I guilty of this, I think the main reason is that I could learn how to do basic editing of a spreadsheet in 10 minutes through trial and error as an 8 year old while I still can barely write a query for what I want in any SQL based program. Now I can make Excel sing, and still can't get a database to combine the numbers in the manner I want. I think the other reason is that a spreadsheet is more flexible than a database (sometimes I want to add this entry to that one and other times I might want to subtract), it's my data, so I don't care that the result is inconsistent I just want it quickly.
I played transport tycoon a ton, but I wish the economic model had been more cyclical. I generally spent the last part of the game spending my profits trying to build railroads that would purposely run into my rivals trucks in a vain attempt to dive them the rest of the way out of business.
Me thinks you are confusing two very similarly named but unrelated companies. Morgan Stanley owns Discover (Dean Witter and Van Kampen funds) but was not affilated with the house of Morgan (it was started by a former JP Morgan partners who left a JP Morgan predicessor prior to Drexel & Co's breakup due to the Glass Stegall act). JP Morgan & Co owns Chase and BankOne.
This always was their business model, search was just the first way to pay for it. Google's mission is to provide a competitive platform to Windows. Since that sort of platform is a natural monopoly, there will be only one big survivor.
At the current state of technology, governments are established to provide institutions and infastructure (markets are pretty poor at both, although the anarcho-capitalist in me hopes that they are getting better). Once those are provided, the most successful contries have strict limites placed on the government's additional activities. At some point transaction costs will be low enough to allow markets to provide most infastructure, but my judgement is that they aren't there yet.
I think more and more of the general public is realizing that experts might not be as expert as we thought (and that good amateurs are usually just as good with less bias in their advice). There are lots of valid reasons for a company to hedge its exposure (even if they expect the value could continue to increase).
I had fun reading "Conspiracy of Fools", especially the risk modelers were freaking out about Enron's potential demise about 2 years before anything really bad had happened. If you were looking for a fun summer read, you might enjoy it.
Your class act will soon be busted for securities law vilations and could share a cell with Kenny-Boy (that would be a really easy conviction (since the evidence was broadcast on national tv, too). You can't undo the losses of some shareholders, unless you undo the losses of all shareholders.
Also, I've never heard of any stock where you can buy 6 month out, at the money options for a basis point of par, 1-2% would be very cheap options (especially for stocks that drop as much as that one did). 5% would be normal technology company premiums (it would have taken about 30 mn to buy those options in most cases, but still would have been a good bet in this case). Since he was hedging, I'm sure he could have found a few banks to loan him the money. The OCC might have had an issue with his owning 100,000 contracts, though.
Minor nit, you don't have to wait for an uptick to buy options. You do have to wait for an uptick to sell short. Your strategy was essentially what Mark Cuban did to remain a billionare after the dotcom crash. Most purchase agreements forbid it as a matter of boilerplate, but his somehow neglected that item.
The company could most likely own put options on itself, although it might come interesting if their auditors felt the position needed to be disclosed as a footnote. I know Microsoft and Dell were writing put options on their own shares when the bubble burst (MS just bought them back early, Dell repurchased the stock for several years at well above market prices). I don't believe they were the only two, just two who were still doing it in size in 2000.
I don't recall the specifics of Red Hat's IPO, I thought the "general public" portion of the IPO was reserved for code contributors (which would limit them to something like insiders). In the case of Google, they were essentially making a market in the stock early so it wasn't really an IPO in the traditional sense. I should have been clearer in stating that if me as an average dumb fella off the street is being sold the stock (not in an auction and with no special ties to the company) it's probably a stinker. Normally IPOs are intentionally underpriced and distributed reward good customers of the underwriter, if they aren't following that practice than its likely that the shares aren't underpriced as much as one thinks they are.
It's always wise to recall Groucho Marx when dealing with IPOs, "I don't want to be a member of any club that will take me." When average investors (or brand new investors) are being allocated IPO shares it's a good idea to run away from the deal.
I'll keep thinking about, but am not sure that just localizing the means of production leads to security. This has been quite facinating, thanks.
There is an old papers which I think you would enjoy, The Nature of the Firm by Ronald Coase--it's a pdf here (probably the most inspired economist I know of, he was, of course, smart enough to never admit to being one). He looks at the firm in a similar way as your view on societal units.
Now I'm confused, how does haggling give dignity to anyone in the process? If my abilty to get the best price (or a fair price) depends on my ability to negotiate, I don't ever want to live in that society. I'm not sure how you can expect to buy say a bushel of wheat for a different price from two vendors, all the free market requires is that you can not buy wheat, that several vendors sell it (perhaps two grades or brands), and that you can substitute barley or corn.
Markets can transact in security (I'm thinking of several ways to do it now), but by design they cannot be security. Human nature cannot offer you security no matter how it's organized. In that sense, I don't disagree with you, in concept, but perhaps in execution. Markets will never provide the security you seek, because humanity can not. We're selfish creatures (except in very small groups, and even then our selfishness sometimes rears its head). I choose a market based system because they are the that works well knowing that all the other actors are flawed and selfish, rather than a system that depends on them not being selfish. I wish they weren't but barring the Mellinial reign I don't think human society will find that on it's own.
You would probably be quite interested to learn more about the Japanese economic system. Melon may cost ~JPY 2000 each, but by golly they are really nice and the farmer makes a good living. It's market based but more social (just as they are more concerned as a culture with the group than the individual), their distribution of benefits is unlike both the US winner takes all (or most) and Europe's the government spreads it to everyone "fairly".
I consider a system where all able bodied individuals have the opportunity to provide for themselves and privately take care of all those unable to work (the orphan, widow and alien, etc) to be the best system. I tire of our system's coddling of those who should have been saving when they work but do not.
I'm not going to requote everything point by point:
Haggling
Free markets don't require haggling, the freedom of choice among products/brands and to choose not to buy a product (say peppers over tomatoes) is enough to have a free market. Personally I hate haggling over crap, just tell me what price you want and I'll take it or leave it, I bought my car on ebay in part to avoid the haggling over a price.
On the information delivered by the market. The end result IS the valuable information, knowing that a transaction occured at a price is the information that a market provides. It's tremendously valuable, even without all the background research. Think of it this way, if you see a long line at the ice cream stand, on a warm but not hot summer day, you are likely to go investigate why. The fact that people are willing to stand in a line and "pay" a portion of their time to do so suggests that there is a very favorable transaction occuring. Even if the people who were in the line read the paper and saw the advetisement for a free banana split, you don't need to know all the research to get the same benefit. Transaction or lack of transaction carries more than enough information to make decisions on even if custom pricing is not accomplished. It's the transaction information that I claim is well worth the admittedly large costs of a market based system.
On extending markets and economies:
Open outcry markets function exceedingly well with several thousand traders haggling over prices with surprisingly little more than 19th century technology. Using computers, millions of people participage in a host of markets constantly.
I will grant that I have a vested interest, my career would be impossible if I were unable to spread it to a much larger customer base than you are promoting, but there are millions of people like me, (probably the majority on this message board). I work in risk managment, prior to this I was at a pension fund. To offer those services to a small group would require too large a cost per person to add enough value to make a viable transaction for both parties.
I think both operating systems and economies have taken a surprising number of ideas from the other (queing behavior is one example that has gone both ways).
From where I stand it sure looks like the economy is working for a lot of people, we have far more choices than our pre market ancestors did, and the cost of many of our basic needs have fallen relative to our incomes. I've worked the earth for food and livelihood and find what I do now far more fulfilling (in non-material ways).
I find it exceedingly hard to get in the so-called "free market". The clearing price is merely supply and demand. It does NOT take the following information into account:
-Cost of raw materials.
-Cost of labor.
-Amount of money in the market.
-Income of individuals that need the good.
-Fair profit.
-The needs of the individual workman.
-The needs of the individual consumer.
All of those items pretty much make up supply or demand (with the exeption of the needs of the individuals could be wants.
It's very easy to get the price of most goods transacted in the free market especially in the internet era. All you have to do is watch the transactions. Newspapers print them, property sales are published at the courthouse, all manner of financial instruments are tracked daily, stores have published offer prices, and you can watch a few baskets to see what is selling at a given price (NPD does this for a large number of stores if you are really interested). You lose all of this information if you choose a different method. The guild system benefitted from the market's information flow but restricted the flow to guild members (which was what kept the guild in operation). At this point we are arguing about who should be the benificiary of the information flow not that it isn't worth having.
Value to whom? The information is controled to the point that corporations and other con artists have all the information- and thus all the power.
You keep bringing up corporations and con artists, but the information is there for everyone to use. They do use it, but plenty of consumers and honest businesspeople do, as well.
The free market is inaccurate because it encourages an abscence of information- and thus fraud. A distributist economy overcomes this not by setting prices by a central authority- like under communism or a stock market- but rather by setting prices individually based entirely on human relationships.
Your restriction of information can only be maintained until you transact, at which point your transactions become information to all other market participants. A stock market is certainly not a central authority (anymore than the forum in Democracy is a central authority). It is central, but it takes input from all participants.
You do the best work for people you know- and you give the best price to people you love. You should not be doing business with anybody else.
Therin lies the hope and cruel reality of all non-market based systems. They seek to extend the social relationships to an economy, but it never works well once your unit gets much bigger than a family unit. True communism works great in a family, because in most families the members care a great deal about the whole. So price signals aren't necessary. It even extended to the kibbutz, but the only mechanism that effectivly can weigh all of the items (and others) in the list you cited using current technology is a market. Perhaps with more advanced computers we will be able to better allocate resources (and eliminate the emotional excesses and inequalities of a free market) but those are a long way off based on current macro economic models.
The market sets a clearing price, which may change based on differing information, but the huge benefit to a market is that someone (usually everyone) gets the pricing information at a nominal cost and that information is exceedingly hard to get in almost all other systems. Our society tolerates the other flaws of a market based system (the most obvious being asymetric rewards) because the value of the pricing information is much larger.
What does your statement mean? What is bad about expensive pricing? It almost always indicates that something required many human hours and other resources to create. By inacurate pricing do you mean volatility or fruad?
Markets are really good at setting a price in an efficient manner (the pricing is free). They are horrible at distributing gains in an equitable manner (the returns for being the worst IT grad at San Francisco State in 1998 probably far outweigh being at the top of your class in 2001).
I touch the mouse as little as possible when using a spreadsheet (arrow keys with shift control and alt are orders of magnitude faster). Ctrl+d and ctrl+r used to be customizable as fill down and right, respectivly, but in the latest versions the ability to assign any keyboard short cuts to those two features disappeared (they no longer appear in the edit menu to be assigned). Even if I don't want to, I'll pay for Office before using the mouse to work with spreadsheets.
That wasn't intended to be a dig on America. There is absolutly nothing wrong with liking quick and cheap, it reflects our zeal for efficiency. Japan prefers fast and high quality (but they pay through the nose for it. Neither is particularly better or worse, just different.
We're very efficient but how many American products would you hold as an example of high quality? They exist, but are rare. Who came up with a way to build merchant marine ships faster than Germany could sink them though?
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I guilty of this, I think the main reason is that I could learn how to do basic editing of a spreadsheet in 10 minutes through trial and error as an 8 year old while I still can barely write a query for what I want in any SQL based program. Now I can make Excel sing, and still can't get a database to combine the numbers in the manner I want. I think the other reason is that a spreadsheet is more flexible than a database (sometimes I want to add this entry to that one and other times I might want to subtract), it's my data, so I don't care that the result is inconsistent I just want it quickly.
I played transport tycoon a ton, but I wish the economic model had been more cyclical. I generally spent the last part of the game spending my profits trying to build railroads that would purposely run into my rivals trucks in a vain attempt to dive them the rest of the way out of business.
Me thinks you are confusing two very similarly named but unrelated companies. Morgan Stanley owns Discover (Dean Witter and Van Kampen funds) but was not affilated with the house of Morgan (it was started by a former JP Morgan partners who left a JP Morgan predicessor prior to Drexel & Co's breakup due to the Glass Stegall act). JP Morgan & Co owns Chase and BankOne.
Water Displacement formula # 40 :)
This always was their business model, search was just the first way to pay for it. Google's mission is to provide a competitive platform to Windows. Since that sort of platform is a natural monopoly, there will be only one big survivor.
At the current state of technology, governments are established to provide institutions and infastructure (markets are pretty poor at both, although the anarcho-capitalist in me hopes that they are getting better). Once those are provided, the most successful contries have strict limites placed on the government's additional activities. At some point transaction costs will be low enough to allow markets to provide most infastructure, but my judgement is that they aren't there yet.
I think more and more of the general public is realizing that experts might not be as expert as we thought (and that good amateurs are usually just as good with less bias in their advice). There are lots of valid reasons for a company to hedge its exposure (even if they expect the value could continue to increase).
I had fun reading "Conspiracy of Fools", especially the risk modelers were freaking out about Enron's potential demise about 2 years before anything really bad had happened. If you were looking for a fun summer read, you might enjoy it.
Me thinks you have mistaken Billy for Lerooooooy!
Yeah and that's why the top of this artform was stuff like King's Quest, Pirates!, SimCity, and Elite.
Your class act will soon be busted for securities law vilations and could share a cell with Kenny-Boy (that would be a really easy conviction (since the evidence was broadcast on national tv, too). You can't undo the losses of some shareholders, unless you undo the losses of all shareholders.
Also, I've never heard of any stock where you can buy 6 month out, at the money options for a basis point of par, 1-2% would be very cheap options (especially for stocks that drop as much as that one did). 5% would be normal technology company premiums (it would have taken about 30 mn to buy those options in most cases, but still would have been a good bet in this case). Since he was hedging, I'm sure he could have found a few banks to loan him the money. The OCC might have had an issue with his owning 100,000 contracts, though.
Minor nit, you don't have to wait for an uptick to buy options. You do have to wait for an uptick to sell short. Your strategy was essentially what Mark Cuban did to remain a billionare after the dotcom crash. Most purchase agreements forbid it as a matter of boilerplate, but his somehow neglected that item.
The company could most likely own put options on itself, although it might come interesting if their auditors felt the position needed to be disclosed as a footnote. I know Microsoft and Dell were writing put options on their own shares when the bubble burst (MS just bought them back early, Dell repurchased the stock for several years at well above market prices). I don't believe they were the only two, just two who were still doing it in size in 2000.
I don't recall the specifics of Red Hat's IPO, I thought the "general public" portion of the IPO was reserved for code contributors (which would limit them to something like insiders). In the case of Google, they were essentially making a market in the stock early so it wasn't really an IPO in the traditional sense. I should have been clearer in stating that if me as an average dumb fella off the street is being sold the stock (not in an auction and with no special ties to the company) it's probably a stinker. Normally IPOs are intentionally underpriced and distributed reward good customers of the underwriter, if they aren't following that practice than its likely that the shares aren't underpriced as much as one thinks they are.
It's always wise to recall Groucho Marx when dealing with IPOs, "I don't want to be a member of any club that will take me." When average investors (or brand new investors) are being allocated IPO shares it's a good idea to run away from the deal.
I'll keep thinking about, but am not sure that just localizing the means of production leads to security. This has been quite facinating, thanks. There is an old papers which I think you would enjoy, The Nature of the Firm by Ronald Coase--it's a pdf here (probably the most inspired economist I know of, he was, of course, smart enough to never admit to being one). He looks at the firm in a similar way as your view on societal units.
Now I'm confused, how does haggling give dignity to anyone in the process? If my abilty to get the best price (or a fair price) depends on my ability to negotiate, I don't ever want to live in that society. I'm not sure how you can expect to buy say a bushel of wheat for a different price from two vendors, all the free market requires is that you can not buy wheat, that several vendors sell it (perhaps two grades or brands), and that you can substitute barley or corn.
Markets can transact in security (I'm thinking of several ways to do it now), but by design they cannot be security. Human nature cannot offer you security no matter how it's organized. In that sense, I don't disagree with you, in concept, but perhaps in execution. Markets will never provide the security you seek, because humanity can not. We're selfish creatures (except in very small groups, and even then our selfishness sometimes rears its head). I choose a market based system because they are the that works well knowing that all the other actors are flawed and selfish, rather than a system that depends on them not being selfish. I wish they weren't but barring the Mellinial reign I don't think human society will find that on it's own.
You would probably be quite interested to learn more about the Japanese economic system. Melon may cost ~JPY 2000 each, but by golly they are really nice and the farmer makes a good living. It's market based but more social (just as they are more concerned as a culture with the group than the individual), their distribution of benefits is unlike both the US winner takes all (or most) and Europe's the government spreads it to everyone "fairly".
I consider a system where all able bodied individuals have the opportunity to provide for themselves and privately take care of all those unable to work (the orphan, widow and alien, etc) to be the best system. I tire of our system's coddling of those who should have been saving when they work but do not.
I'm not going to requote everything point by point:
Haggling
Free markets don't require haggling, the freedom of choice among products/brands and to choose not to buy a product (say peppers over tomatoes) is enough to have a free market. Personally I hate haggling over crap, just tell me what price you want and I'll take it or leave it, I bought my car on ebay in part to avoid the haggling over a price. On the information delivered by the market. The end result IS the valuable information, knowing that a transaction occured at a price is the information that a market provides. It's tremendously valuable, even without all the background research. Think of it this way, if you see a long line at the ice cream stand, on a warm but not hot summer day, you are likely to go investigate why. The fact that people are willing to stand in a line and "pay" a portion of their time to do so suggests that there is a very favorable transaction occuring. Even if the people who were in the line read the paper and saw the advetisement for a free banana split, you don't need to know all the research to get the same benefit. Transaction or lack of transaction carries more than enough information to make decisions on even if custom pricing is not accomplished.
It's the transaction information that I claim is well worth the admittedly large costs of a market based system.
On extending markets and economies:
Open outcry markets function exceedingly well with several thousand traders haggling over prices with surprisingly little more than 19th century technology. Using computers, millions of people participage in a host of markets constantly.
I will grant that I have a vested interest, my career would be impossible if I were unable to spread it to a much larger customer base than you are promoting, but there are millions of people like me, (probably the majority on this message board). I work in risk managment, prior to this I was at a pension fund. To offer those services to a small group would require too large a cost per person to add enough value to make a viable transaction for both parties.
I think both operating systems and economies have taken a surprising number of ideas from the other (queing behavior is one example that has gone both ways).
From where I stand it sure looks like the economy is working for a lot of people, we have far more choices than our pre market ancestors did, and the cost of many of our basic needs have fallen relative to our incomes. I've worked the earth for food and livelihood and find what I do now far more fulfilling (in non-material ways).
I find it exceedingly hard to get in the so-called "free market". The clearing price is merely supply and demand. It does NOT take the following information into account:
-Cost of raw materials.
-Cost of labor.
-Amount of money in the market.
-Income of individuals that need the good.
-Fair profit.
-The needs of the individual workman.
-The needs of the individual consumer.
All of those items pretty much make up supply or demand (with the exeption of the needs of the individuals could be wants.
It's very easy to get the price of most goods transacted in the free market especially in the internet era. All you have to do is watch the transactions. Newspapers print them, property sales are published at the courthouse, all manner of financial instruments are tracked daily, stores have published offer prices, and you can watch a few baskets to see what is selling at a given price (NPD does this for a large number of stores if you are really interested). You lose all of this information if you choose a different method. The guild system benefitted from the market's information flow but restricted the flow to guild members (which was what kept the guild in operation). At this point we are arguing about who should be the benificiary of the information flow not that it isn't worth having.
Value to whom? The information is controled to the point that corporations and other con artists have all the information- and thus all the power.
You keep bringing up corporations and con artists, but the information is there for everyone to use. They do use it, but plenty of consumers and honest businesspeople do, as well.
The free market is inaccurate because it encourages an abscence of information- and thus fraud. A distributist economy overcomes this not by setting prices by a central authority- like under communism or a stock market- but rather by setting prices individually based entirely on human relationships. Your restriction of information can only be maintained until you transact, at which point your transactions become information to all other market participants. A stock market is certainly not a central authority (anymore than the forum in Democracy is a central authority). It is central, but it takes input from all participants.
You do the best work for people you know- and you give the best price to people you love. You should not be doing business with anybody else.
Therin lies the hope and cruel reality of all non-market based systems. They seek to extend the social relationships to an economy, but it never works well once your unit gets much bigger than a family unit. True communism works great in a family, because in most families the members care a great deal about the whole. So price signals aren't necessary. It even extended to the kibbutz, but the only mechanism that effectivly can weigh all of the items (and others) in the list you cited using current technology is a market. Perhaps with more advanced computers we will be able to better allocate resources (and eliminate the emotional excesses and inequalities of a free market) but those are a long way off based on current macro economic models.
The market sets a clearing price, which may change based on differing information, but the huge benefit to a market is that someone (usually everyone) gets the pricing information at a nominal cost and that information is exceedingly hard to get in almost all other systems. Our society tolerates the other flaws of a market based system (the most obvious being asymetric rewards) because the value of the pricing information is much larger.
What does your statement mean? What is bad about expensive pricing? It almost always indicates that something required many human hours and other resources to create. By inacurate pricing do you mean volatility or fruad?
Markets are really good at setting a price in an efficient manner (the pricing is free). They are horrible at distributing gains in an equitable manner (the returns for being the worst IT grad at San Francisco State in 1998 probably far outweigh being at the top of your class in 2001).
I touch the mouse as little as possible when using a spreadsheet (arrow keys with shift control and alt are orders of magnitude faster). Ctrl+d and ctrl+r used to be customizable as fill down and right, respectivly, but in the latest versions the ability to assign any keyboard short cuts to those two features disappeared (they no longer appear in the edit menu to be assigned). Even if I don't want to, I'll pay for Office before using the mouse to work with spreadsheets.
Oh, yeah, occasionally when it happens something takes the country by storm. I was talking about Dell, though.
That wasn't intended to be a dig on America. There is absolutly nothing wrong with liking quick and cheap, it reflects our zeal for efficiency. Japan prefers fast and high quality (but they pay through the nose for it. Neither is particularly better or worse, just different.
We're very efficient but how many American products would you hold as an example of high quality? They exist, but are rare. Who came up with a way to build merchant marine ships faster than Germany could sink them though?