but you're forgetting my point, which was that even if some companies are
getting "screwed over", said screwing may benefit society on the whole.
On Thu, 23 Aug 2007, Dave Morris wrote:
> It is falsifiable, just not easily, as too many lazy scientists crave. :-)
> The experimental test is to implement change in the stock market and see if
> by somehow removing the easy incentive for leaders of companies to get rich
> by screwing the company over, the number of companies getting thus screwed
> over goes down. It would be a very difficult experiment spanning at least a
> decade maybe more. The control variables are a huge pain in the ass since so
> many other effects would take place over that span of time. You might have
> to run many experiments testing many variables to definitively disprove it.
> But it is conceivable that you could test the theory and prove it false, or
> by not proving it false increase your confidence that it may be true. And
> just because it's not easy doesn't mean it isn't right. :-)
>
> Dave
>
>
> On Aug 23, 2007, at 2:51 AM, Daniel Reeves wrote:
>
>> 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
>>
>>
>>
>
> Dave Morris
> cell: 734-476-8769
> http://www-personal.umich.edu/~thecat/
>
>
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