> What if it takes 12 months of hard thinking to draw the right conclusion from the information? Are there many investors who go to such lengths?
It's not required to be all of them. Suppose that it indeed isn't, but the ones who do that work for investment funds who control significant pools of money.
Now the investors in two or three of those places do the research and conclude that some company is about to start doing well and their share price is currently $50 but is about to be $150. So they start buying it, and keep buying it until it gets up near $150. Which happens pretty quickly because they control enough money to use up all of the short-term liquidity at the lower prices and the majority of the shares are held by people who aren't even paying attention and therefore don't try to sell when the price starts going up. Once the price gets to that point they don't buy any more because it's no longer selling at a discount.
Then the company actually starts doing well to the point that everyone can see it but the price hardly moves because it was already priced in.
That would mean that the p/e-ratio of a company would rise sharply long before the profits set in. And that rise would be called "mysterious" by the general public. And then only when the profits set in, the p/e would come down.
The landmark paper, "Attention is all you need", that triggered the breakthrough that led to current transformer architecture LLMs, only came out in 2017. Without that breakthrough, they wouldn't exist. And even then, the early models produced gibberish. Better gibberish than older Markov chain text generators, but asking GPT-2 "What is three plus five?" would give some nonsense, non-sequitur answer, that might start with a (incorrect) number if you were lucky. At the time, everyone was wondering if scaling up the model size would improve intelligence or hit a wall. ChatGPT didn't release until 2022.
And you'd need to know back in 2015 that Nvidia specifically would be the big winner from AI. They don't even manufacture their own chips. Intel also designs chips and GPUs, but if you bet on them in 2015, you'd have lost money between then and 2025.
> That would mean that the p/e-ratio of a company would rise sharply long before the profits set in. And that rise would be called "mysterious" by the general public. And then only when the profits set in, the p/e would come down.
You have to look at the volumes involved: if there are tens of millions of shares of a particular stock moved everyday, a single event that involves 100,000 shares is going to be lost in the noise.
There are always people who think they know better (if they didn't think so they wouldn't be trading), and they may make crazy-appearing trades. Lots of the people in The Big Short were viewed as 'lunatics' ("You're betting against the housing market?") that turned out to be right. But also remember that there are people who think the world is flat.
> The price roughly rose along the earnings. Even though the foundations for generative AI became clear in 2015.
It's also why you hear the talking heads on television say things like "…this has already been priced in.".
You're not likely to see that in huge companies because everybody is already paying attention to them and it's harder to know something someone else doesn't about the thing everybody already knows everything about. Also, then it's more likely to happen on a scale of 10 days than 10 years.
Where that really happens is with startups and younger companies. Some company is currently making negative dollars but a few people have figured out that they're likely to be big so their share price is up before their earnings are.
And suppose you somehow actually knew what every major company's earnings would look like in every year from 2015 to now. Do you invest in Nvidia in 2015? Or do you invest in Netflix in 2015 and Tesla in 2019 and so on and not bother with Nvidia until just before the hockey stick?
> As people are forced to de-lever, everything goes down at once, often by very similar amounts, even though it cannot be possible that everything suddenly lost the same amount of value simultaneously.
The price of something and the value of something were never expected to be the same. What's the value of food? If you have none you die, so the value is quite high, but the price is much lower than that because there are many competing suppliers.
And the price of a large class like investment securities can easily change all at once if there is a large shift in supply or demand.
Not disagreeing with you, but isn't that already obvious from the fact that economic activity happens in the first place?
If you buy 5 apples from me for $5 then two things must be true: 1. The value that those 5 apples have to you exceeds the value that $5 have to you, at least at this very moment. Otherwise you would hang on to your $5 instead. 2. The value that those 5 apples have to me is less than $5 have to me, otherwise I would hang on to the apples.
The price of those 5 apples at this moment may be $5 but that doesn't reflect the value they have to neither me nor you. It's not the avereage either, necesarily. The only thing we know is that the value of them to you is higher and to me is lower.
Not necessarily. You could have a transaction take place where the buyer and the seller both value what's being exchanged in exactly the same amount and then go through with the transaction anyway because they both find trades entertaining or have a cultural preference for doing business with each other or just both place zero value on transaction costs.
That isn't common but that doesn't mean it could never happen.
> The price of something and the value of something were never expected to be the same
While I agree with you (quite firmly: it’s a great starting point to put on the table to challenge orthodoxy in this space), and think you’re agreeing with the parent comment, it is a fundamental tenet of mainstream economics and the political arguments of neoliberal (aka current mainstream) policy that [price == (market averaged) value], or at the very least [price ~= value].
Another interesting line of argument is to explore things that are valuable that don’t typically get a price: for example household labour, or love and friendship (at least directly: I’m sure a Friedman acolyte would reduce all relationships to exchange and reframe gifts and acts of love as investments).
As an aside for the parent comment: thanks for sharing this, it’s one of the top category of comments/quotes I’ve seen on HN in being useful, insightful, and challenging of conventional understanding in a way that improves understanding and future prediction.
Mainstream economists believe that value >= price. This is where economic surplus comes from. This is why trade is not zero sum, and it's why trade causes societies to get wealthier. Friendship and love fit into this framework just fine, as the price is $0, but the value is greater than $0.
I think we’re using different terms for value but I agree with your argument about comparative advantage and non zero sum trade, while also noting the other comments here that price is intended to correlate with marginal value in a suitably free market, to the degree that individual measures of value can be mediated through a price mechanism.
This is perhaps the broader point, which is that to the degree economics acknowledges non-priced value it’s a hand wave to “there’s some economic surplus here otherwise these people wouldn’t reach agreement to exchange”.
But to the degree that senses of value are the motivating factor behind economic exchange it’s oddly absent from the discussion. I get the reasons: philosophical inquiries about value and aesthetics are a lot more challenging to work through than concepts of utility reflected by measurable actions, but this goes to the overall point about the limitation and overreduction of current mainstream economics, and the criticism of people like Graeber of its politicised and somewhat arbitrary intellectual grounds.
To the degree mainstream economic reduction is useful to support understanding that’s fine - it absolutely allows reasoning and insight in many scenarios, especially microeconomics - but to the degree that decision-makers double down on it (especially macro) despite it being incomplete or absolutely wrong in certain environments and contexts because it promotes certain power structures and power plays that is highly problematic, especially when people jump to its defence out of misplaced loyalty to a school of expertise.
Note that in orthodox microeconomic theory, price is equal to the marginal value of the last exchanged unit. To use the above example of food:
> What's the value of food? If you have none you die, so the value is quit of high, but the price is much lower than that because there are many competing suppliers.
The first calories of the day, the ones that prevent you from dying, have a very high subjective value - but you pay them at the value of the 3000th calorie of the day, the extra drop of ketchup on your fries, which has a very little value.
And thus of course average value x volume is very different from (marginal value of last unit) x volume.
> While I agree with you (quite firmly: it’s a great starting point to put on the table to challenge orthodoxy in this space), and think you’re agreeing with the parent comment, it is a fundamental tenet of mainstream economics and the political arguments of neoliberal (aka current mainstream) policy that [price == (market averaged) value], or at the very least [price ~= value].
For mainstream economics, this is true in a very specific technical sense; all averages lose information, and the "market average" is a very particular form of average that doesn't behave the way most people think of an average behaving—particularly, it is not like a mean, the normal "average" that people think of, that is sensitive to changes in any individual values, it is somewhat like a median in that it is insensitive to changes in existing values that do not cross the "average"; e.g., if you take an existing market for a commodity with a given clearing price, and reduce, by any amount, the value of the commodity to any proper subset of sellers who would sell at the current market clearing price, the market clearing price does not change. The assessment of value across the market has decreased, but the output of the particular averaging function performed by the market has not.
The ban on swastikas in Germany is an authoritarian law, it's just one which is popular enough there that there isn't enough support to repeal it despite it being an unambiguous constraint on speech.
Non-consensual violence is prohibited because it directly harms other people. Face coverings don't directly harm anyone and laws that exist only for the government's convenience are authoritarian laws. There are ways to investigate bank robberies even if the robbers are wearing masks and in fact a law against masks is fairly ridiculous because anyone willing to break the law against robbing banks would be willing to break a law against wearing a face covering, so such laws only afflict innocent people.
>The ban on swastikas in Germany is an authoritarian law,
With this type of logic, all laws authoritarian then, like speeding laws, theft laws, and anything else that prevents you from doing what you want to do becomes authoritarian.
“Expression” is a bit of an overloaded word here. Carrying a swastika is considered similar to hate speech. Just like you cannot just make death threats in the U.S., even though you are just “expressing” yourself as long as you do not carry out the threat. Not saying those are exactly the same, but there are limits to expression, and spreading hate against large swathes of people is considered like that in Europe. Especially because that kind of speech can at some point turn into actual physical violence against the groups in question.
Threats aren't illegal because of their information content, they're effectively evidence of intent to commit violence. It's like confessing to a crime. You're being punished for the crime, not for the admission, but you admitting to it sure makes it easier to prove.
You and the parent both made good points. In Germany a swastika might be seen as more of a direct threat of specific action than other places. That makes it more sensible to classify as a threat.
> No, they position themselves against it, because they have a narrative similar to the (former) “deep state” narrative in the US, but you can be assured that they will reverse course as soon as they can afford it.
We seem to have a general problem with people not understanding that democracies have regular elections and the other party is going to get back in at some point. So then whenever one party is in power, instead of thinking ahead by five minutes and realizing that adding new constraints on the government and adding rather than eroding checks and balances will help you the next time the other team gets in, everybody thinks of them as an impediment to doing whatever they want immediately.
And then like clockwork they get butthurt when they checks they eroded or failed to put into place aren't there after the next election, as if they had nothing to do with it.
Mechanics don't have to work for the dealership. If the dealership isn't paying them well, they can go work for an independent shop, which is exactly what's happening.
Getting paid the book rate is an advantage to the mechanic because then they still get the full rate if they're more efficient at their job, which is an advantage to everybody. As long as the book rate is reasonable. And if it isn't then they don't take the job, which isn't a problem for the mechanics, it's a problem for Ford.
Yep I know a few mechanics and all of them who worked at dealerships have gone independent. Either started their own shop, or are working for a non-dealer shop.
A mechanic getting $20/hr is crazy. Shops charge the customer $100+ per hour for labor. Of course they have overhead, but many people don't realize that mechanics buy their own tools.
The lack of any chipset that would have tolerable information for producing those or any lifetime or willingness to deal with someone smaller than a Sony or LG. But yeah, drivers is close to where that ends up breaking.
The thing I don't really understand is why no one is doing this. Fine, Qualcomm sucks, but why is there no phone SoC from SiFive?
The TDP of a lot of existing phone chips (e.g. various Snapdragons) is often 10-15W. Ryzen 7 5800U and various others are configurable down to those numbers. Why has no one ever put one in a phone or in a tablet with a cell modem?
Where is Dell or Framework or any of these young companies from China that want to take a dent out of Samsung? Where, for that matter, is Samsung?
Trolls come out to say there is no demand for it, but do the math. Having open source drivers doesn't make your chip less attractive to the people who don't care about that, so if you design the chip you still get all of those sales and the ones from the people who do care. Meanwhile the other incumbents are hidebound and myopic, so if your hardware creates a software ecosystem that depends on it, you'll have it to yourself for a decent while before the recognition that you're getting 100% of those sales because you're the only one providing the hardware documentation they need can permeate through the relevant layers of the incumbent's bureaucracy. And by then you've reinvested that revenue into making a better chip than them.
Maybe Framework might one day be able to support the market with new hardware.
We need an open hardware consortium to promote software freedom. If we don't have an open hardware environment that is a foundation for free software, we are fighting a losing battle.
> I feel like scrutinizing the industry for a 2-3% error on an obviously difficult problem is exactly why we pay so much in the United States for health care.
If only. Then the outcomes would be better.
The real reason is that it's ostensibly supposed to be a market but the pricing for everything is completely opaque and shrouded in bureaucracy and corruption.
It's not quite that one either. The big problem is that most people get health insurance through their employer, and then it's the employer choosing it rather than the insured. Otherwise people would choose different insurance and in particular insurance with lower premiums but higher deductibles, and then use the money they saved on premiums to pay out of pocket for things that cost less than the deductible. And then actually insist on getting a real quote and having the ability to compare prices for non-emergency medicine.
So the main problem is employer middlemen. Which happens in significant part because of tax incentives for employers to do that which you can't get if you do it yourself.
> it's getting harder and harder to justify the efficiencies of centralization.
A lot of times they aren't even real to begin with.
People assume that economies of scale keep going up as long as scale keeps going up, but that's almost never true. They typically have diminishing returns or thresholds past which the unit cost stops going down. If you want to build solar panels you have to build a factory. If the factory can produce a million solar panels a year and you only want 10 solar panels you still have to build the entire factory. It's more efficient to build a million than 10.
But if people want a billion solar panels a year then you need a thousand factories, and one bigger factory isn't materially different than having two factories across the street from each other, so there's no real advantage to having them all operated by the same entity. Moreover, even if you only need 10 solar panels, you can get them from any of the thousand factories that each make a million a year. You're not losing the economies of scale by having many sellers and many buyers.
Meanwhile centralization often incurs additional costs. You already identified several, but another big one is land. Individual homeowners each have a roof or balcony wall that was otherwise going to have nothing on it. A centralized solar farm is more often going to have to pay for space.
Centralization is usually pushed by someone trying to monopolize something.
Well, there really are economies of scale involved in building solar farms. Accidental deaths per installed megawatt are orders of magnitude lower than rooftop solar. A single-axis solar tracker can rotate hundreds of square meters of solar panels. Washing dust off solar panels can increase their output by several percent, but is much more likely to happen if it's somebody's full-time job instead of a household chore, especially a household chore that puts you at risk of falling off a roof and dying. A FLIR image can identify failing solar cells so you can queue them for replacement or repair, and a lawsuit against a maker of faulty solar panels is much more feasible if the potential damages are €60 million rather than €600. Etc.
Also, clouds are less of a problem for a transmission grid with distributed solar farms than for an individual household with its own autarkic solar power system.
Even for solar energy, land is not a big cost, financially speaking. Morally and environmentally, it may be (it's arguable—solar farms don't have to devastate the ecosystem the way strip mining and oil spills do), but not financially.
> Accidental deaths per installed megawatt are orders of magnitude lower than rooftop solar.
This is 100-150 people a year. It's not even clear that this is more than the number of people who would die in car accidents on their way to work at centralized solar farms etc.
> A single-axis solar tracker can rotate hundreds of square meters of solar panels.
Those also cost thousands of dollars and it's not clear that it's a significant savings over the units that rotate fewer panels but cost less money.
> Washing dust off solar panels can increase their output by several percent, but is much more likely to happen if it's somebody's full-time job instead of a household chore, especially a household chore that puts you at risk of falling off a roof and dying.
This is a cost rather than an efficiency. If you get home and see dust on your panels you grab the hose and spray them off from the ground without having to pay anyone. The solar farm has to pay salary and benefits.
> A FLIR image can identify failing solar cells so you can queue them for replacement or repair
This is an inefficiency again. The centralized farm is paying for space so they replace panels with degraded output. The homeowner leaves them to run, gets 10% of the expected instead of 0% and if they want more capacity they get more panels instead of doing work to identify and remove existing ones.
> a lawsuit against a maker of faulty solar panels is much more feasible if the potential damages are €60 million rather than €600.
Class action lawsuits are a thing.
> Even for solar energy, land is not a big cost, financially speaking. Morally and environmentally, it may be (it's arguable—solar farms don't have to devastate the ecosystem the way strip mining and oil spills do), but not financially.
Land cost is why they can't put the solar farm near where the users are, because that's where the land is expensive, so instead they put it in the middle of nowhere. But even that land isn't free, and then you have to eat even higher transmission costs.
I think the answer is that they are, because there aren't that many infrastructure deaths.
https://www.ncbi.nlm.nih.gov/books/NBK448087/ says that in the US, where the statistics are best, "electrical injuries cause approximately 1000 deaths annually. Of these, around 400 result from high-voltage electrical injuries, while lightning accounts for 50 to 300 deaths." That's 400 deaths per year from high-voltage transmission lines and substations, and from other high-voltage sources such as CRT televisions being repaired or ion-implantation voltage sources. https://en.wikipedia.org/wiki/Electricity_sector_of_the_Unit... says the USA's utility-scale electricity generation was 4230.723 TWh in 02022.
So that's ballpark 100 nanodeaths per megawatt hour from transmission wires and the like. Or 0.1 deaths per terawatt hour. By contrast, https://www.nextbigfuture.com/2008/03/deaths-per-twh-for-all... claims that rooftop solar claimed 0.44 deaths per terawatt hour at the time; possibly that has improved since then, but I doubt that it has changed that much. Brian Wang returned to the question in 02021 in https://www.nextbigfuture.com/2021/07/2020-fatalities-for-us... and estimated almost 1 death per terawatt hour.
So it seems clear that the infrastructural deaths are much lower than the deaths from falling off roofs.
There are definitely economics of scale. They are just not visible in Germany due to outdated building and policy practices.
> I'm not talking about prices, which may incorporate subsidies, permitting costs, taxes such as tariffs, transaction costs, lawsuits against non-performing building contractors, and market inefficiencies such as homeowners not having access to the zero-marginal-cost excess power that can be produced on sunny days for regulatory reasons.
Every single thing here is policy failure by German government.
A lot of solar systems are set up to sell excess power back to the grid. It makes sense that these systems would have some regulatory criteria because you wouldn't want e.g. home solar systems putting power on the lines when the utility company has the power off because of a downed wire or active work.
It's also possible to have a solar system that doesn't do this. Either you have a battery system and if you generate excess power you only put it into your own batteries or the system is small relative to the load of the house so you're rarely if ever generating more than you're actively using and configure the system so the grid is only ever attached to the input side. This should not be any more dangerous to the grid than using a UPS or charging an electric car and if the regulations make it more difficult than that they should be suspected of malicious intent.
The systems discussed in the article aren't necessarily selling excess power back to the grid, but they are sending it back to the grid (possibly for free). Because they work by pumping power into a wall socket.
They do so responsibly (fancy electronics that turn them off when the grid goes down). But it is the case where you are acknowledging that extra regulatory criteria make sense.
But in that case the regulations would only have to apply to plugging in something that doesn't do that. There shouldn't be any forms or approvals or fees for someone who buys a product that does.
I agree there shouldn't be, but I don't think it's surprising that in many places there are. It takes active work for the regulator to look at the product and say "this design is sound, we're sure it won't kill anyone".
Purpose, ought, shouldn't, shouldn't, sense. These are words of minimal relevance to regulations and bureaucracy, which have internal incentive structures that rarely align with any kind of human morality.
Suppose that it isn't literally impossible to affect what the rules are and then if we're going to attempt it we need to determine what they ought to be.
Well, if you don't have any such compass, your efforts will be at best ineffectual. But an even more likely reason your efforts will be ineffectual is that the change you want to make is to a point outside the possibility space determined by the internal incentive structures of the institution.
Analogously, you might reckon that the best place for a nickel mine would be on 16 Psyche, because that's where the largest surface nickel deposits are. Or you might reckon that it would be good for an interpreter to give an error when the user attempts to run an infinite loop. But, lacking an interplanetary spaceship or a solution to the Halting Problem, these calculations are of little value.
The most effective response I've found to regulations that harm me is to leave.
It's not required to be all of them. Suppose that it indeed isn't, but the ones who do that work for investment funds who control significant pools of money.
Now the investors in two or three of those places do the research and conclude that some company is about to start doing well and their share price is currently $50 but is about to be $150. So they start buying it, and keep buying it until it gets up near $150. Which happens pretty quickly because they control enough money to use up all of the short-term liquidity at the lower prices and the majority of the shares are held by people who aren't even paying attention and therefore don't try to sell when the price starts going up. Once the price gets to that point they don't buy any more because it's no longer selling at a discount.
Then the company actually starts doing well to the point that everyone can see it but the price hardly moves because it was already priced in.
reply