This is my article! I was surprised to see it here again. I hope you all enjoy it, I had a blast writing it. Thanks again everyone for the kind words and valuable feedback.
Great article. Other comments will have plenty to nitpick, but that will always be true for an article this long that covers such a broad spectrum of the financial world (from interest rates to venture capital incentives!).
Yes, at the time of the initial transaction the borrower would not have a liability on their balance sheet that included the interest due.
Over the course of the borrowing period the borrower would accrue interest expense commensurate with the passage of time that would increase the borrowers total liabilities. The author misunderstands the fundamental accounting definitions of liabilities (and also assets). Liabilities (under US GAAP but same core idea under IFRS) are present obligations. At the initial time of borrowing the borrower does not have a present obligation to pay interest on the liability. Similarly, an asset is a present right, and at the time of initial borrowing the lender is not owed the interest.
It's not the worst thing I've read, the author has clearly spent time learning things in good faith. That said, there are lots of indicators the author is not an expert in accounting / finance.
It was quite a good article if you don't care to nitpick over terminology. Too many technical people avoid the business side of things because they find it boring or are too cynical to engage with it, which limits their impact. Instead we get sleazebag money guys running the world.
The people who are in a position to influence the world are those who understand it, and if this article nudges people with a hacker mindset towards having more influence, then that's a good thing.
You are fixating on one tiny point which isn't really that important within OP's ... errm "opus".
Why not critique the entire work?
Anyway:
I borrow 100 from someone. I am now in debt and they are in credit - to balance, both are 100.
However, they require a return on investment - usury: 10 for 100 (or a 10% margin - call it what you like).
When I take out my loan, I am in debt for 110 and they are in credit for 100 with a promise of 10 later. So we have some accounts - my one account is 110 in debit (I borrowed 100 and promised to pay 10 on top) and they have two accounts - one for the principal (100) and another for the 10 interest. To me, in this case, the principal and interest are part of the same account but to the lender they are separated out because the interest is probably taxable as income.
However, it might be the case that I can set off my debt or the interest on my debt against some tax. In that case I will maintain two accounts - the principal and the interest.
All those interests will also end up in additional accounts related to probably banking.
I've probably pissed off a few accountants with my choice of terms but in the end I do understand how fiat money works.
What gets on my tits is assertions such as "People who don't understand ..." with no working.
the US treasury secretary was on calls about whether to bail hedge funds out of gamestop to prevent cascading financial system failures. arguably there is nothing that is too dumb to be written about finance. dont let anyone discourage you.
Balance sheets and accounting are made up. You know in maths how you could do calculations on two different ways and arrive at the same result? That's what the author is doing. "Proper accounting" is how you do it, but you could actually just think of it this way. It makes no difference to the end result.
In avg, the normal way it creates the liability over time and i would argue that in a colloquial its absolutly fine and doesn't change the message at all.
From someone who does this for a living - danielmarkbruce is right about the mechanics. When you borrow £100, you book £100 as a liability. The interest doesn't exist yet.
Interest gets recognised as it accrues over time. Each month (or whatever period), you debit interest expense and credit accrued interest payable. The liability grows as time passes.
Recording future interest upfront would violate the matching principle - you can't recognise an expense for something that hasn't happened yet. If you pay off the loan early, you don't owe that interest.
That said, I think the article's bigger point about how money flows still holds. The technical accounting is just one layer of how this stuff actually gets recorded.
He's talking about bonds, though. These can't generally be paid back early. The same goes for some other loans like mortgages which often come with an agreement that you won't pay it back within a number of years (unless you pay a fee). If you intend to pay back the interest normally then you could totally book it as a liability up front, it's the same thing at the end of the day. I mean, it is literally a liability. You've agreed to pay back the amount of the loan plus interest.
I'd encourage people doing their own accounts to think of it like this and don't do things that professional accountants do "just because".
The thing is accounting is all made up. We try to squeeze this idea of "value" into this abstraction called "money" and make it all work. But it's trivial to find cases where it's overly simplified and doesn't really work.
For example, how do you book depreciation of a motor vehicle? For the average person with a single utility vehicle the vehicle's value remains roughly the same from the moment of purchase until the moment is is written off. The value is its utility to you. In my accounts, I book this simply as "1 car" in my assets. But accountants don't like that. Everything has to be valued in money. So you end up with stupid stuff like averaging the depreciation over time that is pure fiction and only exists to make the books work and reduce the "shock" when a vehicle is finally written off.
> A common lament among founders, even successful ones, is:
"Sometimes I feel like I'm wasting my twenties".
Interesting perspective, I feel like I see this much more attributed to someone working on a meaningless problem for a paycheck at a large company. I guess it speaks to the difficulty in finding purpose in any endeavor in your twenties.
It's basically a tradeoff between wasting your personal life or wasting your professional life. If you get a job that is truly 9-5 (or maybe even a bit less), it leaves a lot of time for forging friendships and relationships and learning hobbies while you're still young, doing sports, seeing the world.
Founders usually feel they're missing out on all or most of these. And some of them probably feel like they don't really have a choice - maybe their specialty/resume is one that's difficult to get hired but skilled enough to make money on their own.
However, plenty of jobs take all your time and still feel meaningless. Many (most? - median personal income in USA is $42,000) don't pay enough for people to really socialize much anyways or do most of the hobbies they might enjoy or travel at all. Generally, having the choice of "HOW should I 'waste' my twenties?" is a fairly privileged one.
I have this crazy insatiable addiction to food and shelter. My paycheck supports my addiction.
Thought experiment: you have three sets of 10 recent college grads. One set works as enterprise devs in a tier 2 city, one set works at BigTech and another set works for a startup, which group do you think will have the highest median income after 10 years?
I would much rather work for a “meaningless paycheck” (and RSUs in a public company), than bust my ass at a startup for below market wages and “equity” that is illiquid and will statistically be worthless.
But wagies clock out at 5 and live that half of their lives, severance style.
Startups/entrepeneurs often don't even have that duality and live our single life entirely through work. I would identify with "wasting my twenties" in the sense that the life of the entrepeneur isn't really age specific, it would be quite similar to do business at 20 than to do it at 50. The only difference being experience. But there's not much use of my young body, or libido, strength, that is typical of youth experiences.
> "Sometimes I feel like I'm wasting my twenties".
Is near universal to anyone in their twenties regardless of job type/sector. It's the start of most people's adult life, and without the lack of experience that age brings, it's natural to question if you're on the "right path" and/or be swayed by potential other opportunities you've not yet explored.
Hell, even with the experience of age, people still often ask themselves that very same question, and not just for their twenties either.
> In practice, buybacks can be used to create what is effectively a
shareholder dividend in a more tax-advantaged way. Whereas with dividends,
they are taxed as income, and this is realized immediately. With buybacks,
they are taxed as capital gains, but crucially the gains are not realized
until the asset is sold. This could be indefinitely far in the future, so
it's more capital efficient. It has the added benefit that it helps pump
the token, and imo this is kind of cute because it marries both the
fundamental and speculative aspects.
This depends a lot on jurisdiction.
Some jurisdictions give you a certain amount of dividend income tax free. Some jurisdictions tax your capital gains even when they aren't realised. Lots of other variants exist.
> but reading indictments to learn from others' mistakes.
Oh oh.
> It's about knowing where to buy estradiol valerate on the internet and how
to compound injections
Oh no.
This is 5 paragraphs in, and I already red-flagged out of this, not just because of the time it would take to read this, but because I don't want to go crazy reading this stuff.
In case it isn't clear, it's not healthy to read indictments thinking how to avoid being caught by law enforcement and buying grey market hormones. Politics aside, at least get a prescription, it's not like they are not giving them out.
Hacking is a huge spectrum I know, but if we have to decide on some limits to what is open to be modified and understood by the lay(wo)man, and what is closed and left to professionals, wouldn't we agree that law and medicine would be such fields? (and possibly military?) Trying to hack medicine or law is as extremist as arguing that you don't have the rights to plant the seeds of fruit you buy.
As far as rights go, sure people are given the rights to represent themselves pro-se and apparently to buy hormones online, but going beyond what's allowed, are you really willing to ruin your life just to stick it to the man or to exercise your right to do whatever?
This smells a lot like a hacker thought because they are exceptional in one field (cybersecurity), they therefore are exceptional in all fields. The result is that information presented in this article is very surface-level, and quite biased.
the only thing it takes to be exceptional in most fields is time and effort. there is no secret sauce. There is not something innate that "finance people" have that "computer people" don't, other than a willingness to trudge through boring finance-related crap and vice-versa.
This is all spawned from insecurity that your prestigious degree or whatever can be replicated through independent learning
Being exceptional in cybersecurity is a pretty good indicator that someone will be successful in other fields. A good cybersecurity person will understand that cybersecurity is a mix of technical mastery and the art of understanding human behaviour.
I legitimately thought the description of a 'shitcoin' was supposed to be a euphemism for IPO shares until it turned out there was a separate section for that.
This is a critique of the VC ecosystem based on a dichotomy of "inflated" versus "fundamental" value, with a CTA to hackers to "do something about it."
Here's one that better suits the title:
"Pricing Money: A beginner's guide to money, bonds, futures and swaps" (866 points)
I can relate to a lot of things said in the article, both practically and philosophical. Thanks for speaking to/for fellow hackers!
PS: Hackers websites don't have to look this ugly. We do take care of attention to detail that the page have to be rendered for mobile devices as well.
That's primarily not a website, but a hacker zine. That's just the format they come in for historical reasons, similar to RFCs.
I personally also don't love it, but fortunately, hackers have the technology to reflow legacy fixed-width text files to any format of their choosing :)
The critique of the financial system relies on a misunderstanding of the Discounted Cash Flow (DCF) model.
You conflate 'r' (the discount rate) with 'Rf' (the risk-free interest rate). In reality, for high-risk assets like startups, 'r' is defined by the Weighted Average Cost of Capital (WACC) or CAPM: r = Rf + Beta(Rm - Rf).
Even in a ZIRP environment where Rf -> 0, the Beta (risk/volatility) for a startup is massive. A rational investor would still demand a high 'r', leading to a low valuation. The fact that VCs ignored this and funded "blatantly bad deals" cannot be explained by low interest rates alone. It is better explained by the information asymmetry a.k.a principal-agent problem.
We have a system where capital flows from passive LPs through multiple layers of rent-seeking intermediaries (VCs, LPs, Fund Managers) who are incentivized by management fees rather than carry. The market failure described isn't "financial nihilism" and "financial short-termism". It's a breakdown of feedback loops where intermediaries face no downside risk for misallocation. When there is no market coordination, no real competition, just unrestricted collusion, then things start to not make sense from the old school financial/business perspective. I do not think this is the failure of economic theory or the financial models itself, rather just that nobody knows or tells, that the prerequisite for these things is at least some degree of fair competition, market based economy, informed, rational actors and restricted collusion.
Suggesting that technical founders can fix this by simply "being decent" ignores the systemic reality. This economic structure rewards extraction over value creation, "decency" is an evolutionary disadvantage. The "real hackers" in this story are the financial and business intermediaries who successfully reverse-engineered the economy to extract rent without generating value, similarly to all those entrepreneurs, CEOs, corpo drones in the business sphere who do not provide any meaningful value to society (and shareholders as well.)
This article discusses high quality investors. Where do I meet high quality founders? I’d be willing to bet my time on a good one, but all I come across is the shitcoin equivalent.
For anyone looking for basic information of financial statements in business, the assumptions and estimates that go into it, I recommend Financial Intelligence by Joe Knight and Karen Berman. It helped me understand how much fuzziness happens in financial statements and how they can affect a business operation
I think overall, the idea of money is messed up on many levels. What we call 'money' today doesn't even have an identity. It's the most important thing in the world, it's also the most heavily utilized thing in the world but almost nobody knows what it means.
- It's backed by nothing.
- It's not a fair medium of exchange because it physically cannot circulate very far from 'money printers' (not many hops) before it's taxed down to nothing. This means that it's unevenly scarce based on social proximity; unfair by design. Cantillon effects on steroids.
- It doesn't even exist as a single cohesive concept; the US dollar in your bank account is not the same as the US dollar in your friend's bank account and it's not the same as the US dollar which European traders use to buy derivatives (e.g. Eurodollars)... There are literally thousands of different ledgers (banks, institutions, in different countries), each presenting its own interface supposedly showing their holdings of this mythical unit called 'The US dollar' which is actually thousands of different currencies, which happen to share the same name, scattered around the world and held together only by regulators whose only shared interest is to print more units for themselves than the next guy does. Slow and fallible human regulators represent the only layer of 'consensus' which exists for the entire fiat monetary system; they move at snails' pace in a world of high frequency trading.
Money is never backed by nothing, or it's worthless. It may not be backed by anything physical, but it's always backed by some form of trust. National currencies are backed by trust in the corresponding government and institutions.
I was disappointed this wasn't about how money itself works - instead it's about various financial arrangements you can use to scam people.
There's a lot of stuff to talk about with how money works! Like, when I use my Visa card issued by a New Zealand branch of an Australian bank to buy something in Europe, there are zillions of moving parts there.
The fact that money doesn't actually move internationally but yet appears to, and the fact that currency exchange can be done despite that. And that 60% of everything is backed by US dollars (rapidly dropping now). How bank transfers work with and without a common central bank; the different mechanisms countries set up to streamline them.
And, the fact that it's not really centrally controlled, and anyone (like Satoshi Nakamoto) can make a currency and there's not really anything a government can do to prevent currencies it doesn't like, and despite that we do mostly have one government-issued currency per country.
This probably won't make you feel any better, but banks don't really loan out money that's not theirs. When they lend money, they literally create it out of thin air. Creating that money has a cost, which is what ultimately limits how much they can lend, and having more deposits can lower that cost somewhat, but there's no direct connection between the money you deposit in your account and the money that the bank lends to someone else.
The modern world would collapse in about a week if banks were not allowed to loan out deposits.
The ability to satisfy needs now and pay for them in the future is why you can have a house, why governments can build infrastructure, etc. That’s the only reason that banks really exist. Keeping your deposit safe for you while providing convenient access via cards, checks and other rails is just a wonderful side effect.
After a few thousand years of civilization we don’t have anything better that could allow you to satisfy current needs with future income. Direct loans are just vendors acting as de facto banks, at much higher risk.
A bank product that doesn’t loan out your deposits is called a safe deposit box. There’s your solution.
The problem isn't really that banks can create money. Ultimately it's up to the people whether they trust paper IOUs or not. The trust in IOUs happened organically and would happen again, unless you suggest they should be outlawed (ie. it's illegal to write a piece of paper saying "I promise to pay the bearer..." on it).
The problem is the governments can bail the banks out. After 2008, trust in paper IOUs (or their digital equivalent) should have plummeted, leading people to seek to store their wealth in other ways. But it didn't, because the governments stepped in and said, "nah, we need this to work, so we'll pay their salaries and bonuses with your taxes".
Bitcoin was intended to be a solution to this problem. There's nothing stopped people creating derivatives on top of Bitcoin and trading those. But nobody, no government nor anybody else, can just print more Bitcoin.
most of the financial systems are just as hackable as computer systems, but most "security" startups just build compliance checkboxes and culturally appropriate hacker ethos for VC money.
How money works? Well look into fractional reserve banking and do the math. If you’re a bank, you can just loan out 10-100 times what you have in assets and ask say 5% interest. Then 5*10 to 5*100 is your annual interest to the bank. That’s why the Bible and Quran are against usury.
That’s not how banking works. Banks cannot lend “10–100× their assets.” Loans are assets. Deposits are liabilities. What limits lending is capital, not reserves, and leverage is tightly regulated at roughly 10× equity, not 100×.
The interest math is wrong too. Banks pay interest on deposits, absorb defaults, cover operating costs, hold capital, and meet liquidity rules. Net margins are about 1–3%, not 50–500%.
Fractional reserve banking does not mean infinite money or risk free profit. It means deposits are not 100% cash backed (because they have loaned out a portion of your deposit).
This is a popular myth, not “doing the math”.
What you’re describing only works in an absurd edge case where people borrow money just to park it and pay interest without spending it. That’s not fractional reserve banking, that’s a broken thought experiment.
I recently discovered narrow banking (https://www.narrowbanking.org/) which basically states the idea of narrow banking which can only make it so that the bank doesn't have the issues with fractional reserve banking if you are worried about it
Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking.
Honestly I am sort of interested in gold pegged currencies right now because US Dollar (let's be honest) feels really shaky right now and even America's debt itself is fueled by it being de-facto currency and I am feeling like previously it helped but I feel like debating that even America itself would benefit from if less foreign nations held US treasury bonds.
There already are some gold pegged stablecoins and theoretically with things like revolut or some instant way to sell crypto without too much hassle/losses and transfering it easily, its rather possible to do such.
> That’s why the Bible and Quran are against usury.
That's why Christian and Muslim (to a lesser extent since they exploited loopholes) nations relied on Jewish financiers. It does not make sense for the exchange of good and services among one another to be held back because someone deciding to sit on a pile of tokens.
This is a common misconception, thinking that fractional reserve banking is the way in which banks lend. In actuality it's a limitation to how banks lend.
Without fractional reserve rules the banks could lend their money infinitely. I like Richard Wagner's theories/research on the subject, as in he actually asked for a loan and went through the books of the bank to verify where the money came from, it came from nowhere, they just credited their account and that's it.
> Markets are computers; they compute prices, valuations, and the allocation
of resources in our society. Hackers are good at computers. Let's learn
more about it.
real learning- copy paste the content and ask for “critical and constructive feedback and potential false narratives from industry professionals” to get 10x from it
From the first sentences, it looks like a 0.1x value. Discrediting the expanded hacker concept just because, criticizing its non-pc language, shaming on the small imoralities (in an industry full of life ruining unethical practices). The list goes on, and I didn't read everything!
In practice, that prompt gets chatgpt role-playing as industry professionals: who knows if it's near or far from the real deal.
Also, reading long texts is good for comprehension. You don't learn with reading summaries, you learn with repetition and even further if write your own summaries.
I'm an ant. I want to tell you how the chemical trails work. Here is how the pheromones work....
Except. The main point of chemical trails, money or other implementations of the messaging bus of a complex adaptive system is THE COMMUNITY it creates. Think the Sapir-Whorf hypothesis, but instead of language determines what you think, expand that to "your messaging bus language determines how your community functions". Yeah there is lots of stuff about money, but how it determines the form and function of the community (as in CAS) is the important part.
The other primary thing to think about money - once you get that it is a messaging bus - is the idea of making money from money. When you understand the function of the system you can then understand that making money from money is not a good idea. This is not a new idea. The concept of throwing the money lenders out of the temple has been around for a long time.
If you understand money, then you will be able to answer this question:
why is making money from money a bad (dysfunctional) idea?
stong1|1 month ago
tylervigen|1 month ago
Kudos for taking the time to put it all together.
danielmarkbruce|1 month ago
People who don't understand the very basics of finance and accounting shouldn't write about finance and accounting.
isubkhankulov|1 month ago
In the context of this post, does it matter? He’s not teaching bookkeeping here. He’s explaining the time value of money.
LeanOnSheena|1 month ago
Over the course of the borrowing period the borrower would accrue interest expense commensurate with the passage of time that would increase the borrowers total liabilities. The author misunderstands the fundamental accounting definitions of liabilities (and also assets). Liabilities (under US GAAP but same core idea under IFRS) are present obligations. At the initial time of borrowing the borrower does not have a present obligation to pay interest on the liability. Similarly, an asset is a present right, and at the time of initial borrowing the lender is not owed the interest.
It's not the worst thing I've read, the author has clearly spent time learning things in good faith. That said, there are lots of indicators the author is not an expert in accounting / finance.
SturgeonsLaw|1 month ago
The people who are in a position to influence the world are those who understand it, and if this article nudges people with a hacker mindset towards having more influence, then that's a good thing.
gerdesj|1 month ago
Why not critique the entire work?
Anyway:
I borrow 100 from someone. I am now in debt and they are in credit - to balance, both are 100.
However, they require a return on investment - usury: 10 for 100 (or a 10% margin - call it what you like).
When I take out my loan, I am in debt for 110 and they are in credit for 100 with a promise of 10 later. So we have some accounts - my one account is 110 in debit (I borrowed 100 and promised to pay 10 on top) and they have two accounts - one for the principal (100) and another for the 10 interest. To me, in this case, the principal and interest are part of the same account but to the lender they are separated out because the interest is probably taxable as income.
However, it might be the case that I can set off my debt or the interest on my debt against some tax. In that case I will maintain two accounts - the principal and the interest.
All those interests will also end up in additional accounts related to probably banking.
I've probably pissed off a few accountants with my choice of terms but in the end I do understand how fiat money works.
What gets on my tits is assertions such as "People who don't understand ..." with no working.
motohagiography|1 month ago
globular-toast|1 month ago
eudnrnr|1 month ago
CyberDildonics|1 month ago
Haaargio|1 month ago
In avg, the normal way it creates the liability over time and i would argue that in a colloquial its absolutly fine and doesn't change the message at all.
dang|1 month ago
Calling All Hackers - https://news.ycombinator.com/item?id=41306128 - Aug 2024 (253 comments)
jackfranklyn|1 month ago
Interest gets recognised as it accrues over time. Each month (or whatever period), you debit interest expense and credit accrued interest payable. The liability grows as time passes.
Recording future interest upfront would violate the matching principle - you can't recognise an expense for something that hasn't happened yet. If you pay off the loan early, you don't owe that interest.
That said, I think the article's bigger point about how money flows still holds. The technical accounting is just one layer of how this stuff actually gets recorded.
globular-toast|1 month ago
I'd encourage people doing their own accounts to think of it like this and don't do things that professional accountants do "just because".
The thing is accounting is all made up. We try to squeeze this idea of "value" into this abstraction called "money" and make it all work. But it's trivial to find cases where it's overly simplified and doesn't really work.
For example, how do you book depreciation of a motor vehicle? For the average person with a single utility vehicle the vehicle's value remains roughly the same from the moment of purchase until the moment is is written off. The value is its utility to you. In my accounts, I book this simply as "1 car" in my assets. But accountants don't like that. Everything has to be valued in money. So you end up with stupid stuff like averaging the depreciation over time that is pure fiction and only exists to make the books work and reduce the "shock" when a vehicle is finally written off.
willparks|1 month ago
Interesting perspective, I feel like I see this much more attributed to someone working on a meaningless problem for a paycheck at a large company. I guess it speaks to the difficulty in finding purpose in any endeavor in your twenties.
Nice conclusion on what to truly value.
nerdsniper|1 month ago
Founders usually feel they're missing out on all or most of these. And some of them probably feel like they don't really have a choice - maybe their specialty/resume is one that's difficult to get hired but skilled enough to make money on their own.
However, plenty of jobs take all your time and still feel meaningless. Many (most? - median personal income in USA is $42,000) don't pay enough for people to really socialize much anyways or do most of the hobbies they might enjoy or travel at all. Generally, having the choice of "HOW should I 'waste' my twenties?" is a fairly privileged one.
raw_anon_1111|1 month ago
Thought experiment: you have three sets of 10 recent college grads. One set works as enterprise devs in a tier 2 city, one set works at BigTech and another set works for a startup, which group do you think will have the highest median income after 10 years?
I would much rather work for a “meaningless paycheck” (and RSUs in a public company), than bust my ass at a startup for below market wages and “equity” that is illiquid and will statistically be worthless.
TZubiri|1 month ago
Startups/entrepeneurs often don't even have that duality and live our single life entirely through work. I would identify with "wasting my twenties" in the sense that the life of the entrepeneur isn't really age specific, it would be quite similar to do business at 20 than to do it at 50. The only difference being experience. But there's not much use of my young body, or libido, strength, that is typical of youth experiences.
0manrho|1 month ago
Is near universal to anyone in their twenties regardless of job type/sector. It's the start of most people's adult life, and without the lack of experience that age brings, it's natural to question if you're on the "right path" and/or be swayed by potential other opportunities you've not yet explored.
Hell, even with the experience of age, people still often ask themselves that very same question, and not just for their twenties either.
eru|1 month ago
This depends a lot on jurisdiction.
Some jurisdictions give you a certain amount of dividend income tax free. Some jurisdictions tax your capital gains even when they aren't realised. Lots of other variants exist.
takinola|1 month ago
TZubiri|1 month ago
Oh oh.
> It's about knowing where to buy estradiol valerate on the internet and how to compound injections
Oh no.
This is 5 paragraphs in, and I already red-flagged out of this, not just because of the time it would take to read this, but because I don't want to go crazy reading this stuff.
In case it isn't clear, it's not healthy to read indictments thinking how to avoid being caught by law enforcement and buying grey market hormones. Politics aside, at least get a prescription, it's not like they are not giving them out.
Hacking is a huge spectrum I know, but if we have to decide on some limits to what is open to be modified and understood by the lay(wo)man, and what is closed and left to professionals, wouldn't we agree that law and medicine would be such fields? (and possibly military?) Trying to hack medicine or law is as extremist as arguing that you don't have the rights to plant the seeds of fruit you buy. As far as rights go, sure people are given the rights to represent themselves pro-se and apparently to buy hormones online, but going beyond what's allowed, are you really willing to ruin your life just to stick it to the man or to exercise your right to do whatever?
NoboruWataya|1 month ago
nialv7|1 month ago
m463|1 month ago
beeflet|1 month ago
This is all spawned from insecurity that your prestigious degree or whatever can be replicated through independent learning
1970-01-01|1 month ago
hsbauauvhabzb|1 month ago
mothballed|1 month ago
raldu|1 month ago
Here's one that better suits the title:
"Pricing Money: A beginner's guide to money, bonds, futures and swaps" (866 points)
https://news.ycombinator.com/item?id=36358754
arunc|1 month ago
PS: Hackers websites don't have to look this ugly. We do take care of attention to detail that the page have to be rendered for mobile devices as well.
lxgr|1 month ago
I personally also don't love it, but fortunately, hackers have the technology to reflow legacy fixed-width text files to any format of their choosing :)
Betelgeux|1 month ago
You conflate 'r' (the discount rate) with 'Rf' (the risk-free interest rate). In reality, for high-risk assets like startups, 'r' is defined by the Weighted Average Cost of Capital (WACC) or CAPM: r = Rf + Beta(Rm - Rf).
Even in a ZIRP environment where Rf -> 0, the Beta (risk/volatility) for a startup is massive. A rational investor would still demand a high 'r', leading to a low valuation. The fact that VCs ignored this and funded "blatantly bad deals" cannot be explained by low interest rates alone. It is better explained by the information asymmetry a.k.a principal-agent problem.
We have a system where capital flows from passive LPs through multiple layers of rent-seeking intermediaries (VCs, LPs, Fund Managers) who are incentivized by management fees rather than carry. The market failure described isn't "financial nihilism" and "financial short-termism". It's a breakdown of feedback loops where intermediaries face no downside risk for misallocation. When there is no market coordination, no real competition, just unrestricted collusion, then things start to not make sense from the old school financial/business perspective. I do not think this is the failure of economic theory or the financial models itself, rather just that nobody knows or tells, that the prerequisite for these things is at least some degree of fair competition, market based economy, informed, rational actors and restricted collusion.
Suggesting that technical founders can fix this by simply "being decent" ignores the systemic reality. This economic structure rewards extraction over value creation, "decency" is an evolutionary disadvantage. The "real hackers" in this story are the financial and business intermediaries who successfully reverse-engineered the economy to extract rent without generating value, similarly to all those entrepreneurs, CEOs, corpo drones in the business sphere who do not provide any meaningful value to society (and shareholders as well.)
hsbauauvhabzb|1 month ago
aleph_minus_one|1 month ago
What do you consider as a "high quality founder"? I guess people will haver very different opinion what makes a founder "high quality".
wanderingmind|1 month ago
cryptica|1 month ago
- It's backed by nothing.
- It's not a fair medium of exchange because it physically cannot circulate very far from 'money printers' (not many hops) before it's taxed down to nothing. This means that it's unevenly scarce based on social proximity; unfair by design. Cantillon effects on steroids.
- It doesn't even exist as a single cohesive concept; the US dollar in your bank account is not the same as the US dollar in your friend's bank account and it's not the same as the US dollar which European traders use to buy derivatives (e.g. Eurodollars)... There are literally thousands of different ledgers (banks, institutions, in different countries), each presenting its own interface supposedly showing their holdings of this mythical unit called 'The US dollar' which is actually thousands of different currencies, which happen to share the same name, scattered around the world and held together only by regulators whose only shared interest is to print more units for themselves than the next guy does. Slow and fallible human regulators represent the only layer of 'consensus' which exists for the entire fiat monetary system; they move at snails' pace in a world of high frequency trading.
yfontana|1 month ago
Money is never backed by nothing, or it's worthless. It may not be backed by anything physical, but it's always backed by some form of trust. National currencies are backed by trust in the corresponding government and institutions.
1vuio0pswjnm7|1 month ago
https://www.textfiles.com/magazines/PHRACK/
Have "hackers" changed
If yes, how
tonymet|1 month ago
immibis|1 month ago
There's a lot of stuff to talk about with how money works! Like, when I use my Visa card issued by a New Zealand branch of an Australian bank to buy something in Europe, there are zillions of moving parts there.
The fact that money doesn't actually move internationally but yet appears to, and the fact that currency exchange can be done despite that. And that 60% of everything is backed by US dollars (rapidly dropping now). How bank transfers work with and without a common central bank; the different mechanisms countries set up to streamline them.
And, the fact that it's not really centrally controlled, and anyone (like Satoshi Nakamoto) can make a currency and there's not really anything a government can do to prevent currencies it doesn't like, and despite that we do mostly have one government-issued currency per country.
deejaaymac|1 month ago
Gold good, paper bad. But also, gold bad, because clipping.
If only there was a solution.
yfontana|1 month ago
dghlsakjg|1 month ago
The modern world would collapse in about a week if banks were not allowed to loan out deposits.
The ability to satisfy needs now and pay for them in the future is why you can have a house, why governments can build infrastructure, etc. That’s the only reason that banks really exist. Keeping your deposit safe for you while providing convenient access via cards, checks and other rails is just a wonderful side effect.
After a few thousand years of civilization we don’t have anything better that could allow you to satisfy current needs with future income. Direct loans are just vendors acting as de facto banks, at much higher risk.
A bank product that doesn’t loan out your deposits is called a safe deposit box. There’s your solution.
globular-toast|1 month ago
The problem is the governments can bail the banks out. After 2008, trust in paper IOUs (or their digital equivalent) should have plummeted, leading people to seek to store their wealth in other ways. But it didn't, because the governments stepped in and said, "nah, we need this to work, so we'll pay their salaries and bonuses with your taxes".
Bitcoin was intended to be a solution to this problem. There's nothing stopped people creating derivatives on top of Bitcoin and trading those. But nobody, no government nor anybody else, can just print more Bitcoin.
andsoitis|1 month ago
How can there be more money in circulation if we can’t create more?
Since wealth can increase (there’s more wealth today than 1000 years ago) why would you expect that money wouldn’t?
Or do you think there should always have been only $1 constant dollar for all time?
eru|1 month ago
Why not, as long as they have the consent of the owner? And all banks have the consent of the depositors.
jimbo808|1 month ago
nubskr|1 month ago
huijzer|1 month ago
dghlsakjg|1 month ago
The interest math is wrong too. Banks pay interest on deposits, absorb defaults, cover operating costs, hold capital, and meet liquidity rules. Net margins are about 1–3%, not 50–500%.
Fractional reserve banking does not mean infinite money or risk free profit. It means deposits are not 100% cash backed (because they have loaned out a portion of your deposit).
This is a popular myth, not “doing the math”.
What you’re describing only works in an absurd edge case where people borrow money just to park it and pay interest without spending it. That’s not fractional reserve banking, that’s a broken thought experiment.
Imustaskforhelp|1 month ago
Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking.
Honestly I am sort of interested in gold pegged currencies right now because US Dollar (let's be honest) feels really shaky right now and even America's debt itself is fueled by it being de-facto currency and I am feeling like previously it helped but I feel like debating that even America itself would benefit from if less foreign nations held US treasury bonds.
There already are some gold pegged stablecoins and theoretically with things like revolut or some instant way to sell crypto without too much hassle/losses and transfering it easily, its rather possible to do such.
Aunche|1 month ago
That's why Christian and Muslim (to a lesser extent since they exploited loopholes) nations relied on Jewish financiers. It does not make sense for the exchange of good and services among one another to be held back because someone deciding to sit on a pile of tokens.
jbs789|1 month ago
Banks start with some capital, borrow in the form of deposits, and lend in the form of bonds, mortgages etc.
The regulatory capital ratio determines how much capital they must hold to support the assets.
TZubiri|1 month ago
Without fractional reserve rules the banks could lend their money infinitely. I like Richard Wagner's theories/research on the subject, as in he actually asked for a loan and went through the books of the bank to verify where the money came from, it came from nowhere, they just credited their account and that's it.
aleph_minus_one|1 month ago
Now let's biblical exegesis to define what is legitimate interest and usury.
The "good" (or "bad"?) thing about these holy scriptures is that they can be interpreted quite freely to fit a personal or institutional agenda.
antonvs|1 month ago
The problem with that is they deny the existence of the time value of money, which is essentially a mathematical fact.
It's why Islamic banks come up with various workarounds to be able to charge the equivalent of interest.
01HNNWZ0MV43FF|1 month ago
CraigJPerry|1 month ago
all models are wrong but some are still useful. This model isn’t useful at all since the fraction was legislated to be 0 years ago.
yieldcrv|1 month ago
This guy gets it, okay devs, read this article
adeptima|1 month ago
https://chatgpt.com/share/695e125f-1254-800a-8661-d7a046f4c2...
pnt12|1 month ago
In practice, that prompt gets chatgpt role-playing as industry professionals: who knows if it's near or far from the real deal.
Also, reading long texts is good for comprehension. You don't learn with reading summaries, you learn with repetition and even further if write your own summaries.
AIandAPIs|1 month ago
globalnode|1 month ago
[deleted]
talkingtab|1 month ago
Except. The main point of chemical trails, money or other implementations of the messaging bus of a complex adaptive system is THE COMMUNITY it creates. Think the Sapir-Whorf hypothesis, but instead of language determines what you think, expand that to "your messaging bus language determines how your community functions". Yeah there is lots of stuff about money, but how it determines the form and function of the community (as in CAS) is the important part.
The other primary thing to think about money - once you get that it is a messaging bus - is the idea of making money from money. When you understand the function of the system you can then understand that making money from money is not a good idea. This is not a new idea. The concept of throwing the money lenders out of the temple has been around for a long time.
If you understand money, then you will be able to answer this question:
why is making money from money a bad (dysfunctional) idea?