Comment by m000
10 days ago
"During bubbles, every experiment or idea gets funded, the good ideas and the bad ideas. And investors have a hard time in the middle of this excitement, distinguishing between the good ideas and the bad ideas. ... But that doesn't mean anything that is happening isn't real."
Remind me again why we need investors to fund bad ideas? The whole premise of western capitalism is that investors can better align with the needs of the society and the current technological reality.
If the investors aren't the gurus we make them to be, we might as well do with a planning committee. We could actually end up with more diversified research.
"Under socialism, a lot of experimental ideas get funded, the good ideas and the bad ideas. And the planning committee have a hard time in the middle of this excitement, distinguishing between the good ideas and the bad ideas. ... But that doesn't mean anything that is happening isn't real."
We need investors to fund ideas to find out if they are good or bad. It is called testing.
> Remind me again why we need investors to fund bad ideas?
A lot of good ideas only look bad in hindsight. It costs time and money to determine goodness, and that deserves funding.
> A lot of good ideas only look bad in hindsight. It costs time and money to determine goodness, and that deserves funding.
Governments can also do that funding. The most pivotal technologies in recent history have been a result of government investment.
Private capital has a role, but it's mostly at the productization phase, not fundamental research.
Committees' investment tends to be not very diversified and often too risk-averse because of how blame placing works. E. g. most of soviet's cloning of chip (and many other products) wasn't due to lack of engineering skill - it's just less risk for the bureaucrats running the show. R&D for an original chip is risky and timing it to the next November the seventh is likely to not work. Cloning is a guaranteed success.
The whole point of capitalism is that one is entitled to the consequences of their own stupidity or the lack thereof. The investors are more willing to take the risks because their losses are bounded - they are risking only as much as they are willing, rather than their status in an organization. Of course once all investors ends up investing into the same bubble there is no real advantage over a committee.
> Remind me again why we need investors to fund bad ideas?
Early stage investors generally fund a portfolio of multiple ideas, where each idea faces great uncertainty - some investments will do tremendously well, some won't. Invstors don't need every investment to do well due to the assymmetry of outcomes (a bad investment can at worst go down 100%, a good investment can go up 10,000%, paying off many bad investments).
> The whole premise of western capitalism is that investors can better align with the needs of the society and the current technological reality.
This is not the premise of capitalism, it's the justification for it - it's generally believed that capitalism leads to better outcomes over time than communism, but that doesn't mean capitalism has 0 wasteage or results in 0 bad decisions.
There is a very important difference: real investors risk their own money, the money they saved over their entire life making decisions.
Under socialism bureaucrats risk someone else's money.
We are not in a pure capitalistic society, we also have States, central Banks with central planning expending over half the money in Europe and USA and more than half in Asia.
As a European myself that see the public money being wasted by incompetent people and filling the pockets of politicians, specially marxist ones. For example, the money Spain received after COVID filled so many socialist pockets and has not given information back to Europe as of how it was spent(it was spent on their own companies of friend and family).
>> There is a very important difference: real investors risk their own money, the money they saved over their entire life making decisions.
Except for the "institutional investors".
Even then, the people the money came from voluntarily chose those institutions. If you don't like risky investments, there are lower risk institutions or products you can put your money in. It's still ultimately the will of the individual what they do with their money, and the consequences of bad choices are still mostly contained to the individuals who make them. But when it's done with tax money, everyone's dragged into it and has no personal choice in the matter. Even worse, when it's tax money without democracy, even if the majority of people don't like how it's used, they even collectively have no choice in the matter.