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“A solution in search of a problem” is a low-rates phenomenon

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Re: “A solution in search of a problem” is a low-rates phenomenon

#101

Post by notahacker »

xyzelement wrote: post #34
obblekk wrote: post #24

I really dislike these takes on low interest rates. As far back as the 70s (when interest rates were 8-15%), there have been random business ideas being started and shutdown (pet rocks, every airline ever, etc.). We don't remember those because they shutdown 40 years ago. Today, we only see the successful ones that survived (walmart, fedex, etc.). There's a legit question: why have long term interests declined over t…

Hang on... This sub-thread is venturing into the territory of lumping airlines with "solutions in search of a problem" and that just doesn't make any sense to me. You can argue that airlines have not returned on the capital (it may be true, I have no idea) but there's clearly demand and utility for the product, as evidenced by nearly every flight being nearly or completely full at all times.

Airlines vs Silicon Valley are actually a good example of how the sort of business that is massively threatened by higher interest rates is often an actual real business solving real people's problems that just happens to be capital intensive, low margin and fairly predictable, not the solution in terms of a problem where the return on investment is claims of high margins and pure optimism.

High interest rates won't stop VCs looking for 20-40x returns under high uncertainty falling for a pitch about how everyone will use this dumb website in future, honest. (It might reduce the amount LPs put in and get out of VC as a sector, but there's no reason to believe this improves VCs' judgement)

But high interest rates are a major problem for an airline that has a few billion dollars of aircraft to finance, and lots of passengers but at low single digit profit margins.

Re: “A solution in search of a problem” is a low-rates phenomenon

#103

Post by malfist »

Sohcahtoa82 wrote: post #61
malfist wrote: post #2

I thought this article had a good rule on how to differentiate dead end "solution in search of a problem" inventions and ones that might be successful. > whether the technology does something that would be useful if everyone had it, but is relatively useless at small scale I've often told my partner a lot of his "smart home" devices are solutions in search of problems. It seems to ride this line. Probably why despite…

I'm baffled at what purpose there is to voice-activated lights. Light switches are always at the entrance to a room. If I'm entering or exiting a room, I turn the light on or off as I pass the switch. This is going to be much faster than "Alexa, turn the computer room lights off" on my way out and then waiting to make sure it understood me. The only exception is my front porch light. I usually leave it off, but turn…

If I'm cooking and have my hands in meat, turning on a overhead light, or under cabinet lighting without using my hands is helpful.

Re: “A solution in search of a problem” is a low-rates phenomenon

#104

Post by opportune »

obblekk wrote: post #24

I really dislike these takes on low interest rates. As far back as the 70s (when interest rates were 8-15%), there have been random business ideas being started and shutdown (pet rocks, every airline ever, etc.). We don't remember those because they shutdown 40 years ago. Today, we only see the successful ones that survived (walmart, fedex, etc.). There's a legit question: why have long term interests declined over t…

One theory for why we seem to structurally “need” low rates now is due to the “tendency of profit to fall” the natural interest rate - what it would be without the fed - has also fallen. Over the long run the Fed gravitates towards the natural rate because it creates the most stable business environment.

The major structural phenomenon which prevents the tendency for profit to fall is technological innovation which creates disruption and temporary periods of higher profits due to things becoming more efficient. However, now that technological progress is quite far along, a lot of employment is in service fields which naturally cannot be made much more efficient (eg teaching, being a nurse).

I don’t entirely buy into all the Marx concepts but I do think the tendency for profit to fall is an inevitability in a stable, functioning free market as efficiency and competition drive down margins. This causes ROIC to lower

Re: “A solution in search of a problem” is a low-rates phenomenon

#105

Post by oxfeed65261 »

ipsi wrote: post #14
electroly wrote: post #8

Earlier quoted context omitted.

I had several Palm devices. As I recall there was a fairly long gap between the death of PDAs and the birth of smartphones. I certainly did not replace my Palm with a smartphone; I replaced it with nothing, and then years later I got a smartphone. Most of the things that are amazing about smartphones were not present on my Palm IIIe, FWIW.

> there was a fairly long gap between the death of PDAs and the birth of smartphones. Only if you define the birth of smartphones as starting with Android/iPhone. Palm released their own smartphones using the same OS as their PDAs (the Treo line) prior to that, and Microsoft had Windows Mobile plus a bundle of third-party manufacturers. Plus Blackberry had been around the whole time, too. Looking it up, it seems that…

I had a Treo when the first iPhone came out. The Treo had cut-and-paste and 3G wireless. The initial iPhone had neither.

The Treo may have been inferior in other ways, but it can be hard to remember how limited the first iPhone was.

Re: “A solution in search of a problem” is a low-rates phenomenon

#106

Post by drekipus »

epicureanideal wrote: post #63
mym1990 wrote: post #46

Earlier quoted context omitted.

The case for decrease of human talent(however you quantify that kind of metric, if it is even true) likely has little to do with population growth, and rather the quality of education that can be provided to a broad population.

Or to the reduced incentives available to most of the population. The very rich are accumulating more and even the upper middle class are struggling, and it might take decades of work to build up enough capital to start a small business, while someone with the right connections and half the talent is handed money for little effort.

> it might take decades of work to build up enough capital to start a small business, while someone with the right connections and half the talent is handed money for little effort

You can't have it both ways; either it takes decades or it's handed over for little effort.

You also don't need much capital to start a few small businesses. Obviously it depends on what you want to do. but it won't take decades to start a dog walking business, for instance.

All business requires working with other people, and other people have money. I started selling hair products in tandem with some guy I met at a men's shed when I was unemployed. The "right connections" isn't limited to your notion of "upper class" whatever that might be.

Re: “A solution in search of a problem” is a low-rates phenomenon

#107

Post by doubleunplussed »

rr888 wrote: post #83

Surely Real Rates are the issue? Ie now when inflation is 7%+ and rates are 4%, rates are effectively lower than when inflation is 2% and rates are 1%. I'm not buying lots of these analyses.

For what it's worth, since people make borrowing and lending decisions taking into account what they think inflation will be over the course of the loan, usually inflation predictions over the next however-many years are used to compute the effective real rate of interest, not the current rate of inflation.

Re: “A solution in search of a problem” is a low-rates phenomenon

#108

Post by Espressosaurus »

drekipus wrote: post #106
epicureanideal wrote: post #63

Earlier quoted context omitted.

Or to the reduced incentives available to most of the population. The very rich are accumulating more and even the upper middle class are struggling, and it might take decades of work to build up enough capital to start a small business, while someone with the right connections and half the talent is handed money for little effort.

> it might take decades of work to build up enough capital to start a small business, while someone with the right connections and half the talent is handed money for little effort You can't have it both ways; either it takes decades or it's handed over for little effort. You also don't need much capital to start a few small businesses. Obviously it depends on what you want to do. but it won't take decades to start a…

You can have it both ways if it's different people. The amount I save over 10 years is going to be radically different than the amount of money someone pulling a mil per year is going to save is going to be radically different than the amount of money someone working minimum wage will be able to save.

Re: “A solution in search of a problem” is a low-rates phenomenon

#109

Post by epicureanideal »

PeterisP wrote: post #86
wolfram74 wrote: post #79

Earlier quoted context omitted.

What's the point in generating value if it's all being captured by the capital holding class?

The chance to become part of the capital holding class.

Right, but incentives are reduced as this becomes less and less likely for any given amount of effort.

Re: “A solution in search of a problem” is a low-rates phenomenon

#110

Post by wkyle »

prottog wrote: post #66
obblekk wrote: post #24

I really dislike these takes on low interest rates. As far back as the 70s (when interest rates were 8-15%), there have been random business ideas being started and shutdown (pet rocks, every airline ever, etc.). We don't remember those because they shutdown 40 years ago. Today, we only see the successful ones that survived (walmart, fedex, etc.). There's a legit question: why have long term interests declined over t…

> why have long term interests declined over the past 500 years, accelerating in the past 50-100 years The cost of money (that is, interest) is based on two things: the time value of money, which is the concept that an amount of money is worth more now than the same amount of money later (above and beyond inflation); and the default risk, that you may not get back some or all of the money that you lent out. As the wo…

> The answer to that more likely has to do with some very broad phenomenon: capital has been accumulating due to increases in energy availability. Human talent (that turns capital into something actual) is plateauing due to slowing of population growth.

> As the world became more stable over time, the default risk also lessened over time

I think these are both saying the same thing from two sides - the default risk going down doesn't really mean anything in isolation. The implied context is the default risk goes down for the same rate of return (or the rate of return goes up for the same default risk).

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