hogFeast

I think the point is that the economy has become more-oriented towards financial outcomes. Companies are doing things which boost their stock price but don't actually result in a greater level of overall economic activity beyond higher profits.

This criticism is always going to be scattergun because there isn't any one thing you can point to. I expected the article to be terrible but the conclusion/main points are basically sound (I actually assumed the guy wasn't a financial professional but appears to have been, it is a bit scattergun but actually covers a lot of ground well).

You are seeing things today that make zero sense. Companies that have profitable businesses trading on 5x earnings and other companies that are never likely to be profitable are trading on 30x or 50x sales.

I think people view the stock market as semi-relevant because it often isn't new capital being raised but it has a huge signalling effect for private sector activities. I remember five years ago when people said the stock market was dead. Well, it turned out those people need your money now. The tail is wagging the dog. And, unfortunately, one of the side-effects has been that it is impossible to raise money for anything profitable (the problem with profit is that they are never large enough, losses are fantastic because you can always say...but wait until we are profitable, the profits will be huge). The companies on 5x earnings are buying back, the companies on 50x sales are issuing stock (largely for employees and insiders to cash out).

I am not sure if it is a huge issue because it will correct. But I think there will need to be a re-examination (once again) of the role of monetary policy, it has made everything significantly worse. Huge impact on inequality, created a fake shortage of safe assets which caused a bump in prices that led more money out of risky assets (this is the opposite of the intended effect of QE), etc. A total car crash.

One thing that is perhaps understated is the extent to which the US market has globalized. A lot of stocks today are overvalued but GOOG was trading at 12x earnings ten years ago. And what people then under-estimated was the global growth potential. YouTube and Netflix are watched more than linear TV in some countries amongst young people, and live TV is still a very big business. That is why it is difficult to talk about the connection between growth in US equities and US economic growth, they are detached.

Another things that is understated is the extent to which most institutional investors have totally checked out of...well, investing. Not just ETFs but in Japan, they just buy CLOs...in Taiwan, they just buy CLOs...in Germany, CLOs (and private loan funds). All this money is flowing into private equity but not lending to the real economy (and it is fair to point out, that lending to private equity is just transferring money from X to Y...it creates nothing). QE has facilitated this, it made investing in risk-free assets very profitable, the drop in interest rates since the early 80s did the same, these flows of foreign money haven't improved investment, they have just siphoned wealth out of the US (totally counter-intuitive but economic models operate under the assumption that supply of savings creates demand for investment, unf the supply of investable ideas is quite fixed but private equity will create the securities if there is enough capital...it can't go on forever). This is the irony of saying the US should copy the "Asian Growth Model"...that model only works because exporters can invest the dollars and create the overseas investment income.

I will give you some actual facts here (because you appear to be genuinely interested, I can only speak about England which industrialized first).

Urbanisation happened over a long period of time and was very far advanced in the UK (and in places like Belgium). Europe always used a far higher stock of capital (inc. animals) than in Asia but it was only when land began to be enclosed that you saw productivity really improve (it wasn't until the 1700s that European agricultural productivity really equalled places like China), and urbanization accelerate. It is also important to remember that the Industrial Revolution did not happen overnight, there was a period of proto-industrialization when work was "put out" by merchants, this was often in textiles and sometimes with capital/machines that workers owned in their own homes.

It was really in the late 18th/early 19th century that you saw levels of protest begin to rise, as factories started to grow, as workers began to get displaced into factories, and then as workers got displaced by children working in factories. This was a huge "thing" in politics throughout this period, although during the Napoleonic Wars laws were passed which clamped down on protest significantly (Chartism, the Luddites...this was probably the first example of cohesive "working class" political movement anywhere). Importantly though, the only cohesive example (that I know) of protest against agricultural improvement was the Swing Riots in the 1830s, which were localised.

To be clear, this is not because there were no protests but because the protests had happened two centuries earlier with enclosure. That was the main process that really led to agricultural productivity improving (combined with the mortality from the Civil War and migration to the Colonies decreasing the pressure on population). Mechanisation in agriculture wasn't really a factor until much, much later (there was very little need, labour was basically free and ample...the poor laws of the early 19th century were a huge wage subsidy for land owners).

The other stuff the guy you replied to said is way, way off...as I have said elsewhere, this is just feudal romanticism by people who don't understand the past but have their views about the present so just see what they want to see. The standard of living then was significantly below the level existing in every developing nation today. It is fair to say that the industrial revolution treated them no better (the riots I mention above bear that out, it wasn't automation but mechanisation and the introduction of child labour which mechanisation facilitated), but that ignores the massive political changes that occurred soon after (if you look at the UK, the stuff occurring in factories was a huge scandal...a lot of the "political economists" of the day who are famous today unf did not help, but it did get solved and living standards improved).

It can possibly be because that is what history is. It is the study of things which are not the present.

It is irrelevant whether yesterday is like today because history is not about yesterday. Again, if you are interested about this subject, I would read some books about historiography (EH Carr and Elton are two of the most important books of this last hundred years...but, again, I don't think you will find anyone arguing for the position you are taking because it so clearly is an attempt to justify a political position today...this isn't what history is, any political position today has to be justified in the terms of today...historical relativists do not take your line, no-one does, it makes no sense unless you have no idea what history is).

I studied this at university. I have done the research. I am telling you do not (your only evidence is that you think it was like the place you grew up...seriously?).

Keith Wrightson is the basic textbook used on this subject (Omrod has written one about an earlier period). Pls, even for HN...this is wild, wild, wild levels of delusion.

You have missed the point totally.

The "cohesive narrative" stands alone. History exists only on its own terms. You cannot look at something that happened in history and say: we can do this because it happened then. It is not absurd, it is the basic aspect of how histography is taught in university (and btw, if you study politics...you will find the same idea, "path dependence"...you see parallels in every social science because it is a fairly common mistake made by people who haven't thought about the issue deeply...the "why don't you be like Denmark" meme is a classic of comparative politics).

I am not saying that the present is the only lens (again, you haven't even started to understand what I wrote). The point is that the present is the only present. The past can only be understood in it's own terms. You are not constrained in any way because the past provides only information about the past, not the present.

I am not sure why you think you can compare to a rural place.

One, the number of children then was far higher, and there was no school.

Two, I don't think you understand that incomes were so low back then that they could not afford even basic machinery. The furniture that most people had was a few chairs, tables, and things to eat with. Even basic household machinery (for example, a mangle) that was common in pre-20th century rural society, didn't exist (these machines also weren't produced in large volume).

Three, no most women didn't work...I am not sure why and how you came to this conclusion. But women didn't commonly start working until proto-industrialisation. I think what may be confusing you is that women did work in agriculture during harvest times, this was not the case for most of the year.

Four, the definition of household tasks isn't even comparable. Household tasks included things like gardening which would only make sense in the context of a society with a non-existent market economy. Again, the comparison is...non-sensical, it makes no sense.

Five, you can just Google this. There are ample historical estimates of this kind of thing. It is not like this information is totally unknown.

I would suggest reading a book about social history rather than attempting to compare with some other period of history that you think you know better (your views of pre-20th century life are also not correct but that is a whole other story).

Again, this is exactly my point. This isn't history. This is specifically not what history is for. History does not inform that process because the past is not like the present. They are orthogonal. Attempting to inform your view of the present using the past is like trying to play baseball like football...it just doesn't make any sense.

Quite right.

I think we are seeing proof of what you are saying with the childcare cost crisis in most developed nations. A good proportion of early years childcare (and often later) was "free". Now that it is being transferred into wage labour in many countries with growing labour force participation amongst women, we are learning that this stuff was very costly. Similarly, all the household tasks then would take a full working day.

Also, they did have sports and games. Many of the games we play today have their origins in that period, but they weren't of the formal nature that we have today (and there were far more bloodsports). They had culture of a sort: theatre, singing, music. And they had more mass social events like festivals and market days (life today is far more atomized, back then this was a way for everyone to gather in a place and get business done). The rich didn't do organized sports either (as we conceive)...hunting of course was a huge pasttime.

The "innovations" of that period passed into irrelevance when the world changed. Our "innovations" will also pass into irrelevance too.

EDIT: btw, someone else has said that only the activities of the rich are recorded...this isn't right, there are lots of social history books which cover the leisure activities of workers in this period (if you Google social history or leisure history, you will find the period you are interested in).

Where were you taught that?

Fairly basic logic should indicate to you that it wouldn't have been possible for people to work as much. There was no manufacturing. The vast majority of people who worked, worked in agriculture. You cannot work in the middle of winter, you cannot work at night. I don't know how it would have been possible...and that is why people then lived in crushing poverty (it isn't comparable to anything that exists today, even third-world nations today aren't close to the poverty that existed then).

I think the surprising thing is that anyone would conclude that anything about feudalism was better. The reason why people didn't work long hours was because the economy was stuck in a Malthusian trap, and there wasn't enough productivity or work to actually feed people (apart from after mortality crises where close to a majority of the population died).

The only reason the argument is being made is so that it can support the OP's conclusion about work in the present. It has no real significance by itself, this isn't history (incidentally, this is why history is important...it is taught so badly in the US, so badly...but everyone makes these bizarre ahistorical comparisons, everyone looks at the past when trying to understand the present...it is unfortunate that we have the knowledge to inform the limits of this process, but people just ignore it).

No, it is a comment about overcrowding. The point is: there was no way to move lots of people into these areas to do work and maintain living standards. Buildings also cost labour to produce, now that society is rich, can everyone just buy infinite building materials?

Correct, the ones we have now that only rich people can buy and which exist during a shortage of housing. Assuming that this can just scale up to house millions of people makes no sense (and has never occurred anywhere, the reason why public transit systems are so important is because it has never been possible to economically build enough housing within cities).

It would depend on the underlying event. The reason we have financial markets isn't to predict things, it is to fund things that need funding, and the price mechanism guides that for better or worse.

Creating an artificial prediction market is more like gambling where people are transferring risk for its own sake. Nothing wrong with that but I am not sure what the purpose would be. As said, these markets are also unlikely to add any new information either because the kind of events being talked about some largely random.

Most cities used to have all the industry located in the centre. It led to huge slums (because there was insufficient supply and massive demand) and everyone leaving the city when the slums got cleared.

Even if you have great transportation (Tokyo, London, New York), the commute is still pretty brutal.

The only real "solution" that was ever presented to this problem was to create smaller garden cities that would have their own industries...this never worked out because everyone had to be in the city (perhaps coincident with more service-based economies, manufacturing did move out of big cities).

It is an extremely hard problem (and to be blunt, the solution of most planners has been: make me emperor, I will allocate the resources...it is a huge political/social/everything problem) but remote working is a very legitimate solution...although the response of any company towards better conditions for workers is always suspicion (if the workers are happier, don't we lose...somehow?).

(An extremely nerdy comparison is with proto-industry in the early stages of the Industrial Revolution...a lot of the intermediate production in textiles was done in homes by, what we would call today, independent contractors...as the capital intensity of the textile industry increased and new technology was developed so...to put it bluntly...that you could employ children to do the work then you saw industry move into city centres and slums appear. But before this time, you had people working in their own homes and on their own machines, and it was far more decentralised...although these people were often localised geographically as there was a whole supply chain. Definitely indicates that things don't really need to be the way they are.)

I was forced to torpedo a previous career because a relative got sick, and then I got sick...moving to the city wasn't a good idea but the only choice in that industry, so I had to move on (I grew up in the city in question, utter hellhole, commutes are horrendous, I would have moved because I loved the work but that was all).

Obviously, I have a biased perspective but what frustrated me wasn't the loss to my own career. I just got on with it, retrained, moved on. But the fact that I had useful skills, had spent years developing them, and the most rational thing for me to do was to literally start from zero in an industry that was more accommodating...which seems a bit silly.

So I wouldn't even frame this as a personal thing. The reason the career development opportunity is so large is because the opportunity for employers is so large...and, ofc, they are the ones resisting this.

Right, but the point is that prediction markets remove the subjectivity, and I am saying they don't. They are just wrong in different ways.

Rewarding individuals? So we swap one set of "experts" for another? The point of this is that no-one is an expert. The problems are created not because we don't have prediction markets, but because we treat "experts" with reverence.

The comment about randomness you made to another reply...with any event, there is some part of the outcome that is unpredictable. You could have perfect information, and still would be unable to predict it every time. Some events have no information that can be used to predict them, so predicting is just the event's previous frequency or last value.

I don't think prediction markets make sense. The information about whether a country will become a dictatorship is usually private, and impossible to obtain. It isn't like a betting market where the relevant information is public.

I probably agree with your aims. I think that systems should exist to make better decisions but there is limit because no-one can make perfect decisions (and it is probably more important to consider robustness at that point). I think attempting to reward predictions makes no sense, everyone is prone to these biases. I don't think rewarding a certain group of people makes that any better.

One part of markets that people often get wrong is that sometimes markets are totally wrong. With Enron, the information that the company was fraudulent was publicly available, and relatively easy to find. But the price for the stock was set by people who didn't want to find it. Mayweather vs McGregor...crazy odds. In 2012, the US prediction market Intrade had wildly inaccurate odds for the Presidential election, this was a market that was trading hundreds of thousands per day. Markets work most of the time, they don't work all the time (I would say financial markets are the best evidence of this, you see stuff that makes no sense almost all the time because investors have such different aims...you think no-one is this stupid, then you see it happen in a megacap stock worth hundreds of billions, and your perspective on human reasoning changes significantly).

Yep, I have been there. Example (sorry to use another finance story): the market today is overvalued by any logic. Valuation, 0% returns for next ten years. Equity risk premium, max 2% real. Contributions that are valued most heavily are complex and surprising. If you say the market is overvalued when it has gone up 15%/year for a decade then people are expecting something very big...not some nerd talking about equity risk premia.

I think this is the difference between how humans reason emotionally and how humans reason logically.

Finance is a bad example because most people lose it when money is involved. But you see this in other areas where it is very hard to make a contribution if that contribution isn't surprising, controversial, or shocking in some way. It has to have emotional valence. This isn't universal. Some areas of study don't have that culture, some organizations have clear decision-making processes that try to stop this...but everyone is prone to emotional reasoning.

That is what has always confused me about "prediction markets".

The reason why non-experts perform as well as experts is because there is a huge level of randomness in actual outcomes, and very little information that can help predict beyond randomness.

And prediction really isn't the goal in practice, but robustness. Even if you were a "superforecaster", you are still going to be wrong most of the time. So surely it is more important to be robust to outcomes and stop trying to predict something that can't be predicted.

(To compare this with large skill gaps to expertise...sports betting, these events are random, some are more random than others but the gap with expert knowledge exists because there is information that exists that will help you predict outcomes. That gap doesn't exist in politics because there is no real information that can help you...it is just totally different, it makes no sense to compare them imo).

I studied politics and history. In my experience, there is also a bias towards writing exceptionally partisan things. I used to write things that were hedging, and which were summaries of the argument. Invariably, these papers scored significantly lower than papers which took a position (whether that was accurate or not).

Of course, university isn't reality. But my point is that people do not find realistic opinions that interesting. Saying "I don't know" or "both sides have merit" is sometimes accurate but never interesting. Society selects for this.

I also worked in finance which exposes you to a reasonably fast feedback loop between opinion and reality. I met people who had multi-decade records of crushing it, and they usually had very anodyne takes. You come in expecting they have access to some higher form of truth...in reality, they are just better at seeing what is already there.

You see this, particularly, when a famed investor says the market is over-valued. Inevitably, they will get lambasted publicly. But you realise that their view is usually one that works long-term, that is quantifiable, that uses reason...everyone else just wants emotion.

The difference isn't knowledge. You can have huge knowledge, you can be rewarded heavily for being right, you can be a media "expert"...but if you aren't interested in reality, it doesn't matter.

I don't think it is about avoiding having strong views either but it has to be strong views, weakly held. With time I think a minority of the population realises that some people will have the same opinion regardless of what facts are presented to them. What is frustrating is that society reproduces so much of this nonsense.

It doesn't work this way.

If Alphabet wanted to prove they lasted three years, they would have found a way to prove it. Auditors don't go around challenging on things like this. In particular, they don't go around challenging companies on depreciation because that is a key lever that management can pull if they need to hit numbers.

It is very difficult to discern exactly why they will have done this but the functional answer is: they have done this because they needed earnings to increase. In this case, it looks like the difference between a 15% and a 20% beat (I believe the change was made in January, I think they had quite a big beat in that quarter after some flattish momentum, middle of the year very strong anyway).

Boris Johnson actually did something similar.

Iirc, he gave an interview where he bizarrely and repeatedly mentioned the fact that he likes to paint wine boxes like buses...over and over. And it was thought (and, most likely, leaked) that he was doing this so that when people Googled "Boris bus" it would come up with this story, and not the story about the infamous "Brexit bus" (it also leaked that it was Lynton Crosby, a well-known political campaign manager, that suggested this...which does support the claim that it isn't total bs).

The funniest part of this is that you have people with no fundamental understanding of companies attempting to perform fundamental analysis...the solution which doesn't seem to have occurred here is...perform fundamental analysis.

All of the stuff that is being signalled here can also be worked out by just reading the financial reports (the issue with a lot of these models is that information leaks through...ofc, companies that announced downsizing are more likely to go bust...if you need NLP to work this out, finance is not for you...the example of semis is the same, everyone knew that ppl were uncertain about supply, you didn't need NLP for that). The only reason these results are in any way remarkable is because academics convinced everyone that there is no "signal" in conference calls...right, everyone who has ever invested money knows this is false, this isn't surprising.

And, just like value factors, this will go badly wrong because computers can't actually value businesses by themselves, they can't do fundamental analysis. Attempting to shortcut this is not smart.

I don't think I really said this wasn't the case. What I said is that corporations comprise the most popular/most watched videos (which is true, if you look at the video rankings).

That can happen simultaneous with good, independent videos being produced. But I think those non-corporate videos would do better if YouTube wasn't so hostile (again, content strikes, getting reported for violations...have you genuinely never heard any complaints about YouTube from people who create videos on the platform?).

No, that is not right. He got paid $20bn last year, and is getting paid more this year. One thing that tends to be confusing for people is that a dollar amount is not being paid, so if you issue shares 100 shares at $100/shares, and the value of the company rises to $200 share then the "value" of the award it not $1k. Giving away shares or paying huge stock-based comp is basically saying that your company is worthless (this is a principle that existed for years before, in tech this has been totally bastardized as employees/managers have looted companies).

It is a big deal. It is the biggest comp deal of all-time by tens of billions. As I also explained at great length, it makes no sense because he already had a big position in the stock. The idea that you need to pay someone $20-50bn/year to do a proper job when they are already worth $150bn is...grotesque (I am a big capitalist, I am not in the US but, if I was, I would be a socialist...in Austin, you have people living in tents under almost every bridge, and you have Musk cosplaying as a working man in his $50k house in the same city...whilst he is trying to get rid of his $100m in property elsewhere...it is utterly grotesque, it makes no fucking sense, it isn't a meritocracy, it is feudalism...no-one who is as rich as him has ever demanded share awards like this, no-one, it just doesn't happen because no-one who has this much money is actually that greedy...they can't spend it, so what is the point...it is impossible to look at Musk's actions and not think: "there is something seriously wrong with this person").

Tax avoidance. SpaceX. Other self-aggrandizing nonsense projects. Because TSLA is self-evidently overvalued.

I think point 2 is actually quite important. YouTube used to be a source of genuinely innovative content. It is now far more corporate and anodyne, and the most popular videos are largely big production companies, and part of that is copy-striking.

Ofc, the intention of copy-striking was not to decrease competition. But that ended up happening because of the way that the system is implemented (it isn't just copy-striking, I think reporting violations/automated violation systems have the same consequence).

The Musk package is financial genocide. The guy owns a ton of shares already, his incentives were totally aligned...think about this way: he owns 17% of the company already so 17% of the package comes from Musk himself, the rest comes from everyone else...that should make clear exactly what is occurring. The economics are totally fucked, he is getting paid 10% of the market cap in a year...when he isn't hitting targets (and the guy is borrowing money like crazy...I think he has borrowed something like $60bn, I don't think anyone has soaked a company this badly...I have certainly never seen anything like this in a company that wasn't fraudulent). It is amazing that no-one has sued the Board (but, again, the problem today is that these investors don't really exist anymore, the largest active investor in TSLA has a 1.5% stake).

This is the kind of thing that people will write about in 20 years and be like..."wow, that actually happened, no-one did anything".

The point totally missed here.

The logic for share awards initially was to align the interests of shareholders and managers. The problem here is: you have founders often with supervoting shares, they usually have a huge role in appointing the Board, and they are basically looting everything that isn't nailed down from minority holders.

The big change was Musk's package. When that happened, all hell broke loose. It is a crazy situation because he already has a huge share in the upside of TSLA, but now he is taxing minority holders too.

If anything, this is going to get worse because the rise of passive investing has left the market with essentially no corporate governance escape valves (and, although it is basically verboten to mention this now, changes in "board hiring policies" are having the same effect...if you know, you know...it is not possible to say this explicitly on the internet).

But this is nothing to do with rewarding success or aligning incentives. This is just majority holders who control management and the Board looting non-controlling shareholders. In the cases where this isn't true, for example AAPL, the CEO pay is just wildly out of proportion to the amount of value generated...it is just insane (you are actually seeing tech-oriented PE funds make money from taking public companies private because they are able to gain control over stock-based comp...how crazy is that). Making comp wholly dependent on the share price (as in the Musk deal) is also completely inappropriate because, as a first-year finance student can explain, the stock price is not composed solely of company-specific risk.

Just generally, I don't think executives realise this is going to come back to bite them. I am an arch-capitalist but this isn't capitalism, it is feudalism. The economic system in the US is rigged totally. The level of inequality and unfairness that exists in US society has never been sustained by any society. Executives are creating the machine that will end them.

The best part is saying that you have learned so much about why you shouldn't be mean to companies on Twitter, and how embarrassing that behaviour is...and doing it in a whiny email to a customer.

Some people go through life "learning" the same lesson over and over.

Yes, that is what I meant by the transmission (indeed, there was a huge difference between QE in 2010 and QE in 2014). There is also a huge difference in QE now, and 2010. Each time the structure changes and the impact on transmission changes (because the Fed had no idea how QE was supposed to work, and apparently still doesn't appear to know precisely). A key point is that QE in 2010 primarily worked through portfolio composition, not directly on money supply.

Similarly, giving people cash handouts is not necessarily inflationary either (it happens all the time anyway, food stamps, unemployment benefits) because cash handouts don't necessarily increase the money supply. The issue is that transmission appears to have changed in a very subtle way (this isn't just occurring in the US either) where you have fiscal policy seeming to leak through to the money supply (something that a significant proportion of politicians think is impossible atm).

The reason why it is "controversial" is because people believe we did the same thing in 2010, and no inflation occurred.

Very broadly this is true, M2 peaked at 10% in 2008 and was 6% for most of the decade but the actual transmission of this into the real economy was impaired. So you have to actually understand how monetary policy is being transmitted.

But what has just happened is evidence that this lesson wasn't learned because the view seemed to be that inflation is impossible...not that we need to look at transmission more carefully. M2 growth YoY is running at 25%, federal spending is clearly leaking into the money supply, on top of supply issues...it is going to be tricky to resolve fast (even if you don't consider the political pressure the Fed is clearly under, the willingness to trade inflation for lower unemployment...that is what this comes down to, can your politicians take the pain? It is very clear there is no capacity for pain in the US).

The mantra of every unreasonable person.