Capitalism's Fundamental Flaw
forbes.com
Capitalism's Fundamental Flaw
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Re: Capitalism's Fundamental Flaw
#2Antonio - good find. I read this article earlier this morning and it spoke directly to the disconnect I've noticed as well. Logistically, what do you think leaders on the Street and in business can do to curb these short-termist, corrupted practices?
Re: Capitalism's Fundamental Flaw
#3Antonio - good find. I read this article earlier this morning and it spoke directly to the disconnect I've noticed as well. Logistically, what do you think leaders on the Street and in business can do to curb these short-termist, corrupted practices?
If you don't mind me chiming in, I think the lesson is that there really is nothing that can be done to curb it.
Why? Two reasons.
First, every time we create legislation, laws and other governing to something, the problem either gets worse or creates a whole new set of issues. The problem becomes a snowball -- you can look at the examples there to see some of this.
Second, the saying that goes something like "locks keep out the curious, not thieves" is very true. Those who want to scam will always find a way and there is nothing to stop them, only try and catch them and prosecute them.
I could go on with a very lengthy post about this and sound very studious, but I think those two points in their simpler form make a lot of sense. What do you think?
Re: Capitalism's Fundamental Flaw
#4Perhaps a better title would be "Mercantilism's fundamental flaw". Rand makes few assumptions regarding the inherent integrity of "leaders"; in fact, she assumes no such integrity, and argues for liberty.
While we trip over ourselves (as a society) to give up our freedoms and grant ever more sweeping power to "leaders" to save us, we will reap what we deserve -- ever greater examples of waste, bungling, abuse, malinvestment and looting, on scales simply unimaginable just a few years ago.
We gave up our ability to directly monetize wealth 2 or 3 generations ago -- what features of our present financial system makes you believe that it is "Capitalism"? Government giveth, and government taketh away. Sounds like good, old-time kingly Mercantilism to me...
Re: Capitalism's Fundamental Flaw
#5I think the appeal of finance is the intellectual leverage one gets there. If I am really bright and I can develop a profitable arbitrage trade in the marketplace I can turn it near instantly into millions of dollars (if I'm right, obviously the market does not give points for effort).
If I'm in a start up, which we would probably consider to be very high cleverness to reward leverage, it can take a long time and have lots of randomness to get the big payoff, e.g. Kiko.
Now, compare that to being an employee, where to get enormous payoff you have to climb the ladder into stock options land.
The article's point is that this is not how the world should be, but markets cause this by construction: If I'm stranded on an island with a bunch of Robinson Crusoes I'm going to try swapping coconuts for mangoes across the island before I start experimenting with cross breeding them.
From a welfare perspective it even makes sense to do the easy things first (trade) and the hard stuff next (R&D) because effort is more likely to be rewarded in the former than the latter.
One could also complain about how all the socially well connected are lobbyists instead of high school teachers and the beautiful are in pharmaceutical sales rather than portrait modeling. Sure it's sad, but also mostly inevitable.
Re: Capitalism's Fundamental Flaw
#6Antonio - good find. I read this article earlier this morning and it spoke directly to the disconnect I've noticed as well. Logistically, what do you think leaders on the Street and in business can do to curb these short-termist, corrupted practices?
If you don't mind me chiming in, I think the lesson is that there really is nothing that can be done to curb it. Why? Two reasons. First, every time we create legislation, laws and other governing to something, the problem either gets worse or creates a whole new set of issues. The problem becomes a snowball -- you can look at the examples there to see some of this. Second, the saying that goes something like "locks…
I disagree strongly.
1) Legislation can change things significantly and effectively. It can also merely shovel things around. Both are possible and doggedly asserting that only one effect ever happens is just ridiculous.
2) Locks keep out thieves very well a lot of the time. They may not keep out every thief, but it keeps out most of them, most of the time.
Re: Capitalism's Fundamental Flaw
#7If the government imposed a small tax on stock purchases and other financial transactions, with the tax level rising according to the number of intermediaries and the amount of leverage, then working in an organization through which lots of money passes would not be such a lucrative career.
(And if it remained lucrative, at least the government would be able to participate in the bounty that comes from skimming a few parts-per-thousand off the top of a very large cash flow.)
Re: Capitalism's Fundamental Flaw
#8I think the appeal of finance is the intellectual leverage one gets there. If I am really bright and I can develop a profitable arbitrage trade in the marketplace I can turn it near instantly into millions of dollars (if I'm right, obviously the market does not give points for effort). If I'm in a start up, which we would probably consider to be very high cleverness to reward leverage, it can take a long time and hav…
> if I'm right, obviously the market does not give points for effort
But the market does give points for effort. How else do you explain the bonuses awarded to bankers who damaged the economy? They were rewarded despite their antisuccess.
Re: Capitalism's Fundamental Flaw
#9Perhaps a better title would be "Mercantilism's fundamental flaw". Rand makes few assumptions regarding the inherent integrity of "leaders"; in fact, she assumes no such integrity, and argues for liberty. While we trip over ourselves (as a society) to give up our freedoms and grant ever more sweeping power to "leaders" to save us, we will reap what we deserve -- ever greater examples of waste, bungling, abuse, malinv…
We gave up our ability to directly monetize wealth 2 or 3 generations ago
?
Re: Capitalism's Fundamental Flaw
#10The reason speculators can make tons of money on Wall Street, is because they can get people to play along.
You don't make money because an asset you own rises. You make money because someone buys it at that price. (That's the same, I know, but it's an important point to understand - it's NOT just numbers going up and down in a computer, at the end of the chain there's actual liquid money changing hands).
Now we've lived through two financial bubbles right after each other, and one can hope that people will learn that sharp rises in the value of an asset are often inflated, and stop putting their money into the game. After all, those who bet and then hedged their bets on real estate (this time) and .coms (last time) were also (generally!) the ones who lost the most.