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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/
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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.=A0
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 =A0disassociated from the things being invested
in and the real long term values thereof.=A0 Meanwhile most people, who
work for the companies thus traded, suffer.=A0Ironically 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,
07, 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 ". =A0 Investing in new companies does .
It's a fine line, but =A0 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. =A0 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 sometimes occur, but those are
obvious flaws that are difficult to correct. Interesting to consider. :-)
Dave On Aug , 2007, at 10:16 AM, Daniel Reeves wrote: We've been
debating this essay =A0 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 =A0 other people, no? - no, not if you think in
terms of wealth (wealth =3D stuff you want, =A0 money =3D way to transfer
wealth ) * Or am I totally simplifying the haves vs. the have-nots with my
pie =A0 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 =A0
world, i.e., that everyone just has money that "grows"? Or does money =A0
only grow if it is taken away from others? - You're right, not possible, but
for the opposite reason of what you seem =A0 to be suggesting. =A0 You grow
money by giving it to someone (lending it), =A0 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. =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! Danny -- =A0
http://ai.eecs.umich.edu/people /dreeves =A0 - - =A0 search://"Daniel
Reeves " "Everything that can be invented has been invented." =A0 --
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/
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