But then you have an unfalsifiable theory, Dave! [1]
Also, as they say, the plural of anecdote is not data.
[1] For the nonscientists, and I hope this isn't already obvious, but
unfalsifiable = bad. It's a theory with no predictive power, ie, not
scientific, ie, useless!
--- \/ FROM Dave Morris AT 07.08.22 23:16 (Today) \/ ---
> Not being a private investigator, or the FBI, and given that they have been
> unable to identify such things in advance, I'm not willing to bet on it. Some
> stock rises are good. Others are based on short term thinking. And 1 year may
> not be long enough, it may be 5 or 10 years before a company that was good
> for 25 years finally is destroyed. Or the company may be bought out by other
> companies such that it ceases to exist as such and thus becomes impossible to
> track. You only really find out through hindsight- when you have friends
> who've worked there and described in person what happened. Or when CEOs
> retire as multi-billionaires at the end of 50 years of this and reveal what
> they did 25 years ago.
>
> So I don't think betting on it is the right way to resolve the matter. :-)
>
> How much do you have in the stock market these days? How do you choose who
> you invest it in? How long term do you think?
>
> I've got about $16k, though I'm planning to pull that out soon and put it in
> my house instead once the account vests (my EDA retirement is basically an
> online stock trading account). Most of it is in FedEx and UPS, since I heard
> on NPR that their stock was way down due to gas prices, and I thought to
> myself "I use them every day in my company and they do a great job, that
> doesn't make sense, they'll bounce back". So far I've been right, but only
> about 5-6% on average, not too exciting.
>
> The next time I invest in the stock market will probably be to support a
> small company trying to get started. I may be the one starting it. :-)
>
> Dave
>
>
> On Aug 22, 2007, at 9:35 PM, Daniel Reeves wrote:
>
>> Not sure if this was clear but I meant to propose this as an actual
>> wager. I think disagreements are much more interesting when the
>> participants can quantify their confidence in their positions.
>>
>> (I also have the ulterior motive that we're working on adding new
>> betting mechanisms, and decision/prediction mechanisms, into yootles.)
>>
>> Any other ways we can turn this disagreement into a prediction about
>> some measurable future thing? My position is that Dave only appears
>> right through the power of hindsight.
>>
>>
>> On 8/22/07, Daniel Reeves wrote:
>>> Dave, if you pick a stock that surges up on some short-term news I'll bet
>>> you a large amount of money that it will still be up, say, 1 year later.
>>> (Does that pin down the heart of what we disagree about?)
>>>
>>> --- \/ FROM Dave Morris AT 07.08.22 09:57 (Today) \/ ---
>>>
>>>> You point out some potential benefits, and others have pointed out
>>>> specific
>>>> examples. I agree with these, but my argument is not that the stock
>>>> market
>>>> should be abolished. It does provide value. My argument is that it's got
>>>> flaws that are getting worse, and thus should be recognized.
>>>>
>>>> What of examples like Enron where executives obfuscated the records, made
>>>> millions to billions, then screwed everyone else when it collapsed? Or
>>>> the
>>>> CEOs who inflate the value, cash out in the stock market, then leave
>>>> before
>>>> the company collapses into ruins in a series of buyouts? In these cases
>>>> the
>>>> stock market and the traders and the collective wisdom are easily fooled,
>>>> and
>>>> get fooled over and over again, at least in the short run. But the way
>>>> the
>>>> stock market works incentivizes these short term illusions because it
>>>> creates
>>>> the ability to get really rich because of them. As stocks trade faster
>>>> and
>>>> easier and information becomes more distant from the traders this will
>>>> become
>>>> more prevalent, or so I believe.
>>>>
>>>> How do we fix that without removing the collective wisdom evaluation of
>>>> corporate strategies? Though additionally I'll put my faith in a
>>>> handful of
>>>> experts over the collective wisdom any day. I think the collective wisdom
>>>> lags and follows those who really understand the companies and technology
>>>> anyway.
>>>>
>>>> As far as short-selling companies who are pursuing the above strategies,
>>>> I
>>>> think that is a good strategy, and I'm sure there are some who do make a
>>>> profit doing that... but it requires longer term thinking and longer term
>>>> strategies to do so, and the fact that we're moving away that as a
>>>> society
>>>> means that such strategies won't counterbalance the problem. Though
>>>> again
>>>> the stock market alone isn't the only cause of short term thinking. I
>>>> just
>>>> think it's one piece of the issue, and perhaps one that could be adjusted
>>>> to
>>>> help improve it.
>>>>
>>>> Dave
>>>>
>>>>
>>>>
>>>> On Aug 21, 2007, at 8:44 PM, Daniel Reeves wrote:
>>>>
>>>>> Not only do I disagree with Dave, I'll go so far as to claim he
>>>>> disagrees
>>>>> with his own position. If not, Dave, why not make a killing shorting
>>>>> stock
>>>>> of the next company to do a round of layoffs for the sake of a short
>>>>> term
>>>>> boost in stock price? The market is smarter than we think.
>>>>>
>>>>> Nor do I have a beef with day traders. Either they're providing
>>>>> valuable
>>>>> information to the market or they're going to get smacked hard. (In
>>>>> expectation at least.) In any case, they're paying a fair rate for the
>>>>> money they borrow and no matter how little time they own a stock they
>>>>> are,
>>>>> in aggregate, contributing to the investment in those companies. (And
>>>>> short-selling is just borrowing stock, later buying it to pay back the
>>>>> loan, so nothing slimy about that, contrary to popular conception.)
>>>>>
>>>>> I used to be like Dave, pointing to a litany of "obvious" flaws in the
>>>>> market (stock market or "the market" more generally, like microsoft
>>>>> being
>>>>> sucky (for me) yet rich). But the market had a habit of being smarter
>>>>> than
>>>>> me and I've learned some humility in this regard.
>>>>>
>>>>> As for Dave's specific allegation (the stock market focuses on short
>>>>> term
>>>>> gains), I don't think that's true. The stock price estimates (the
>>>>> per-share net present value of) the cumulative future cash flow of the
>>>>> company. The stock market estimates that better than any other known
>>>>> mechanism. It is of course prone to fits of hysteria but when it does
>>>>> it's
>>>>> taking a very *long term* (fantasy) view.
>>>>>
>>>>> That said, there are cases where markets fail and that is in the face of
>>>>> externalities. A classic example of an externality is the Tragedy of the
>>>>> Commons in which a bunch of farmers ruin a common grazing field because
>>>>> no
>>>>> one person has incentive to ration their use of it if no one else is.
>>>>> It's
>>>>> analogous to traffic congestion which is one of several reasons we need
>>>>> higher taxes (gas, roads) on driving. [1]
>>>>>
>>>>> The need to tax pollution is another classic example.
>>>>>
>>>>> Eugene's Starving Artist is an interesting example of a possible market
>>>>> failure. That might be explained in terms of externalities (positive
>>>>> this
>>>>> time) if the art was of a kind that couldn't be charged for by usage
>>>>> (public sculpture perhaps). In other words, you have free-riders.
>>>>>
>>>>> Eugene's Down On Their Luck example I believe is an argument for risk
>>>>> pooling, one form of which is the "social safety net", ie, welfare. It
>>>>> seems that participation should be optional though.
>>>>>
>>>>> Clare's Parasite CEO example I'm still thinking about...
>>>>>
>>>>> Danny
>>>>>
>>>>> [1] See:
>>>>>
http://freakonomics.blogs.nytimes.com/2007/06/18/hurray-for-high-gas-p...
>>>>> and add to the list that cars are dangerous to cyclists and skaters!
>>>>>
>>>>>
>>>>> --- \/ FROM Dave Morris AT 07.08.20 15:21 (Yesterday) \/ ---
>>>>>
>>>>>> 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/
>>>>>>
>>>>>>
>>>>>
>>>>> --
>>>>> http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"
>>>>>
>>>>> "Try identifying the problem and then solving it."
>>>>> -- suggestion from Dilbert's boss
>>>>>
>>>>>
>>>>>
>>>>
>>>> Dave Morris
>>>> cell: 734-476-8769
>>>> http://www-personal.umich.edu/~thecat/
>>>>
>>>>
>>>
>>> --
>>> http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"
>>>
>>> "Backup not found. (A)bort (R)etry (T)ake down the entire network:"
>>>
>>>
>>
>>
>> --
>> http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"
>>
>>
>
> Dave Morris
> cell: 734-476-8769
> http://www-personal.umich.edu/~thecat/
>
>
--
http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"
"We're kind of being trained to be warriors, only in a much funner way."
-- Jesus Camp participant, age ~9
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