It's regarded as an inflation hedge but it seems more accurate to describe it as a measure of liquidity and liquidity expectations in capital markets now. Like a "Risk-on" gauge.
It has the best (and most reliable) integrated AI-based web experience. The Bing side bar can read what is in the open tab, etc. It's useful but it probably not worth the trade-offs
Feel like I've been waiting for a Chrome tablet since before Sundar was CEO. Then a few years later there was that expensive Pixel laptop. Now they're finally shipping this in 2023. I've always wondered what was holding back a launch of this.
Edit: I realize this is Android and not ChromeOS. I just can't believe they didn't ship a flagship tablet all this time.
The historical raison d'etre for the Federal Reserve act was principally point 3. Points 1 and 2 have become the central focus or modern Fed "mandate" and generally thought to be beneficent outcomes of a successful #3, besides. If the Fed inflicts too painful of a recession it fails at points 1 and 2, as well.
He was comparing the point value of an index at two points to the /nominal/ dollar value of GDP at the same interval. That firms in the Dow in returned a lot of capital to shareholders in the form of dividends doesn't mean the market value of their equity increased any during the period. You're mixing capital returns with capital appreciation which isn't what he said at all. What he said was completely accurate. I think he knows what it was like to have lived and invested through the period.
> Or, if we look at another measure, the sales of the FORTUNE 500 (a changing mix of companies, of course) more than sextupled
Paying out a dividend devalues a company by the same amount it benefits the shareholders. So evaluating neither the appreciation nor the return make any sense without factoring in the dividend.
In theory, yes, but in practice market premiums are variable and greater than book values. It is true that dividend paying stocks fall somewhat on their ex-date. If they're undergoing capital appreciation too, that's generally made up for in short order.
I'm not saying to disregard dividends in terms of total return, either, only that Buffett wasn't talking about total return, so the "well, actually" I was responding to was just off the mark. If you or me were alive then and/or aware enough to watch the DJIA (classically in the 20th century, many American's measure of "the market" even if not technically the case) things really would have looked like they went nowhere (nominally) from the middle 60s until the early 80s.
The working poor pay into FICA which is a greater percentage of their cash flow. They get it back upon annual tax reconciliation. The same entitlement programs nonetheless have lots of unfunded liabilities so the money has already been allocated even if it's not currently "there" -- 'The Rich' are beneficiaries of entitlement spending too.
It's a simpler situation than that. Regardless of proportions of payment, we already have a percentage of the population whose public services are paid for by someone else, either directly through income or divided tax or indirectly through higher prices from corporation tax, or more indirectly through inflationary monetary policy.
In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
The Yard sale model in this post demonstrates that rich people are not necessarily better at allocating capital even if/as they accumulate and compound it faster.
The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.
It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment.
In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Presumably you could update this model to give some people “better investing skills” and others worse skills. (In practice you’d just bias the coin flip against the ‘worse’ investors.) I suspect that once inequality has crept into the game then even having “better investing skills” is outweighed by the advantage of being already-rich. But I haven’t run the simulation to see how much investing advantage gets wiped out by wealth inequality: seems like it would be a fun project to code up with my 15y/o.
> What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth.
Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.
What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?
TFA talks about all of this. The point of the article is that in a system with a finite amount of wealth, even a society that starts equal will eventually become highly unequal: as long as there is continued betting/competition where all parties have an equal risk tolerance corresponding to their income. The concentrating effects of these bets is the important lesson. TFA describes some ways to avoid this outcome.
But TFA article is completely unrelated to the real world.
There is not a finite amount of wealth. People create new wealth through innovation.
People do not mindlessly continue the same investing strategy when incentives change. If you reduce the expected return from an investment, they stop investing in it.
So any strategies that might be useful for the contrived game described in the article are not relevant to the real world.
Nearly every economic action you take can be viewed as an investment or bet. Getting up in the morning and going to work represents a bet that your compensation will be worth the time spent. Sending your kids to school/college is an even more obvious example. For self-employed people all of this gets much more literal: every job involves a tradeoff of time and resources that could be spent on different projects. Even open-source hobby projects are can be a time-investment in building your resume. These "bets" have counterparties as well: for example, your employer can afford to negotiate much harder than you can on salary, because you need a job and health insurance more than they need you.
I also agree that this is a simplified model. But its simplicity is what makes it elegant: you can see the effect in a model that lacks all of the complexity of real-world economic activity. In the real world the "bets" are more complicated and the odds more variable, but you can't just claim "this effect must go away" without articulating a clear reason that it would.
The reasonable point you do make is that in our current economy the "pie" isn't fixed: new wealth is being created all the time, and this is one reason we don't collapse into permanent inequality the way this model does. This doesn't negate the model, however, it just means there is something counteracting it. Unfortunately the fear is that in the future (or perhaps even the present) new wealth creation will no longer keep up with this underlying concentrating effect, and we'd better think hard about what to do then.
> but you can't just claim "this effect must go away" without articulating a clear reason that it would.
If the effect is that, all else being equal, people with a lot of money can make more money in an absolute sense than people without a lot of money, then of course it doesn't go away. It's not that that isn't real (it's simply how percentages work) it's that it's not actually a problem because the model is so far removed from reality as to be irrelevant.
The real world is not a 1v1 adversarial game where people are betting against each other. More often they are collaboratively betting together and both benefit if they succeed.
Young, poor* entrepreneur brings an idea, maybe specialized domain knowledge, and time and energy
old, rich investor brings capital, maybe business experience and network, and gives it to entrepreneur to execute.
If all goes well old, rich investor and young, poor entrepreneur both make a lot of money. Young, poor entrepreneur becomes old, rich investor for the next generation.
If the venture fails, old, rich investor loses money (which went to pay some number of employees and vendors, who get to benefit from it), but old, rich investor expects this to happen for some or most investments. Young, poor entrepreneur loses time but gains experience and connections.
Nobody tricked anybody or stole anything from anyone or "lost a bet" like they are playing a rigged game in Vegas.
If you tell old, rich investor they aren't allowed to make any money by investing in young, poor entrepreneur any more, they don't just keep on doing it and allow you to redistribute their profits. They buy T-Bills instead. Young, poor entrepreneur goes to work for some other company (that old, rich investor probably funded in the past and owns) and gets a mediocre salary instead of getting rich and the world is deprived of whatever innovation they might have had.
This is pretty much fine for the old, rich investors, they're already rich. But it screws over the possibility of getting rich for anyone who isn't already. Which, if you were trying to reduce inequality, is the opposite of what you'd want.
* - or more realistically, middle or upper-middle class
Another unrealistic part about the model is that people keep betting a fixed percentage of their net worth. If you have a million dollars, maybe you can invest $100,000 into the seed round of a startup. If you have a billion dollars, it's unlikely you can invest $100 million into one investment. You spread it across multiple investments, maybe hundreds, and the average return is less than what you would get from succeeding on one big investment, because there simply isn't an opportunity that can make use of that much capital at once.
Again, you are talking about a world where the economy is not static: where there is room for overall economic growth that exceeds the wealth-concentrating effect. That’s the world we’ve lived in for at least the past few decades. But there’s no immutable law that says we’ll be able to maintain 3-10% GDP growth forever. There have been many periods of economic stagnation in the recent past where wealth concentrated exactly the way this model suggests. And there will be similar periods in the future, whether that’s the near future (demographic decline) or slightly more distant future (exponential growth can’t continue forever.)
In either case it is useful to understand the underlying concentrating effect even if one believes it is tolerable because other effects dominate.
