pick Starbucks. This is the value of a brand. And while they are still competing, everything is all good.

But 5 years later once all of those individual coffee shops have gone out of business, you're left with just Starbucks and Dunkin Donuts. And they don't compete on price. Quality drops.

Each of those 25 shops were doing their own creative thing. They were trying out all sorts of innovations. Some worked, others didn't. Now we have no innovation. The big shops are conservative and move at glacial pace.

As a worker you were helping drive those innovations. You were testing stuff out. Now working at BigCo, you follow orders. You do what the machine tells you to do. If you're working for Uber, you pick people up, follow the route, and drop people off.

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Here's this question asked on quora: How much does soda cost?[0] This is in no way an authoritative source, but it's a neutral third-party that can at least end the slander that you are operating against me.

The answer they give is that it's fair to say that basically the water and sugar is free, cost is right around $0.10, and after shipping it's about a quarter. So was I wrong by 250%? No, because they don't only offer cans of soda. Most of the soda they sell is at restaurants and all they need to ship is the dry stuff. I figure the $0.10 average is right on the money.

[0]: https://www.quora.com/How-much-does-it-cost-to-manufacture-3...

Isn't this exactly how YC network effects work?

Is that why the parent is downvoted?

It's how modern capitalism works, yes, and at least some of the downvotes are surely from freemarketeers who truly believe all the stuff described in the GP is just a perfectly fine, fair state of affairs.

Can we all agree that if we’re gonna claim that real socialism(tm) has never been tried that real capitalism has similarly never been tried. The current system is very much a hybrid socialist/capitalist approach and attempting to attribute all the ills of society to capitalism is simply dishonest.

This is exactly what is happening and it's quite sad that most people don't realize this. Lots of commenters in this thread are completely unaware of what's actually going on.

The problem has nothing to do with capitalism. The problem is with money, which is created from thin air and distributed to the rich and powerful, and to those who defend this unfair system.

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