X-Spam-Status: No, score=-2.6 required=5.0 tests=BAYES_00 autolearn=unavailable version=3.2.2 Sender: -2.6 (spamval) -- NONE Return-Path: Received: from newman.eecs.umich.edu (newman.eecs.umich.edu [141.213.4.11]) by boston.eecs.umich.edu (8.12.10/8.13.0) with ESMTP id l7N6qknd024774 (version=TLSv1/SSLv3 cipher=DHE-RSA-AES256-SHA bits=256 verify=FAIL) for ; Thu, 23 Aug 2007 02:52:46 -0400 Received: from eyewitness.mr.itd.umich.edu (mx.umich.edu [141.211.176.131]) by newman.eecs.umich.edu (8.14.1/8.14.1) with ESMTP id l7N6qEmX020157 for ; Thu, 23 Aug 2007 02:52:24 -0400 Received: FROM newman.eecs.umich.edu (newman.eecs.umich.edu [141.213.4.11]) BY eyewitness.mr.itd.umich.edu ID 46CD2E95.87AF5.15026 ; 23 Aug 2007 02:52:05 -0400 Received: from boston.eecs.umich.edu (boston.eecs.umich.edu [141.213.4.61]) by newman.eecs.umich.edu (8.14.1/8.14.1) with ESMTP id l7N6pPhN020015 (version=TLSv1/SSLv3 cipher=DHE-RSA-AES256-SHA bits=256 verify=FAIL); Thu, 23 Aug 2007 02:51:25 -0400 Received: from boston.eecs.umich.edu (localhost.eecs.umich.edu [127.0.0.1]) by boston.eecs.umich.edu (8.12.10/8.13.0) with ESMTP id l7N6pind024747 (version=TLSv1/SSLv3 cipher=DHE-RSA-AES256-SHA bits=256 verify=NO); Thu, 23 Aug 2007 02:51:45 -0400 Received: from localhost (dreeves Æ localhost) by boston.eecs.umich.edu (8.12.10/8.12.9/Submit) with ESMTP id l7N6pide024744; Thu, 23 Aug 2007 02:51:44 -0400 X-Authentication-Warning: boston.eecs.umich.edu: dreeves owned process doing -bs X-X-Sender: dreeves Æ boston.eecs.umich.edu In-Reply-To: Message-ID: References: <93EC811F-946D-4EA2-ADE3-5D43B46EA65E Æ umich.edu> <4CE28F9E-2B6E-4834-B3FA-1C3FBF2E7341 Æ umich.edu> <02548635-1F0E-4244-847D-8FA54DACAD4B Æ umich.edu> <1acf35a70708221835o75734aa2waa72f00b69632a18 Æ mail.gmail.com> MIME-Version: 1.0 Content-Type: TEXT/PLAIN; charset=US-ASCII; format=flowed X-Spam-Checker-Version: SpamAssassin 3.2.2 (2007-07-23) on newman.eecs.umich.edu X-Virus-Scanned: ClamAV version 0.91.1, clamav-milter version 0.91.1 on newman.eecs.umich.edu X-Virus-Scanned: ClamAV version 0.91.1, clamav-milter version 0.91.1 on newman.eecs.umich.edu X-Virus-Status: Clean Date: Thu, 23 Aug 2007 02:51:44 -0400 (EDT) To: Dave Morris cc: improvetheworld Æ umich.edu, Steven Reeves , reeves-hayos Æ umich.edu, reeves-kalkman Æ umich.edu From: Daniel Reeves Subject: Re: mind the gap 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-prices/ >>>>> 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