All of this talk about supply chain issues are totally missing the point in my opinion. So many articles (and tweet chains I guess) have been written about supply chain issues, yet every one of them seems to ignore the elephant in the room which is demand for goods vs services. Over the course of the pandemic there was a staggering re-balancing of consumer spending [0] from services to goods, to which supply chains have not caught up.
If the spending doesn't re-balance again as restrictions are lifted this is not a temporary supply chain issue caused by just-in-time methodology, it's just the new normal.
I worked at a company who made products on contract, but the contract stipulated the vendor we had to use to get the raw materials. The raw materials were just aluminum castings, but they were a custom shape specifically for this customer of ours. They could only be used for this one product.
I noticed that the inventory levels of our vendor were dropping, but we weren't buying. Meaning our customer was ordering the same product from a competitor.
I proposed that we spend the money to buy the rest of the material at the vendor. Basically denying our competitor the materials and forcing either them to come to us or the customer dropping the order and reordering through us. This would have been a risk because that's about a year supply of proprietary castings that we can't use for anything else, but I really thought it was a worthwhile opportunity. But it went against lean principles so we didn't do it.
Fast forward 6 months and our competitor basically did the same thing to us.
You describe microscopically what's happening macroscopically: The US is experiencing runaway consolidation and monopolization in every market sector. It is the business plan of every VC-funded startup discussed on this forum to monopolize a market and extract ALL the profit from it. The excess capacity of every supply chain in the entire country has been liquidated for short-term profit over the past decade, and then COVID happened. No one seems to be calling out this behavior, so I expect it will continue.
I believe the claim is completely defensible and ultimately correct.
A) This was a multi-factoral event certainly but all of these other factor are "immediate causes" which can themselves be traced to absolute maximum return on equity as a more final cause.
B) No doubt "hard to restart" process are were involved. But the world relies on single-source, hard to restart, large scale production of many things today because these produce the highest returns for those who invest in them and the lowest prices for those who buy from them. And both kinds of actors have been willing to just stop producing rather than doing something that might be costly to keep production going (and they decided they didn't want backup before this for the same reason).
C) Supply lines that stretch around world exist as a combination of economies of scale and "labor market arbitrage" and both these are driven by return, even though "labor market arbitrage" doesn't increase efficiency or robustness.
D) Chip manufactures put money into "up-date" chip processes, notably leaving the sorts of chips actually used in cars woah fully under-invested and generally many sorts of lack of robustness can be traced down to money flowing only to the normally profitable. Shutting down production isn't necessarily that bad for a company - they don't wages and they can start back up once things stabilize. It's much less disastrous than making a bunch of stuff and not being able to sell it. Clearly, that thinking is guiding a lot of decisions.
The average lifespan of a company is 10 years.[0] The average lifespan of companies on the S&P is maybe a little more than twice that. Each year you have a 1/100 chance of seeing a hundred year flood. With a short lifespan the odds are decent that your company simply won’t see one. The question is then: how good of an idea is it to spend to be robust to them? Of course it is viciously circular: planning to not be robust to white swans is probably why the lifespans are so short and shrinking.
As for the turn to founder control, one counterexample is Tim Cook who doesn’t have voting control of Apple but is sitting on a massive shock absorber made of cash earning insanely low rates of return. The idea that you need control of the board to be robust doesn’t seem to be necessary. It is probably helpful, apple may be sui generis, but it isn’t necessary.
The buried lede is an assertion that a tax on unrealized capital gains will cause reduced private ownership of large companies, resulting in a reduced ability to handle 100-year flood events.
Along the way, there are a bunch of other assertions that serve as prerequisites, like the idea that these companies can cultivate better employee loyalty and plan for longer horizons.
How much do we know about how true that is, though? Do privately-owned companies disproportionately survive these sorts of events historically?
But it's critical to note that the proposal has different rules for privately held stock & real estate. So the tweet author's buried argument doesn't hold water.
I believe those assets would mostly be treated the same as they currently are, e.g. sold or death.
For the 700 or so people who are targeted it basically creates a tax on the collateralized loans they get to avoid selling stock/cap gains in the first place. While not doing that directly, that's the effect of it.
And they get 5 years to pay the initial bill. 23.8% / 5 = 4.7% growth a year to be even (well something like 6 or 7 adding the new annual 23%). Most of these guys will likely generate more on paper profit than and they get deductions for any losses if they don't
It's what pisses me off most about the proposed Purdue Sackler settlement. Giving billionaires such long lead times to pay off fines and taxes allows them make more money than they owe.
The last graph on the WSJ article though says “Smart investment bankers and asset managers are already thinking about how to financially engineer products that will emulate existing stocks but be hard to value”
Check out the 2nd link for Pandora Paper reporting showing one egregious example of how they take advantage of this.
The owner of Nike puts millions of nike stock into a GRAT, which is privately held, and then the government gives that grat a 15% discount before it's passed along to his children.
Shouldn't get tax benefits for something that you claim is harder to sell (privately held stock) when in actuality the assets are 100% publicly traded nike stock.
The Wyden tax bill is a 100 pages long so maybe it goes after some of that crud, but there will always a scheme to lower your taxes.
“cause reduced private ownership of large companies, resulting in a reduced ability to handle 100-year flood events.”
How the market speculation on the value of a company can affect its resiliency ? If tomorrow everyone sold Apple stock for 1 cent, why would Apple the company care ? Same revenue, same costs. Give me a break with the importance of the stock casino.
Well, publicly owned companies have, in the last 20+ years, been very bad at keeping spare capacity around. Lots of "rationalizations" and "rightsizing" and so on have cut all the reserves.
That said, this does read like someone with a personal axe to grind, leading to motivated reasoning.
Behind every big corp is a well armed government and police apparatus
Given how many Fortune 500 companies have died even in prosperous times since the list started, I’m gonna file this away as “manufacturing consent to maintain the status quo.”
Corporations are not literal machines or organisms. They’re a social acquiescence given the reality of biological need at scale. The logistics are necessary; the behavior is necessary; the ownership angle is propaganda.
One major claim of Nobel Laureate Vernon Smith's "Rationality in Economics" is "the profit-maximizing firm will fail in finite time."
The book is excellent, one of my favorite econ books, and is Smith's somewhat dense but well-written explanation for and interpretation of economics. His main thesis is that "rationality" is not a "constructivist" property of various agents, being possessed by any (or every) individual separately, but is an "ecological" property that emerges collectively from e.g. the price system, organization of firms and other economic relations.
His argument about profit-maximizing firms proceeds almost exactly along the lines of this tweetstorm, but goes further. Why would Wall Street want to reward companies that fail to be robust to changes? Are there other structural problems (the law? regulatory regime? bailouts? monopoly?) that cause CEOs and Wall Street actors to be collectively "irrational" as we are seeing today with JIT-everything?
IMHO, the problem is political-economic. Finance has arrived at this equilibrium of asset price insanity and phony accounting because the regulatory regime and state actions as a whole (e.g. bailouts) are entirely out of whack – the system has no working feedback mechanisms at the moment, so the economy is in a real sense failing. How did the state fail? Partly in response to demands from powerful & wealthy entities on e.g. Wall Street.
I think the massive difference between income and capital gains taxes plays a huge role - especially when you get into the .1% where a substantial portion of wealth and income lie.
All of this funny stuff is mostly people trying everything they can to get capital gains instead of income so they can pay a 25% tax rate instead of a 39% tax rate. When you're talking about billions of dollars - 14% is a lot of money.
From the perspective of the average person - the tax code probably makes sense. If you already pay 39% tax on your income, and THEN you have to pay 39% on your capital gains and half of your capital gains are actually just inflation - it's like you're getting taxed on your tax! True inflation has likely been ~4% since 2008. The S&P average is ~7.25% per year. So half of the "capital gains" the ordinary index fund investor would pay are just inflation.
But the .1% are different. You don't make it into the .1% with a ~7.25% return and a laborer's salary. You need to be making ~30%+ returns for decades. Or, ~10,000% for a few years (a lot of the successful VC-funded entrepreneurs).
Half of their capital gains aren't inflation. Barely any of it are. Effectively, there tax rate is ridiculous low compared to the average Joe.
And what's worst - the Fed is causing so much of that inflation. Would Tesla be a $1.1T company today if the Fed wasn't pumping up asset prices, lowering interest rates, and making future cash-flows absurdly and artificially valuable? No. And yet, Elon Musk gets to make $100Bn on paper - and he can take loans against those gains with <3% interest and never pay ANY taxes.
It really seems like this is a completely separate world - and it's >30% of US wealth - and it should be dealt with separately.
The system is coming apart, shaking itself to bits because it's become unmoored from its foundations. It seems like a lot of different reasons because the system is so complex that it's fractal; you can zoom in to any one part and still see complexity, so it's easy to pick out PhD-thesis-size problems and just get lost in it. But fundamentally, if you zoom out, it's really simple.
It's greed. I'm not religious or spiritual, but I am really talking about a serious psychological/spiritual disease that has infected our society. It's not just about getting enough to survive, or even enough to thrive, but there are so many actors out there out to get as much as possible that they simply cannot be satisfied anymore. Their stomachs are bottomless pits.
How else can you possibly explain multiple individuals being worth more than $200 billion (Sixty. Thousand. Lifetimes. Of Wealth), and yet it is not enough for them. They must command huge empires, the boards of which must "motivate" them with more money. These people have serious psychological problems. Like, please, just disappear to your islands and enjoy the rest of your short lives, please!
The entire world economy has been just one massive casino, one huge get-rich-quick scheme. And TV too. Fame and fortune without working for it, getting famous with no talent or skills. Think of how many millions and billions of people worldwide have been programmed to think they can and should be millionaires and that it can happen at the drop of a hat?
And now, a CEO has 1000x the pay of a median worker. They're all mini warlords, their plunder is bullshit bonuses and hollowing out business after business. A huge pump-and-dump scheme.
Just a couple decades ago, people dreamed of simpler lives. Plumbers, electricians, doctors, lawyers, engineers, small business owners. People dreamed of a kitchen renovation and saved up money for years to afford a new garage or that nice car at retirement. They couldn't imagine becoming YouTube starts or overnight millionaires because of some reality TV show or viral video.
Everything is fucked and it's because everyone thinks they are getting rich tomorrow. It's a mad dash to grab as much as possible, and people don't even enjoy the stuff they do have!
Society is sick and decades of neglect are coming due; the blighted pillars are crumbling.
How bad are the supply chain bottlenecks really? Compared to the amount of discussion on the matter they seem pretty minimal outside a couple sectors. I certainly don't see any lack of products being sold at grocery and big box stores. The only exception I see are some hot items like GPUs and game consoles but I don't they the supply chain itself is the constraint but rather the actual silicon.
The only significant example I can think of is the car market. If you sold or didn't have a car pre-pandemic then getting one now is going to be expensive both new and used. Then again I have scene dozens of used cars sitting in parking lots (w/o license plates and with old car rental decals) so I'm starting to think there is some scalping going on in that market as well.
Getting a basic door for inside your house has a 2 month wait, it used to be 2-3 days.
A certain type of adapter (3/4 inch to 1/2 inch) used to attach modern washing machines to older water lines is completely sold out in every store on a 50km range from my house, no-one knows when it'll restock. All other sizes are fine.
About half of the bog-standard IT gear I normally buy is months+ lead time if I need that specific part. I can usually find a workaround, but it's often ugly. Don't look at the man behind the curtain swearing in the racks.
I had hoped that by now things would have eased up, but if anything it is worse than the start of the year.
We just bought a house in SF, closed end of July. Furniture of all kinds is backordered... in some cases severely (think 26+ weeks).
Daily necessities are doing fine and most products aren't completely unavailable, but prices & lead times are increasing. There's a finite amount of time that can continue though... if companies can't get new delivery trucks or locomotive engines then eventually that will have a significant impact.
FWIW some companies have managed things much better. Our new Tesla Model Y was delivered in a bit under three months. Compared to what some auto makers are doing that's a miracle.
Raw materials are seeing issues, which is trickling down to nearly everything. Metal costs have gone up >25% from what I've seen, plastics are nearly impossible to get from the large suppliers, etc.
Many electronics components are majorly supply constrained right now, is isn't just silicon components, passives also have shortages everywhere.
I went for a flu vaccine at CVS this week and the person giving it to me explained the process would be a bit different because they were using much larger needles than usual. I asked why and they said it was due to supply chain issues. While it effectively didn’t change much for me, it also was easy to see that with a bit more pressure, some pretty critical supplies could simply not be available in sufficient quantities.
This is maybe half right. The demand for short term maximization of profits over all others is really driven by being a public company and shareholders only being satisfied if they see gains that exceed the market even at the detriment of the long term viability of the company. The US stock market is better at accepting risk of than my country (Canada) where companies are really harshly punished by shareholders if they show any signs of reduced profits/revenue.
Keeping inventory down is one easy way to maximize the profit as you aren't accounting for unused inventory. While it is correct that this is risky in case of supply chain bottlenecks, holding lots of inventory isn't a good solution either, because the company is now holding the risk of unsellable inventory should there be an economic downturn and people aren't buying your goods. Either one could easily sink a company.
I don't have a great answer, but after what has happened over the past year, I think the solution has to involve manufacturing be better distributed throughout the planet. You greatly reduce the chances of "once in a century" events preventing your shipment of product if you can shift production elsewhere and rely on a distributed supply chain. This would be better environmentally as well as it would require significantly less shipping if things were manufactured near where they were consumed. The costs of implementing this and the complexity for companies to manage is just too high for this to practically happen.
I don't know a ton about finance, but isn't "value investing" another way of describing the thing Ryan is complaining about? ("Value investing" = using metrics like P/E ratio)
Must also take into account that many industrial processes are not easily restartable. Even if only shut down for 1 day or 1 week, it can take multiples of that length of time to ramp back up to 100% output rate. Complex factories do not switch on and off like a lightswitch.
My dad worked on some testing software for a float glass factory back in the 1980s. Float glass is a process where a factory makes a continuous sheet of glass that floats on a river of molten tin, about 3 meters wide, 24 hours a day. It never stops. If it does then the glass cools down and solidifies inside the machinery, and the factory needs to be practically scrapped and rebuilt. I imagine that's the worst case scenario, but many large scale manufacturing businesses are likely to have similar processes that can't be stopped easily, and that cost a fortune to restart.
On the other hand, sometimes, it's straight ahead bad luck.
A chip we use in one of our products is made in a semiconductor fab in Malaysia. It's the only place in the world that makes the chip. That fab has been shut down for about 6 months as the nation struggles with COVID. In the meantime, the inventory in the supply chain, and even customer warehouses, has been picked clean by brokers to be re-sold for high-cost applications like cars and industrial equipment.
We've paid as much as $15.00 for that $0.47 chip. One broker offered them for $50.00.
What? This turned from a supply chain to don't tax the rich post. I completely disagree with it. A good CEO will be able to do both look at the long term and deliver shareholder value. Yes, the growth could be slower but it is on the CEO to convince the board and investors that its a good thing. Either way, now that this issue is front and center, CEOs will not be blamed for planning ahead, so we can happily tax the rich? His logic not mine.
For articulated analyses of complex phenomena a Twitter thread is completely inadequate. For simplistic explanations whose objective is to promote an opinion it is great, because it makes it easy to re-share morsels of the argument.
Everywhere I travel, tiny life. Single-serving sugar, single-serving cream, single pat of butter. The microwave Cordon Bleu hobby kit. Shampoo-conditioner combos, sample-packaged mouthwash, tiny bars of soap. The Tweets I read each day? They're single-serving books.
after a very short period of time after a major disruption, there ceases to be a simple cause and the answer rapidly becomes "well, it's the gibbs phenomenon, it's gonna ring for a while now".
What it is the alternative to the current just-in-time regime?
Warehouses filled with stuff to be sold. Overproduction. Stuff getting destroyed because it expires or cannot be sold for whatever reason.
We may get there, hopefully only temporary, as a reaction to the current situation. For most companies, the amount paid to the factory in China or elsewhere, is only tiny fraction of the price the product is sold for.
That is why companies now are double or even triple ordering. Most of that stuff will just ending up getting destroyed.
Companies should stockpile where they are most vulnerable. I'll give an example. I make (assemble) my own bullets (cartridges) for target shooting.
There are 4 parts: primer, powder, bullet and casing. The casing is the most resilient because I can pick them up and reuse them. The bullet is probably the second most resilient, because in a pinch, I can get molds and pick up and melt down lead and make them. The powder is also pretty resilient because there are multiple manufacturers and all kinds of powder per manufacturer that would work, I would just have to adjust the drop (amount) for the new powder. Primers are the least resilient, because it's hard to replace and also competing manufacturers who make pre-assembled cartridges also need them, so I would certainly make sure I had plenty of those.
Of course, even with all that, there's no way of knowing how long the shortage will last. We're going on a year plus now, and who would have anticipated that?
Well, Overproduction is a problem when you make big batches and then need to store them. A lot of "inputs" outside of food production can be stockpiled reasonably longer, so without breaking with JIT/Lean philosophy all you need to do is to create a bigger buffer at the start of the value chain, which might mean that missing X deliveries won't stop your production rate instead of 1 missing delivery stopping the whole factory.
The average lifespan of a company is 10 years.[0] The average lifespan of companies on the S&P is maybe a little more than twice that. Each year you have a 1/100 chance of seeing a hundred year flood. With a short lifespan the odds are decent that your company simply won’t see one. The question is then: how good of an idea is it to spend to be robust to them? Of course it is viciously circular: planning to not be robust to white swans is probably why the lifespans are so short and shrinking.
Tim Cook doesn’t have voting control of Apple but it is sitting on a massive shock absorber made of cash earning insanely low rates of return. The idea that you need control of the board to be robust doesn’t seem to be necessary. It is probably helpful but it isn’t necessary.
Nassim Taleb calls this fragility vs. "antifragility". A system with frequent small shocks, gets information from those shocks about what to keep buffers of. A system without an absence of frequent, small shocks, keeps no reserves (like the bones of an astronaut in weightlessness too long becoming thinner, or the muscles of someone who does not work becoming smaller). Small shocks are information, and they tell a system what to bulk up on.
Long periods of tranquility, leads to fragility. Which, for many reasons (climate change? war? pandemics? disruptive technologies?) is not a good preparation for the near future.
> Only founder led companies and family owned businesses can stand up to the immense pressure from the dogmas of modern finance.
How about worker-owned companies, co-operatives, and collectives? I totally agree the problem is that with the finance people steering the ship there's incentives to push up your short-term performance and collect bonuses and watch your publically-traded stock value go up. So don't go public; use the value an organization creates to pay the people in it, and invest in making it better for those people and the people you serve. The people who have say in the decisions are the ones who are most interested in having the organization continue to be healthy and a good place to work.
There are other ways. We don't even need to imagine them, they've already happened. We just need to resist the siren song of the lottery ticket and instead try to create systems and organizations that we want to be a part of.
The fact that there are so few of these types of company around probably means that they have trouble surviving in a world where the competition is supported by modern finance.
This is something that is interesting to me, I have been reading about various ideas for worker owned companies. Some friends and I have been talking about how we might organize a side business built around a similar structure and where it might fail for reasons that are not just the business side of things.
The RoE analysis is decent, but it wouldn't be HN if every now and then someone really wants to sell the idea that your average business owner and your average S&P 500 business are all in this together with taxes as their enemy.
Taxes don't apply equally. Taxes are a good thing. Taxes can work.
[+] [-] cbdumas|4 years ago|reply
If the spending doesn't re-balance again as restrictions are lifted this is not a temporary supply chain issue caused by just-in-time methodology, it's just the new normal.
[0] https://apps.bea.gov/iTable/iTable.cfm?ReqID=19&step=2#reqid...
EDIT: That link is broken, should have been this https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri...
[+] [-] zelon88|4 years ago|reply
I noticed that the inventory levels of our vendor were dropping, but we weren't buying. Meaning our customer was ordering the same product from a competitor.
I proposed that we spend the money to buy the rest of the material at the vendor. Basically denying our competitor the materials and forcing either them to come to us or the customer dropping the order and reordering through us. This would have been a risk because that's about a year supply of proprietary castings that we can't use for anything else, but I really thought it was a worthwhile opportunity. But it went against lean principles so we didn't do it.
Fast forward 6 months and our competitor basically did the same thing to us.
[+] [-] herendin2|4 years ago|reply
With that understanding, there's only one rational course of action: to secure your supply before they do, and your competitor realized all this.
The only real decision to make is whether to risk the more aggressive move of also locking up your competitor's supply.
[+] [-] TheRealDunkirk|4 years ago|reply
[+] [-] joe_the_user|4 years ago|reply
A) This was a multi-factoral event certainly but all of these other factor are "immediate causes" which can themselves be traced to absolute maximum return on equity as a more final cause.
B) No doubt "hard to restart" process are were involved. But the world relies on single-source, hard to restart, large scale production of many things today because these produce the highest returns for those who invest in them and the lowest prices for those who buy from them. And both kinds of actors have been willing to just stop producing rather than doing something that might be costly to keep production going (and they decided they didn't want backup before this for the same reason).
C) Supply lines that stretch around world exist as a combination of economies of scale and "labor market arbitrage" and both these are driven by return, even though "labor market arbitrage" doesn't increase efficiency or robustness.
D) Chip manufactures put money into "up-date" chip processes, notably leaving the sorts of chips actually used in cars woah fully under-invested and generally many sorts of lack of robustness can be traced down to money flowing only to the normally profitable. Shutting down production isn't necessarily that bad for a company - they don't wages and they can start back up once things stabilize. It's much less disastrous than making a bunch of stuff and not being able to sell it. Clearly, that thinking is guiding a lot of decisions.
[+] [-] dpierce9|4 years ago|reply
As for the turn to founder control, one counterexample is Tim Cook who doesn’t have voting control of Apple but is sitting on a massive shock absorber made of cash earning insanely low rates of return. The idea that you need control of the board to be robust doesn’t seem to be necessary. It is probably helpful, apple may be sui generis, but it isn’t necessary.
[0] https://www.sciencedaily.com/releases/2015/04/150401132856.h...
[+] [-] flurie|4 years ago|reply
Along the way, there are a bunch of other assertions that serve as prerequisites, like the idea that these companies can cultivate better employee loyalty and plan for longer horizons.
How much do we know about how true that is, though? Do privately-owned companies disproportionately survive these sorts of events historically?
[+] [-] dillondoyle|4 years ago|reply
But it's critical to note that the proposal has different rules for privately held stock & real estate. So the tweet author's buried argument doesn't hold water.
I believe those assets would mostly be treated the same as they currently are, e.g. sold or death.
For the 700 or so people who are targeted it basically creates a tax on the collateralized loans they get to avoid selling stock/cap gains in the first place. While not doing that directly, that's the effect of it.
And they get 5 years to pay the initial bill. 23.8% / 5 = 4.7% growth a year to be even (well something like 6 or 7 adding the new annual 23%). Most of these guys will likely generate more on paper profit than and they get deductions for any losses if they don't
It's what pisses me off most about the proposed Purdue Sackler settlement. Giving billionaires such long lead times to pay off fines and taxes allows them make more money than they owe.
The last graph on the WSJ article though says “Smart investment bankers and asset managers are already thinking about how to financially engineer products that will emulate existing stocks but be hard to value”
Check out the 2nd link for Pandora Paper reporting showing one egregious example of how they take advantage of this.
The owner of Nike puts millions of nike stock into a GRAT, which is privately held, and then the government gives that grat a 15% discount before it's passed along to his children.
Shouldn't get tax benefits for something that you claim is harder to sell (privately held stock) when in actuality the assets are 100% publicly traded nike stock.
The Wyden tax bill is a 100 pages long so maybe it goes after some of that crud, but there will always a scheme to lower your taxes.
https://archive.md/W2074 https://archive.md/yN7M7
[+] [-] whatever1|4 years ago|reply
How the market speculation on the value of a company can affect its resiliency ? If tomorrow everyone sold Apple stock for 1 cent, why would Apple the company care ? Same revenue, same costs. Give me a break with the importance of the stock casino.
[+] [-] AnimalMuppet|4 years ago|reply
That said, this does read like someone with a personal axe to grind, leading to motivated reasoning.
[+] [-] ootsootsoots|4 years ago|reply
Given how many Fortune 500 companies have died even in prosperous times since the list started, I’m gonna file this away as “manufacturing consent to maintain the status quo.”
Corporations are not literal machines or organisms. They’re a social acquiescence given the reality of biological need at scale. The logistics are necessary; the behavior is necessary; the ownership angle is propaganda.
[+] [-] jjoonathan|4 years ago|reply
[+] [-] TheBigSalad|4 years ago|reply
[+] [-] baryphonic|4 years ago|reply
The book is excellent, one of my favorite econ books, and is Smith's somewhat dense but well-written explanation for and interpretation of economics. His main thesis is that "rationality" is not a "constructivist" property of various agents, being possessed by any (or every) individual separately, but is an "ecological" property that emerges collectively from e.g. the price system, organization of firms and other economic relations.
His argument about profit-maximizing firms proceeds almost exactly along the lines of this tweetstorm, but goes further. Why would Wall Street want to reward companies that fail to be robust to changes? Are there other structural problems (the law? regulatory regime? bailouts? monopoly?) that cause CEOs and Wall Street actors to be collectively "irrational" as we are seeing today with JIT-everything?
IMHO, the problem is political-economic. Finance has arrived at this equilibrium of asset price insanity and phony accounting because the regulatory regime and state actions as a whole (e.g. bailouts) are entirely out of whack – the system has no working feedback mechanisms at the moment, so the economy is in a real sense failing. How did the state fail? Partly in response to demands from powerful & wealthy entities on e.g. Wall Street.
[+] [-] onlyrealcuzzo|4 years ago|reply
All of this funny stuff is mostly people trying everything they can to get capital gains instead of income so they can pay a 25% tax rate instead of a 39% tax rate. When you're talking about billions of dollars - 14% is a lot of money.
From the perspective of the average person - the tax code probably makes sense. If you already pay 39% tax on your income, and THEN you have to pay 39% on your capital gains and half of your capital gains are actually just inflation - it's like you're getting taxed on your tax! True inflation has likely been ~4% since 2008. The S&P average is ~7.25% per year. So half of the "capital gains" the ordinary index fund investor would pay are just inflation.
But the .1% are different. You don't make it into the .1% with a ~7.25% return and a laborer's salary. You need to be making ~30%+ returns for decades. Or, ~10,000% for a few years (a lot of the successful VC-funded entrepreneurs).
Half of their capital gains aren't inflation. Barely any of it are. Effectively, there tax rate is ridiculous low compared to the average Joe.
And what's worst - the Fed is causing so much of that inflation. Would Tesla be a $1.1T company today if the Fed wasn't pumping up asset prices, lowering interest rates, and making future cash-flows absurdly and artificially valuable? No. And yet, Elon Musk gets to make $100Bn on paper - and he can take loans against those gains with <3% interest and never pay ANY taxes.
It really seems like this is a completely separate world - and it's >30% of US wealth - and it should be dealt with separately.
[+] [-] titzer|4 years ago|reply
It's greed. I'm not religious or spiritual, but I am really talking about a serious psychological/spiritual disease that has infected our society. It's not just about getting enough to survive, or even enough to thrive, but there are so many actors out there out to get as much as possible that they simply cannot be satisfied anymore. Their stomachs are bottomless pits.
How else can you possibly explain multiple individuals being worth more than $200 billion (Sixty. Thousand. Lifetimes. Of Wealth), and yet it is not enough for them. They must command huge empires, the boards of which must "motivate" them with more money. These people have serious psychological problems. Like, please, just disappear to your islands and enjoy the rest of your short lives, please!
The entire world economy has been just one massive casino, one huge get-rich-quick scheme. And TV too. Fame and fortune without working for it, getting famous with no talent or skills. Think of how many millions and billions of people worldwide have been programmed to think they can and should be millionaires and that it can happen at the drop of a hat?
And now, a CEO has 1000x the pay of a median worker. They're all mini warlords, their plunder is bullshit bonuses and hollowing out business after business. A huge pump-and-dump scheme.
Just a couple decades ago, people dreamed of simpler lives. Plumbers, electricians, doctors, lawyers, engineers, small business owners. People dreamed of a kitchen renovation and saved up money for years to afford a new garage or that nice car at retirement. They couldn't imagine becoming YouTube starts or overnight millionaires because of some reality TV show or viral video.
Everything is fucked and it's because everyone thinks they are getting rich tomorrow. It's a mad dash to grab as much as possible, and people don't even enjoy the stuff they do have!
Society is sick and decades of neglect are coming due; the blighted pillars are crumbling.
[+] [-] KingMachiavelli|4 years ago|reply
The only significant example I can think of is the car market. If you sold or didn't have a car pre-pandemic then getting one now is going to be expensive both new and used. Then again I have scene dozens of used cars sitting in parking lots (w/o license plates and with old car rental decals) so I'm starting to think there is some scalping going on in that market as well.
[+] [-] theshrike79|4 years ago|reply
A certain type of adapter (3/4 inch to 1/2 inch) used to attach modern washing machines to older water lines is completely sold out in every store on a 50km range from my house, no-one knows when it'll restock. All other sizes are fine.
[+] [-] Baeocystin|4 years ago|reply
I had hoped that by now things would have eased up, but if anything it is worse than the start of the year.
[+] [-] xenadu02|4 years ago|reply
Daily necessities are doing fine and most products aren't completely unavailable, but prices & lead times are increasing. There's a finite amount of time that can continue though... if companies can't get new delivery trucks or locomotive engines then eventually that will have a significant impact.
FWIW some companies have managed things much better. Our new Tesla Model Y was delivered in a bit under three months. Compared to what some auto makers are doing that's a miracle.
[+] [-] starky|4 years ago|reply
Many electronics components are majorly supply constrained right now, is isn't just silicon components, passives also have shortages everywhere.
[+] [-] unknown|4 years ago|reply
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[+] [-] NeutralCrane|4 years ago|reply
[+] [-] starky|4 years ago|reply
Keeping inventory down is one easy way to maximize the profit as you aren't accounting for unused inventory. While it is correct that this is risky in case of supply chain bottlenecks, holding lots of inventory isn't a good solution either, because the company is now holding the risk of unsellable inventory should there be an economic downturn and people aren't buying your goods. Either one could easily sink a company.
I don't have a great answer, but after what has happened over the past year, I think the solution has to involve manufacturing be better distributed throughout the planet. You greatly reduce the chances of "once in a century" events preventing your shipment of product if you can shift production elsewhere and rely on a distributed supply chain. This would be better environmentally as well as it would require significantly less shipping if things were manufactured near where they were consumed. The costs of implementing this and the complexity for companies to manage is just too high for this to practically happen.
[+] [-] dismalpedigree|4 years ago|reply
[+] [-] qPM9l3XJrF|4 years ago|reply
[+] [-] dang|4 years ago|reply
An unexpected victory: container stacking at the port of Los Angeles - https://news.ycombinator.com/item?id=29026781
The previous stack:
Long Beach has temporarily suspended container stacking limitations - https://news.ycombinator.com/item?id=28971226 - Oct 2021 (483 comments)
Flexport CEO on how to fix the US supply chain crisis - https://news.ycombinator.com/item?id=28957379 - Oct 2021 (265 comments)
[+] [-] 55873445216111|4 years ago|reply
[+] [-] onion2k|4 years ago|reply
[+] [-] 11thEarlOfMar|4 years ago|reply
A chip we use in one of our products is made in a semiconductor fab in Malaysia. It's the only place in the world that makes the chip. That fab has been shut down for about 6 months as the nation struggles with COVID. In the meantime, the inventory in the supply chain, and even customer warehouses, has been picked clean by brokers to be re-sold for high-cost applications like cars and industrial equipment.
We've paid as much as $15.00 for that $0.47 chip. One broker offered them for $50.00.
We haven't found any in more than 2 months.
[+] [-] ikiris|4 years ago|reply
[+] [-] HarryHirsch|4 years ago|reply
Back then we had second-source agreements. What happened to that concept?
[+] [-] robomartin|4 years ago|reply
[+] [-] yalogin|4 years ago|reply
[+] [-] Dumblydorr|4 years ago|reply
[+] [-] occamrazor|4 years ago|reply
[+] [-] refurb|4 years ago|reply
[+] [-] dredmorbius|4 years ago|reply
https://news.ycombinator.com/item?id=28970983
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] habosa|4 years ago|reply
We need billionaires like him! Not the other kind! /s
[+] [-] hprotagonist|4 years ago|reply
after a very short period of time after a major disruption, there ceases to be a simple cause and the answer rapidly becomes "well, it's the gibbs phenomenon, it's gonna ring for a while now".
[+] [-] throwaway4good|4 years ago|reply
Warehouses filled with stuff to be sold. Overproduction. Stuff getting destroyed because it expires or cannot be sold for whatever reason.
We may get there, hopefully only temporary, as a reaction to the current situation. For most companies, the amount paid to the factory in China or elsewhere, is only tiny fraction of the price the product is sold for.
That is why companies now are double or even triple ordering. Most of that stuff will just ending up getting destroyed.
[+] [-] Clubber|4 years ago|reply
There are 4 parts: primer, powder, bullet and casing. The casing is the most resilient because I can pick them up and reuse them. The bullet is probably the second most resilient, because in a pinch, I can get molds and pick up and melt down lead and make them. The powder is also pretty resilient because there are multiple manufacturers and all kinds of powder per manufacturer that would work, I would just have to adjust the drop (amount) for the new powder. Primers are the least resilient, because it's hard to replace and also competing manufacturers who make pre-assembled cartridges also need them, so I would certainly make sure I had plenty of those.
Of course, even with all that, there's no way of knowing how long the shortage will last. We're going on a year plus now, and who would have anticipated that?
[+] [-] p_l|4 years ago|reply
[+] [-] dpierce9|4 years ago|reply
Tim Cook doesn’t have voting control of Apple but it is sitting on a massive shock absorber made of cash earning insanely low rates of return. The idea that you need control of the board to be robust doesn’t seem to be necessary. It is probably helpful but it isn’t necessary.
[0] https://www.sciencedaily.com/releases/2015/04/150401132856.h...
[+] [-] rossdavidh|4 years ago|reply
Long periods of tranquility, leads to fragility. Which, for many reasons (climate change? war? pandemics? disruptive technologies?) is not a good preparation for the near future.
[+] [-] patrickyeon|4 years ago|reply
How about worker-owned companies, co-operatives, and collectives? I totally agree the problem is that with the finance people steering the ship there's incentives to push up your short-term performance and collect bonuses and watch your publically-traded stock value go up. So don't go public; use the value an organization creates to pay the people in it, and invest in making it better for those people and the people you serve. The people who have say in the decisions are the ones who are most interested in having the organization continue to be healthy and a good place to work.
There are other ways. We don't even need to imagine them, they've already happened. We just need to resist the siren song of the lottery ticket and instead try to create systems and organizations that we want to be a part of.
[+] [-] WJW|4 years ago|reply
[+] [-] dendrite9|4 years ago|reply
This climbing equipment company's stated values are an appealing target to me right now. https://www.totemmt.com/about-us/
[+] [-] Azsy|4 years ago|reply
Taxes don't apply equally. Taxes are a good thing. Taxes can work.