In support of capitalist = society, ways to regulate this such as controlling CEO salaries or stock = deals could benefit long term shareholder value, and thus benefit = society in the long run by optimizing value/wealth creation over time. = (the ideas created by this company ended up being used by government = programs, DoD, and others, so the value was getting out to society when = it was being created, even if no one individual was getting rich because = of it)

Extended= point- the maximization of profit and shareholder value is not = synonymous with the maximization of benefit to society, and in fact is = often quiet opposite. But I guess we'd be doomed in coming to any useful = conclusions if I expand this thread into that other conversation as = well. :-)

I = don't have a solution- I haven't come up with specific suggestions that = would improve the stock market really, and I'd readily acknowledge that = our system works better than any that anyone else is using at the = moment. I just see a potential for improvement to occur.=A0=A0Figuring = out how to do it is the whole point of this list, yes? :-)

Dave

= On Aug 23, 2007, at 12:16 PM, Kevin Lochner wrote:

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.=A0 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. =A0 And just because it's not = easy doesn't mean it isn't right. :-)

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 =3D bad.=A0 It's a theory with no = predictive power, ie, not scientific, ie, useless!
--- \/ =A0 = FROM Dave Morris AT 07.08.22 23:16 (Today) =A0 \/ ---

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. :-)
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(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.
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.=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
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. 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
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
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".
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. 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:=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."
-- 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/

--=A0
http://ai.eecs.umich.edu/= people/dreeves=A0 - = -=A0 search://"Daniel = Reeves"
"We're kind of being trained to = be warriors, only in a much funner way."
=A0-- Jesus Camp participant, age = ~9

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

Dave = Morris

cell: 734-476-8769

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