X-Spam-Status: No, score=-2.6 required=5.0 tests=BAYES_00,HTML_MESSAGE autolearn=unavailable version=3.2.2 Sender: -2.6 (spamval) -- NONE Return-Path: Received: from smtp.eecs.umich.edu (smtp.eecs.umich.edu [141.213.4.43]) by boston.eecs.umich.edu (8.12.10/8.13.0) with ESMTP id l7KJMfnd026053 (version=TLSv1/SSLv3 cipher=DHE-RSA-AES256-SHA bits=256 verify=FAIL) for ; Mon, 20 Aug 2007 15:22:41 -0400 Received: from hellskitchen.mr.itd.umich.edu (smtp.mail.umich.edu [141.211.14.82]) by smtp.eecs.umich.edu (8.13.8/8.13.6) with ESMTP id l7KJMQBD032154 for ; Mon, 20 Aug 2007 15:22:34 -0400 Received: FROM [192.168.1.107] (Unknown [64.9.221.37]) BY hellskitchen.mr.itd.umich.edu ID 46C9E9A3.B4CEF.31189 ; 20 Aug 2007 15:21:07 -0400 In-Reply-To: References: <93EC811F-946D-4EA2-ADE3-5D43B46EA65E Æ umich.edu> Mime-Version: 1.0 (Apple Message framework v752.3) Content-Type: multipart/alternative; boundary=Apple-Mail-26-1024557138 Message-Id: <4CE28F9E-2B6E-4834-B3FA-1C3FBF2E7341 Æ umich.edu> X-Mailer: Apple Mail (2.752.3) X-Spam-Checker-Version: SpamAssassin 3.2.2 (2007-07-23) on smtp.eecs.umich.edu X-Virus-Scanned: ClamAV version 0.91.1, clamav-milter version 0.91.1 on smtp.eecs.umich.edu X-Virus-Status: Clean Date: Mon, 20 Aug 2007 15:21:10 -0400 To: improvetheworld Æ umich.edu Cc: reeves-hayos Æ umich.edu, reeves-kalkman Æ umich.edu From: Dave Morris Subject: Re: mind the gap Status: O X-Status: X-Keywords: X-UID: 1020 --Apple-Mail-26-1024557138 Content-Transfer-Encoding: 7bit Content-Type: text/plain; charset=US-ASCII; delsp=yes; format=flowed I'll rephrase my claim: "Playing the stock market with the objective of short term gains does not contribute to society, and in fact actively harms it." But I do think that is true. The stock market has some benefits, and there are good reasons to have such a thing around, but ours needs help. Stock prices can be a measurement of a companies performance, but it can too easily be influenced in the short term for short term reasons. I feel like it has become common for companies to trim benefits packages, switch CEOs, cut R&D, and do other things which provide a benefit the company for one quarter, and thus make the stock market evaluation bounce when their profits look good for a moment, but which have serious long term costs. The CEOs in charge, and the investors, like this strategy because they can profit from it, then get out before the stock goes down again in the long run. Many people lose from this- not only those holding the stocks when the company goes down in general, but the employees of the company, and those using the services of the company. The stock market encourages short term thinking for short term gain and our country has become swept up in this. I personally know people who have had their companies destroyed this way. I feel like people invest not so much with an idea for building long term stability and high probability of reasonable returns, but as more of a get rich quick theme. And furthermore computer trading and other features have made it easier to trade shorter and shorter term with little understanding or analysis of the companies involved. So stock values become influenced by more trivial surface things, because that's all these day traders have time to see. So now companies are making trivial surface changes to satisfy the whim of short term investors, at long term cost. There was a big discussion on NPR about hedge funds, stock market trading of mortgages, and how it led to the creation of, and current bursting of, the housing market bubble. Part of the problem was that stock market investing had become too disassociated from the things being invested in and the real long term values thereof. Meanwhile most people, who work for the companies thus traded, suffer. Ironically it's their own investment in stock market based IRAs that helps drive the process. So I would argue that the system needs to change. Not that we need to get rid of the stock market entirely, but that we need to shift the way it works to put the focus back on valuing companies that have good long term strategies, and less on valuing get rich quick schemes. What if you had to own a stock for at least a month before you could resell it? Or a week? Or a year? I'm not sure where the right number would be, but it really seems to me that traders who sign on in the morning, borrow $10M from a bank, trade all day back and forth, return the $10M at the end of the day having made $100k, they aren't really helping society, and could be actually harming it in some real and significant ways. Of course part of this also is changing the attitudes of people and whether they should be looking to get rich quick at any expense, or whether they should be looking to help themselves, and incidentally also society, in the long run. But from a top down approach at least we can put in mechanisms that are designed to encourage the latter instead of the former. We can't force anything, and I wouldn't want that level of government control, but right now I feel like we strong encouragements to the opposite of what we want. In the meantime I'll make sure that my company is never publicly traded so I don't have to worry about it. :-) Dave On Aug 20, 2007, at 1:29 PM, Kevin Lochner wrote: > > I have to take issue with Dave Morris re: "Playing the stock market > does not contribute to society." > > Not only does a company's stock price influence its access to > capital, but the respective stock prices of all companies provide > information about the state of the economy that a ceo or > entrepeneur may use in making strategic corporate decisions. Stock > prices are determined primarily by people who are "playing the > stock market". > > > > Investing in new companies does. It's a fine line, but >> I think we've gotten too much separation of rich and poor in our >> society because of the way our stock market currently operates, >> and that could use some correction. I agree that inheritance >> taxes are good as well, to help prevent too many generations of >> people staying rich for free. But we should try to reign in the >> various tricks which exist to leverage large sums of cash into >> even larger sums via short term tricks in business and stocks >> without actually contributing anything. Not only do they take >> funds from people with less, they hurt the country overall. >> >> But he is also correct- there's a wide variance of skill and >> motivation in people, so there should be a wide variance in income >> levels. I'd accept a factor of 100 variance from top to bottom in >> salary as a reasonable maximum in relative value to society that a >> person could be. Some people bust their asses continuously to help >> the world. Some people actively try to live off of others without >> contributing anything. I do have a problem with the factor of >> 1000 or 10000 variances that sometimes occur, but those are >> obvious flaws that are difficult to correct. >> >> Interesting to consider. :-) >> >> Dave >> >> On Aug 20, 2007, at 10:16 AM, Daniel Reeves wrote: >> >>> We've been debating this essay >>> http://www.paulgraham.com/gap.html >>> and I thought I'd move it to improvetheworld... >>> I'll start: Graham is so right! The income gap between the rich >>> and the poor is wonderful! >>> Actually it started more as a debate about the nature of >>> capitalism and interest ("why should money 'grow'?"). Here was >>> the gist: >>> * [the economy] is a zero-sum game, isn't it? >>> - no >>> * those earning money are taking it away, even if only >>> indirectly, from >>> other people, no? >>> - no, not if you think in terms of wealth (wealth = stuff you want, >>> money = way to transfer wealth) >>> * Or am I totally simplifying the haves vs. the have-nots with my >>> pie >>> metaphor? >>> - yes, that's precisely the Daddy Model of Wealth! >>> * Is it THEORETICALLY possible for no one to owe any money at all >>> in this >>> world, i.e., that everyone just has money that "grows"? Or does >>> money >>> only grow if it is taken away from others? >>> - You're right, not possible, but for the opposite reason of what >>> you seem >>> to be suggesting. You grow money by giving it to someone >>> (lending it), >>> not by taking it away. >>> It even got a bit heated, along the lines of "Trixie, I don't >>> think it's right for you to lash out against capitalistic/ >>> yootlicious ideas without grokking the answers to your questions >>> [above]". >>> Oh, and I offered a yootle to the first person who could answer >>> the quasiphilosophical question why money *should* grow, with the >>> hint that it has to do with human mortality. I believe that's >>> the only reason that holds in all circumstances. >>> In any case, Trixie wanted to resume the debate and this is >>> clearly the place to do it! >>> DO NOT CHANGE THE SUBJECT LINE WHEN YOU REPLY (so it's easy for >>> those not interested in this debate to delete the whole thread). >>> Ok, go! >>> Danny >>> -- >>> http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel >>> Reeves" >>> "Everything that can be invented has been invented." >>> -- Charles H. Duell, Commissioner, U.S. Office of Patents, 1899. >> >> Dave Morris >> cell: 734-476-8769 >> http://www-personal.umich.edu/~thecat/ >> >> > > Dave Morris cell: 734-476-8769 http://www-personal.umich.edu/~thecat/ --Apple-Mail-26-1024557138 Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset=ISO-8859-1 I'll rephrase my = claim:
"Playing the stock market with the objective of short term = gains does not contribute to society, and in fact actively harms = it."
But I do think that is true. The stock market has some = benefits, and there are good reasons to have such a thing around, but = ours needs help.=A0

Stock prices can be a = measurement of a companies performance, but it can too easily be = influenced in the short term for short term reasons. I feel like it has = become common for companies to trim benefits packages, switch CEOs, cut = R&D, and do other things which provide a benefit the company for one = quarter, and thus make the stock market evaluation bounce when their = profits look good for a moment, but which have serious long term costs. = The CEOs in charge, and the investors, like this strategy because they = can profit from it, then get out before the stock goes down again in the = long run.


Many people lose from this- = not only those holding the stocks when the company goes down in general, = but the employees of the company, and those using the services of the = company. The stock market encourages short term thinking for short term = gain and our country has become swept up in this. I personally know = people who have had their companies destroyed this way. I feel like = people invest not so much with an idea for building long term stability = and high probability of reasonable returns, but as more of a get rich = quick theme. And furthermore computer trading and other features have = made it easier to trade shorter and shorter term with little = understanding or analysis of the companies involved. So stock values = become influenced by more trivial surface things, because that's all = these day traders have time to see. So now companies are making trivial = surface changes to satisfy the whim of short term investors, at long = term cost.

There was a big discussion = on NPR about hedge funds, stock market trading of mortgages, and how it = led to the creation of, and current bursting of, the housing market = bubble. Part of the problem was that stock market investing had become = too=A0disassociated from the things being invested in and the real long = term values thereof.=A0

Meanwhile most people, who = work for the companies thus traded, suffer.=A0Ironically it's their own = investment in stock market based IRAs that helps drive the = process.

So I = would argue that the system needs to change. Not that we need to get rid = of the stock market entirely, but that we need to shift the way it works = to put the focus back on valuing companies that have good long term = strategies, and less on valuing get rich quick schemes. What if you had = to own a stock for at least a month before you could resell it? Or a = week? Or a year? I'm not sure where the right number would be, but it = really seems to me that traders who sign on in the morning, borrow $10M = from a bank, trade all day back and forth, return the $10M at the end of = the day having made $100k, they aren't really helping society, and could = be actually harming it in some real and significant ways.

Of course part of this also = is changing the attitudes of people and whether they should be looking = to get rich quick at any expense, or whether they should be looking to = help themselves, and incidentally also society, in the long run. But = from a top down approach at least we can put in mechanisms that are = designed to encourage the latter instead of the former. We can't force = anything, and I wouldn't want that level of government control, but = right now I feel like we strong encouragements to the opposite of what = we want.

In = the meantime I'll make sure that my company is never publicly traded so = I don't have to worry about it. :-)

Dave




On Aug 20, = 2007, at 1:29 PM, Kevin Lochner wrote:


I have = to take issue with Dave Morris re: "Playing the stock market does not = contribute to society."

Not only does a company's stock = price influence its access to capital, but the respective stock prices = of all companies provide information about the state of the economy that = a ceo or entrepeneur may use in making strategic corporate = decisions.=A0 Stock prices = are determined primarily by people who are "playing the stock = market".



=A0Investing in new companies = does. It's a fine line, but=A0
I think we've gotten too much = separation of rich and poor in our society because of the way our stock = market currently operates, and that could use some correction.=A0 I agree that inheritance = taxes are good as well, to help prevent too many generations of people = staying rich for free.=A0 = But we should try to reign in the various tricks which exist to = leverage large sums of cash into even larger sums via short term tricks = in business and stocks without actually contributing anything. =A0 Not only do they take funds = from people with less, they hurt the country overall.

But he = is also correct- there's a wide variance of skill and motivation in = people, so there should be a wide variance in income levels. I'd accept = a factor of 100 variance from top to bottom in salary as a reasonable = maximum in relative value to society that a person could be. Some people = bust their asses continuously to help the world. Some people actively = try to live off of others without contributing anything.=A0 =A0 I do have a problem with = the factor of 1000 or 10000 variances that sometimes occur, but those = are obvious flaws that are difficult to correct.


Dave

On Aug = 20, 2007, at 10:16 AM, Daniel Reeves wrote:

We've been debating this essay
and I thought I'd move it to = improvetheworld...
I'll start:=A0 Graham is so right!=A0 The income gap between the = rich and the poor is wonderful!
Actually it = started more as a debate about the nature of capitalism and interest = ("why should money 'grow'?").=A0 = Here was the gist:
* [the = economy] is a zero-sum game, isn't it?
- = no
* those earning money are taking it away, even = if only indirectly, from
=A0other people, no?
- no, not if you think in terms of wealth (wealth =3D = stuff you want,
=A0money =3D way to transfer = wealth)
* Or am I totally simplifying = the haves vs. the have-nots with my pie
=A0metaphor?
- yes, that's precisely the Daddy Model of = Wealth!
* Is it THEORETICALLY possible = for no one to owe any money at all in this
=A0world, i.e., that everyone = just has money that "grows"? Or does money
=A0only grow if it is taken away = from others?
- You're right, not possible, = but for the opposite reason of what you seem
=A0to = be suggesting.=A0 You grow = money by giving it to someone (lending it),
=A0not by taking it = away.
It even got a bit heated, along = the lines of "Trixie, I don't think it's right for you to lash out = against capitalistic/yootlicious ideas without grokking the answers to = your questions [above]".
Oh, and I = offered a yootle to the first person who could answer the = quasiphilosophical question why money *should* grow, with the hint that = it has to do with human mortality.=A0= I believe that's the only reason that holds in all = circumstances.
In any case, Trixie wanted to = resume the debate and this is clearly the place to do it!
DO NOT CHANGE THE SUBJECT LINE WHEN YOU REPLY (so = it's easy for those not interested in this debate to delete the whole = thread).
Ok, go!
Danny
--=A0
http://ai.eecs.umich.edu/= people/dreeves=A0 - = -=A0 search://"Daniel = Reeves"
"Everything that can be invented = has been invented."
=A0 -- Charles H. Duell, = Commissioner, U.S. Office of Patents, 1899.

Dave = Morris
cell: 734-476-8769





Dave = Morris
cell: 734-476-8769

 =

= --Apple-Mail-26-1024557138--