Two years ago I posted: The number of new businesses we get seems limited by the number of folks personally wealthy enough to start new businesses. So having more really rich folks benefits everyone via innovation.
"Now I learn that very rich folks are crucial not only for business starts, but also for most business investment that takes more than a year or so to payoff!"
Sure...If they own everything, and you can't do anything without their permission, we need them.
The more significant question would seem to be why public firms are governed by short-termism, which you treat, I think, as an kind of agency cost. You jump to this conclusion with excessive alacrity.
Was it always this way? I don't think so. In the earlier part of the 20th century as well as the 19th, the public-corporate form sponsored long-term growth. [Perhaps it has something to do with the increasing role of bank capital, which seems always to have sought immediate profitability.]
I wrote out my thoughts on the discrepancy in employment vs. profits here (https://thezvi.wordpress.co... and mostly reached the conclusion that size/selection effects probably dominate, rather than investment or bookkeeping effects. Profitable and large firms go public, firms that need to be unprofitable for a while (or permanently) stay or go private. There are a few other causes I could come up with, but they seem smaller.
This is not an observation on the usefulness of highly concentrated wealth in social system (i.e., lots of billionaires). It's an observation on the systemic dysfunction introduced by inserting market mechanisms into the ownership structure of private businesses.
Robin's ideological biases prevent him from interpreting it in this way.
As for this:
"The number of new businesses we get seems limited by the number of folks personally wealthy enough to start new businesses.So having more really rich folks benefits everyone via innovation."
Here are some ways in which this is stupid:
First, the vague assumption that owned wealth, rather than access to capital, is required to start new businesses. Second, ignorance of the very idea of pooling capital without forms of sole ownership.Third, the vague idea that there is a fixed amount of wealth required to either start a new business or make an innovation. Many of the world's historical innovators, from Eli Whitney to Albert Einstein, have been broke or of very modest wealth during their peak innovation periods. Innovation flows constantly out of good ideas arising from simple execution of standard business processes by anyone doing a job, regardless of the type of corporation they're in. Seriously, there's a reason why the cliche of startups being developed in the founder's garage exists, rather than being developed in luxury hotels or research labs.
The capital and wealth required to make an innovation - either to be in a position to perform the actions leading to inspiration, or to develop the prototype, is a constantly changing and diverse number. The lower the number is, the more innovation you get. If anything, having a large number of billionaires around leads to anticompetitive and innovation-suppressing behavior and less innovation, not more, as innovation is a pain and/or threat to business models developed without it.
A few facts are a dangerous thing in the mind of the motivated reasoner.
"Give me control of a nation's money, and I care not who writes its laws." --Mayer N. Rothschild
I recommend reading "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin. It's well-researched. I also recommend "You Can Profit From a Monetary Crisis" by Harry Browne, and "The Case Against the Fed" by Rothbard.
What this conversation is missing is a distinction between stolen wealth, and earned wealth. Alan Greenspan stole his wealth, in spite of originally eloquently defending the opposite principles (I think he was a sociopath, or just totally corrupted).
The Federal Reserve Bankers and politicians steal their wealth, and devalue the currency. Others, such as Jaan Tallinn, Peter Theil, T. J. Rodgers, John Stossel, Wayne Root, and other wealthy libertarians trade value for value. There's a world of difference.
I think you're confusing the need for the very rich with the need for investment.
Arguing that we need the rich because we need investment simply does not follow. I propose that we take the human element out of the equation, and that we simply have large investment "establishments" whether governmental or corporate in nature. There is no argument that we must, or even should, put a single person behind a large amount of wealth.
Therefore, we do NOT need the very rich (people). At least in the sense that "need" is bi-directional requirement.
If the extremely wealthy limit everyone else to subsistence wages (as they would do if they could), then the statement will be correct, and will always be correct. However, that is not a reason to divert even more wealth to the extremely wealthy, it is a reason to divert wealth away from the extremely wealthy.
QuoteThe number of new businesses we get seems limited by the number of folks personally wealthy enough to start new businesses
I don't think so - the number of new businesses is limited by the number of people crazy enough to start a new biz, despite the odds (Kahnemanns thinking fast slow just the latest to poitn out that only a crazy person would, if he knew the odds, start a new restruant)There is plenty of capital - huge enormous sums of capital sitting there; what there aren't enough of are the crazy hardworking dedicated smart people willing to go 4 years without a salary to make something happen
Probably the most important investment that the US has made, is in universal public education.
You mean the education system that politicians and political activists use to indoctrinate children into some sort of leftist fantasy involving "social" justice and an active hate for free markets and a capitalist system that ends poverty wherever it is introduced? The education system that fails to properly teach children to read and write and do simple arithmetic (over 30% illiteracy rate here in Baltimore)? The education system that politicians use to feed money into the hands of the greedy teachers union, so it can kick back tax payer money to their political campaigns? That education system?
The second is probably in supplying sufficient nutritious food to those who cannot afford it.
There is no one in the US that can't afford nutritious food. This is simply non-sense spouted by those who want to take money from a large portion of the population, pocket most of that money, then trickle out whatever is left to those for the promise of an election vote.
But that assumes that those controlling government policies want people to have upward mobility. Policies in the US discourage upward mobility more so than in Europe, so as a consequence there is less of it.
Since the very rich have greatly increased their wealth, while there is less upward mobility in the US, presumably there is a causal relationship there.
You assume that investments are necessarily very expensive. If middle-class wealth had grown at similar levels to upper-class wealth over the past 40 years, members of the middle class today would all be millionaires, and rich enough to make significant investments in their own small businesses.
No way..... https://uploads.disquscdn.c...
"Now I learn that very rich folks are crucial not only for business starts, but also for most business investment that takes more than a year or so to payoff!"
Sure...If they own everything, and you can't do anything without their permission, we need them.
The more significant question would seem to be why public firms are governed by short-termism, which you treat, I think, as an kind of agency cost. You jump to this conclusion with excessive alacrity.
Was it always this way? I don't think so. In the earlier part of the 20th century as well as the 19th, the public-corporate form sponsored long-term growth. [Perhaps it has something to do with the increasing role of bank capital, which seems always to have sought immediate profitability.]
A thoughtful commentary.
I wrote out my thoughts on the discrepancy in employment vs. profits here (https://thezvi.wordpress.co... and mostly reached the conclusion that size/selection effects probably dominate, rather than investment or bookkeeping effects. Profitable and large firms go public, firms that need to be unprofitable for a while (or permanently) stay or go private. There are a few other causes I could come up with, but they seem smaller.
This is not an observation on the usefulness of highly concentrated wealth in social system (i.e., lots of billionaires). It's an observation on the systemic dysfunction introduced by inserting market mechanisms into the ownership structure of private businesses.
Robin's ideological biases prevent him from interpreting it in this way.
As for this:
"The number of new businesses we get seems limited by the number of folks personally wealthy enough to start new businesses.So having more really rich folks benefits everyone via innovation."
Here are some ways in which this is stupid:
First, the vague assumption that owned wealth, rather than access to capital, is required to start new businesses. Second, ignorance of the very idea of pooling capital without forms of sole ownership.Third, the vague idea that there is a fixed amount of wealth required to either start a new business or make an innovation. Many of the world's historical innovators, from Eli Whitney to Albert Einstein, have been broke or of very modest wealth during their peak innovation periods. Innovation flows constantly out of good ideas arising from simple execution of standard business processes by anyone doing a job, regardless of the type of corporation they're in. Seriously, there's a reason why the cliche of startups being developed in the founder's garage exists, rather than being developed in luxury hotels or research labs.
The capital and wealth required to make an innovation - either to be in a position to perform the actions leading to inspiration, or to develop the prototype, is a constantly changing and diverse number. The lower the number is, the more innovation you get. If anything, having a large number of billionaires around leads to anticompetitive and innovation-suppressing behavior and less innovation, not more, as innovation is a pain and/or threat to business models developed without it.
A few facts are a dangerous thing in the mind of the motivated reasoner.
"Give me control of a nation's money, and I care not who writes its laws." --Mayer N. Rothschild
I recommend reading "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin. It's well-researched. I also recommend "You Can Profit From a Monetary Crisis" by Harry Browne, and "The Case Against the Fed" by Rothbard.
What this conversation is missing is a distinction between stolen wealth, and earned wealth. Alan Greenspan stole his wealth, in spite of originally eloquently defending the opposite principles (I think he was a sociopath, or just totally corrupted).
The Federal Reserve Bankers and politicians steal their wealth, and devalue the currency. Others, such as Jaan Tallinn, Peter Theil, T. J. Rodgers, John Stossel, Wayne Root, and other wealthy libertarians trade value for value. There's a world of difference.
Mmm.
I think you're confusing the need for the very rich with the need for investment.
Arguing that we need the rich because we need investment simply does not follow. I propose that we take the human element out of the equation, and that we simply have large investment "establishments" whether governmental or corporate in nature. There is no argument that we must, or even should, put a single person behind a large amount of wealth.
Therefore, we do NOT need the very rich (people). At least in the sense that "need" is bi-directional requirement.
If the extremely wealthy limit everyone else to subsistence wages (as they would do if they could), then the statement will be correct, and will always be correct. However, that is not a reason to divert even more wealth to the extremely wealthy, it is a reason to divert wealth away from the extremely wealthy.
That is false.
Basically everyone who actually runs a large company?
QuoteThe number of new businesses we get seems limited by the number of folks personally wealthy enough to start new businesses
I don't think so - the number of new businesses is limited by the number of people crazy enough to start a new biz, despite the odds (Kahnemanns thinking fast slow just the latest to poitn out that only a crazy person would, if he knew the odds, start a new restruant)There is plenty of capital - huge enormous sums of capital sitting there; what there aren't enough of are the crazy hardworking dedicated smart people willing to go 4 years without a salary to make something happen
Entrepreneurs and the self-employed create wealth. Government bureaucrats consume wealth. Enough said.
Probably the most important investment that the US has made, is in universal public education.
You mean the education system that politicians and political activists use to indoctrinate children into some sort of leftist fantasy involving "social" justice and an active hate for free markets and a capitalist system that ends poverty wherever it is introduced? The education system that fails to properly teach children to read and write and do simple arithmetic (over 30% illiteracy rate here in Baltimore)? The education system that politicians use to feed money into the hands of the greedy teachers union, so it can kick back tax payer money to their political campaigns? That education system?
The second is probably in supplying sufficient nutritious food to those who cannot afford it.
There is no one in the US that can't afford nutritious food. This is simply non-sense spouted by those who want to take money from a large portion of the population, pocket most of that money, then trickle out whatever is left to those for the promise of an election vote.
But that assumes that those controlling government policies want people to have upward mobility. Policies in the US discourage upward mobility more so than in Europe, so as a consequence there is less of it.
Since the very rich have greatly increased their wealth, while there is less upward mobility in the US, presumably there is a causal relationship there.
http://moneyland.time.com/2...
It seems pretty clear, current US policies are stifling upward mobility.
You assume that investments are necessarily very expensive. If middle-class wealth had grown at similar levels to upper-class wealth over the past 40 years, members of the middle class today would all be millionaires, and rich enough to make significant investments in their own small businesses.