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.=A0 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?=A0 = My position is that Dave only appears
right through the power of hindsight.

On 8/22/07, = Daniel Reeves <dreeves Æ umich.edu> 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.
=A0=A0 (Does that pin down the = heart of what we disagree about?)

--- \/ =A0 FROM Dave Morris AT 07.08.22 = 09:57 (Today) =A0 \/ = ---

=
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? =A0 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

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. =A0 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.

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.=A0 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?=A0 The market is smarter than we = think.

Nor do I have a beef with day traders.=A0 Either they're providing = valuable
information to the market or = they're going to get smacked hard.=A0= (In
expectation at least.)=A0 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).=A0 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.=A0 The stock price estimates = (the
per-share net present value of) = the cumulative future cash flow of the
=A0 The stock = market estimates that better than any other known
mechanism.=A0 = 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
=A0 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).=A0 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.=A0 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-hi= gh-gas-prices/
and add to the list that = cars are dangerous to cyclists and skaters!

--- \/ =A0 FROM Dave Morris AT 07.08.20 = 15:21 (Yesterday) =A0 \/ = ---

=
I'll rephrase my = claim:
"Playing the stock market with = the objective of short term gains does not
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.

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
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. :-)

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".
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.=A0 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. =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
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:=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
other people, = no?
- no, not if you think in terms = of wealth (wealth =3D stuff you want,
money =3D = 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.=A0 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
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!
--
http://ai.eecs.umich.edu/= people/dreeves=A0 - = -=A0 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=A0 - = -=A0 search://"Daniel = Reeves"

"Try identifying the problem and then solving = it."
=A0-- suggestion from Dilbert's = boss

Dave = Morris
cell: 734-476-8769
http://www-personal.umich.= edu/~thecat/

http://ai.eecs.umich.edu/= people/dreeves=A0 - = -=A0 search://"Daniel = Reeves"

"Backup not found. (A)bort (R)etry (T)ake down the = entire network:"

--=A0

http://ai.eecs.umich.edu/= people/dreeves=A0 - = -=A0 search://"Daniel = Reeves"

Dave = Morris

cell: 734-476-8769

http://www-personal.umich.= edu/~thecat/