Tag Archives: web 2.0

Crying Wolf: Holding the Pundits and Media Accountable for Being Wrong about Snapchat and Web 2.0

Snapchat’s valuation has now eclipsed $30 billion on its second day of trading (in agreement with my prediction in June 2014)…yet so many pundits got it wrong. But not just for Snapchat, but also Uber, Facebook, Google, Dropbox, Pinterest, AirBnB, Amazon, and many more.

I’ve been reading predictions of a Web 2.0 bubble burst since 2012..but unlike a stopped clock, these pundits are never right.

Below are links to pundits in 2013–when Snapchat was only valued at $3-4 billion–calling it a bubble. Had someone hypothetically shorted Snapchat then, by now they would have lost 1,000% of their money.

Investors think Snapchat is worth $4 billion. That’s insane.

Snapchat is Intrinsically Worthless:

$4bn for an easily replaceable service that is little more than Microsoft Paint duct taped to a disposable camera? A service that voluntarily throws away its own data in the golden age of data hoarding? A service devoid of the nature of competition that is the driving behind every other profitable company in the world?”

Thursday, 17 Oct 2013 Cashin: Tech valuations remind me of dot-com bubble

Absurdly High Valuations – 42Floors Blog:

When you look at the rumored Snapchat valuations of over 3 billion dollars, it’s difficult to understand how an investor can think that Snapchat is worth that much. Because the truth is, it’s not. Those rumors, even if true, don’t actually value Snapchat at 3 billion dollars.

Venture capital funding rounds keep getting bigger — raising worries about a bubble

Nov 16, 2013: Snapchat’s Value: ‘A Form Of Delusion’ – Business Insider

And here are the same pundits in 2012 calling Facebook a bubble when the stock was trading at $38 (now it’s at $138). Facebook’s profits & earnings have grown so much since then that if Facebook stock were to fall back to $38, the company would actually be undervalued. The pundits underestimated Facebook’s growth and ability to monetize mobile users (but I didn’t):

Is the Social Media Bubble Finally Popping?

Aug 3, 2012 – Facebook’s stunning stock price collapse means that California’s cash-needy state government stands to collect hundreds of millions of dollars less in IPO and …

How Facebook’s Zucked-up IPO just killed the tech bubble

May 25, 2012 – How Facebook’s Zucked-up IPO just killed the tech bubble …. If Facebook’s stock does well — or even simply starts to climb instead of cratering — in coming …

With Facebook Earnings, The Second Internet Bubble Is Over

Jul 26, 2012 – Investors almost immediately dumped Facebook shares, which tumbled in after-market trading by 8%. Facebook’s stock, which was so well-hyped going into its

Why do we keep falling for economic bubbles – and will we ever learn?

May 26, 2012 – The dizzy rise and dip of Facebook stock this week called to mind the dot-com bust … Behavioural economists say yes: Bubbles come from our basic mental flaws.

Is air leaking from the Facebook bubble? – BBC News

May 21, 2012 – So… what happened there? On Friday, after an all-night hackathon at Facebook’s Menlo Park campus, Mark Zuckerberg pressed a button to mark the start of …

Facebook’s Instagram buy: The new dot-com bubble

Apr 12, 2012 – Innovation is losing to funny-money acquisitions in Silicon Valley — and the tech bubble is getting dangerously close to popping.

In 2012 when Facebook bought Instagram for $1 billion, the usual pundits in the media cried ‘bubble’, yet in retrospect it was an ingenious move, and Instagram is now worth $30 billion by some estimates. Instagram’s ad revenue for 2016 was $3 billion, triple the purchase price:

The photo-sharing app that currently boasts over 400 million users is expected to rake in $3.2 billion in 2016 alone, according to analysts at Credit Suisse. Additionally, $572.5 million of that massive total will have been generated during the first quarter of the year, reports CNBC.

From the perspective of the platform that owns Instagram, the news couldn’t be any better. Facebook initially purchased the app for $1 billion in 2012, when it had just 30 million users. Four years down the line, and Instagram looks set to make more than triple its price for Zuckerberg and co. Currently, Instagram is home to its own set of influential users (from rich kids to models), and is arguably crucial to any celebrity’s social media strategy. Then, of course, there are the hundreds of millions of users that have adopted the platform, seeing it overtake rival Twitter by the end of 2015.

So why does a ‘bubble’ that seems so inevitable and obvious just refuse to burst? Maybe it’s not a bubble. These web 2.0 companies are run by very smart and competent people, have huge growth, market dominance, few if any viable competitors, have loyal and substantial user bases, and rapid mobile adoption and mobile ad-integration yielding billions of dollars of revenue. Unlike web 1.0 burnouts such as Pets.com and Webvan, these are not flashes in the pan. These companies are not only here to say, they are growing, and with hundreds of millions of users, have as much reach and influence as major media platforms like CNN, ABC, FOX, and NBC. Snapchat reaches more people than cable news. Instagram reaches more people than Viacom. Facebook is the biggest and most important media company in the world right now, and it’s making the ‘old media’ terrified because they are powerless to stop it. Even though I don’t care much for Facebook’s politics, they are disrupting 60+ year-old oligopoly of ‘old media’.

But what if users defect? Can’t anyone make a social network or a picture sharing app? Pundits said the same about Facebook in 2010 and Google in 2004, but those ‘newer and better’ social networks and search engines that seem so obvious and inevitable never came. Facebook is unique because it got the coveted, less fickle ‘older demographic,’ but they own Whats App and Instagram, which were two of Facebook’s biggest competitors. Also, it helps that Facebook is so big that it’s an indispensable part of almost everyone’s lives. Although anyone can make a mobile picture sharing app, getting the 100+ millions users, branding, and functionality that is unique to Snapchat is much harder.

Not only that, but venture capital has also gotten a lot smarter, having learned their mistakes from the last boom, chasing only the ‘cream of the crop’ instead of in 1996-2000 when everything was indiscriminately bid higher. Companies that have shaky business models and weak growth never attain the highest of valuations. As an example of capitalism becoming smarter and more discriminating, when Fitbit went pubic in June 2015, it ‘only’ had a PE ratio of around 30, although high was not obscene. Had this been the late 90s, it would have likely had a PE ratio of over a hundred. Wall St.’s trepidation about Fitbit proved correct, and the stock and company has faltered significantly since the IPO, due to slowing growth and competition from other wearable fitness devices.

Even if the market falls, staying ‘long’ is often the best course of action. Patience pays. Even when the market crashed in 2008, people who bought tech stocks such as Google in 2004-2006 still came out ahead, and by 2012-2013 even those who bought at the top in 2007 were ahead.

These pundits who prematurely call ‘bubble’ all the time need to be called out, or at least kindly reminded when they are wrong, so they can make a mental note to understand where or how they went wrong and to revise their thought processes when making future predictions.

Amazon, Google, and Facebook: Bigger is Better

Why giants thrive
The power of technology, globalisation and regulation

This is why a simple investing strategy that goes ‘long’ equal weight the three biggest, fastest growing, and most successful tech companies (AMZN FB and GOOG) has done so well. Is past performance indicative of future results? No, but as far as strategies go, it’s hard to beat.

If someone says an investment strategy is ‘fail safe’ usually that’s an indication that it’s time to run to the exits, but Facebook, Amazon, and Google are exceptions, just by virtue of their immensely strong fundamentals and the fact that after a decade or longer no one has been able to come up with viable alternatives to compete with them. I remember in 2004 during the Google IPO, pundits said that anyone could come up with a ‘Google alternative’…lol 12 years later and we’re still waiting. Or in 2008-2012, predictions of a ‘Facebook alternative’, which of course has yet to happen and likely never will.

In capitalism 2.0, Bigger is better.

Just because Myspace lost to Facebook doesn’t mean Facebook will suffer a similar fate.

Airbnb, Uber, and Snapchat…all more valuable than ever, with no viable competitors on the horizon, and their valuations and market growth just keep rising, year after year, to no end, despite endless predictions by pundits of a bubble.

Contrary to popular belief, predictions of collapse are actually as common, if not more so, than predictions of a continuation of a trend. During the 80′s – 2000′s housing boom, predictions of a housing bubble were commonplace. Predicting the 2006 housing crash does not make one a contrarian, because such bearish predictions were actually as common as predictions of the housing market rising. If that seems backward, it’s because the media as of 2008 has given more attention those those who predicted a bubble. For example, Michael Lewis’ bestseller The Big Short, about how some canny traders made a fortune betting against the mortgage market. But the media also ignores all the forecasters were wrong all the way up, only to be right purely by chance in 2008. Likewise, during the 90′s dotcom bubble the media gave more attention to those who were predicting higher prices, but there were still roughly the same number of people who were predicting lower prices, but it’s just that they were mostly ignored, creating a false consensus that everyone was euphoric.

From a market perspective, the number of sellers (pessimists) has to roughly equal the number of buyers (optimists). For prices to keep rising, you need people to sell to the buyers.

These huge tech companies companies don’t need to innovate that much, rather they have market dominance and effortlessly print money through their ad platforms and other services. As the Economist article mentions, they tend to be very well insulated from global economic events (unlike the energy sector or financial sector), and these huge tech companies are also especially well suited to take advantage of global markets. Google, Facebook, and Amazon derive a significant chunk of their revenue overseas. And they can use foreign markets, loopholes, and other accounting schemes to dodge regulations and taxes that are unavoidable for smaller companies.

Up until the late 2000′s, major tech companies seem to have a about a decade of solid growth and stock price appreciation, before tapering and contracting or even collapsing (Cisco, Oracle, Sega, Sony, Atari, 3com, Research in Motion, etc.), but nowadays, as of 2004 or so, major tech companies seem to do a much better job at retaining their growth, market share, and share price appreciation.

Also, the stock market has done a much better job of quickly punishing losers (gopro, fitbit, etc.) but also rewarding winners. The investing landscape is much more choosy and selective, which could explain why active management is having such a hard time in an otherwise very strong bull market. It’s not like the late 90′s when all tech stocks were indiscriminately bid higher. You have the pick the cream of the crop or you will fail. You have all these experts who manage millions or even billions of dollars and they are just as clueless as average investors.

Airbnb Files to Raise $850 Million at $30 Billion Valuation

Look like I’m right right again: Airbnb Files to Raise $850 Million at $30 Billion Valuation:

Airbnb has been restrained about how much capital it takes on compared with ride-sharing company Uber Technologies Inc., which has raised more than $15 billion in equity and debt. Airbnb and Uber are often discussed together because they were founded within a year of each other and have come to define the on-demand economy. Uber is valued at almost $68 billion.

In July 2015, Airbnb raised $1.6 billion at a $25.6 billion valuation, according to Equidate. With the $850 million disclosed in last week’s filing, Airbnb has raised about $3.2 billion in equity, according to Equidate.

That ‘obvious’ Web 2.0 ‘bubble’ refuses to pop as valuations keep rising, year after year, for the leading web 2.0 companies like Snapchat, Uber, Dropbox, Pinterest, and Airbnb.

A year ago Airbnb raised funding valuing it at $25 billion, and I predicted it would be worth as much as much as $80 billion. I still stand by that.

Then on Wall S.t, Facebook, Google, and Amazon stock keeps going up too. Everyone who predicted ‘bubble 2.0′ has egg on their face.

Predicted post-IPO values (one day after trading begins to account for the IPO ‘pop’):

Uber: $150-200 billion
Snapchat: $100 billion
Pinterest $50 billion
Airbnb: $60 billion
Slack: $10 billion
Dropbox $20 billion

All valuations are going higher…that’s pretty much a given.

Companies already listed:

Facebook, Amazon, Google: $1+ trillion each

People are getting richer than ever, as much as the left wishes it weren’t so.

Greatest wealth creation boom in human history unfolding now. This is the 10,000-year explosion condensed into 7 years. It began in 2009 and has much further to go.

From IQ: More Than Just a Number, Part 2:

IQ has become a touchy subject (or at least more so than in the past) because of the greater role biological determinism plays in our super-competitive, winner-take-all post-2008 economy. When you look at all the people who have gotten rich since 2008 (stock market speculators, tech gurus, real estate speculators & investors, coders, web 2.0, VC firms, fund managers) or the people with the most influence on the national debate (Ivy League profs, MIT/ Caltech scientists, string theory physicists, political and economic wonks), it seems like high-IQ has become a requirement to be an important, successful person in society. The “Rise of the Meritocracy” is real, and it isn’t going away.

Indeed, and this trend is accelerating, not going away, sorry.

Right Again: Tech Companies Keep Posting Blowout Earnings

Over and over again, I keep being right.

In mid-2015, in the article Why the Web 2.0/Tech 2.0 ‘Bubble’ Refuses to Burst, I wrote:

But I am pessimistic about the hardware unicorns (Fitbit, Skullcandy, GoPro, Jawbone) as opposed to the app/website ones, so It’s not like I am emphatically bullish about everything, and these hardware companies would fare much worse during a correction. The fact that hardware unicorns trade at a much smaller multiple than website/app ones is evidence of this vulnerability to macro economic factors, and the general tendency of hardware to be susceptible to fads and change in user tastes.

Since then, shares of hardware companies (Fitbit, Gopro) have done poorly, and social networking/ad-based internet companies have thrived.

As of July 2016, the S&P 500 closed at another record high, and Google, Facebook, and Amazon reported yet another quarter of blowout earnings:

Facebook crushes Q2 earnings, hits 1.71B users and record share price

Amazon just posted a record profit for the third straight quarter

Alphabet’s stellar earnings send its share price soaring

Facebook stock is above $130 (it was at $20 in 2012 back when pundits thought it was doomed due to the bad IPO and unfounded fears over Facebook being unable to adapt to mobile usage), Google above $780. (Times TWO for the A and B shares – combined it’s almost $1,600. Mind-blowing considering it was at $100 combined in 2004…let that sink in.) Amazon now at $770.00 share….was at $7.70 in the early 2000′s. That is not a misplaced decimal. Everything just keeps going up and keeps being better then expected, as much as the media keeps repeating the same lines about the ‘economy being weak’, the ‘stock market being overextended’, or ‘tech valuations being a bubble’.

Does that make me a superforecaster? Maybe, but a lot better than z3r0hedge and Karl Denninger of MarketTicker.org, who have been collectively banging their heads against the wall about the same ol’ doom and gloom stuff since 2009 to no avail. You got to know when to throw in the towel and admit being wrong, or that you have no talent at predicting things (of course, z3r0hedge has built a very lucrative business out of scaring people to buy overpriced gold and other bad investments). Most people would be better prognosticators if they tuned out their personal biases in the prediction making process, or if they had a better understanding of macroeconomics (QE is not money printing, for example), investing (index funds beat individual stock picking, with few exceptions), and the stock market (stocks rise because of profits & earnings growth…everything else is noise).

Somewhat related: Donald Trump doesn’t read much. Being president probably wouldn’t change that.

He said in a series of interviews that he does not need to read extensively because he reaches the right decisions “with very little knowledge other than the knowledge I [already] had, plus the words ‘common sense,’ because I have a lot of common sense and I have a lot of business ability.”

Trump said he is skeptical of experts because “they can’t see the forest for the trees.” He believes that when he makes decisions, people see that he instinctively knows the right thing to do: “A lot of people said, ‘Man, he was more accurate than guys who have studied it all the time.’ ”

I kinda feel the same away when it comes to making economics predictions. I don’t need to read dozens of technical books to understand the gist of the situation, relying more on intuition, yet pretty much all my predictions have been right. It’s more about applying existing knowledge and filtering out the noise, than just absorbing as much as possible. Many experts, both on the left and right, were wrong since 2009. Krugman, in 2012, predicted that the sequester and budget cuts would cause a major decline in employment and possible recession, and he also predicted the unraveling of the Euro – wrong on both counts. At the same time, on the ‘right’, there were many failed predictions of hyperinflation, crisis, bear market, recession, and dollar collapse. Interestingly, James Altucher, despite not being an economist, like myself, also predicted everything correctly. I think that agrees with how experts and ideologues sometimes get it all wrong, whereas outsiders with a clear mind can make the correct connections instead of being clouded by too much information or personal biases.

But everything keeps going up, and will continue to do so: Bay Area real estate; S&P 500 and Nasdaq 100; tech stocks like Google, Facebook, and Amazon; leading web 2.0 companies like Slack, Snapchat, Uber, Pinterest, Air BNB, and Dropbox.

Amazon, Facebook , Google – three stocks to rule the world. They cannot do any wrong, and I don’t mean that sarcastically. Buying these stocks is like investing in the companies that are building the matrix, but it’s real life.

It’s just nuts..even Microsoft and Cisco in the 90′s..the growth was finite, but there is no limit to Facebook, Google and Amazon. Every quarter is a crusher…over and over, year after year.

Just when you think their growth is ‘stalled out’, something new comes along. Now it’s mobile. Or it’s ‘messaging’. In a few years, maybe it will be virtual reality.

The small mobile screen is perfect for advertising. Adsense ads are everywhere – Bloomberg, Forbes, Fortune, etc. Sometimes major brands try Adsense alternatives but always go back because Adsense pays the most and has the most advertisers. Whenever someone clicks those ads, Google makes money and so does the publisher. Facebook also plans to unveil a similar 3rd party ad platform.

The most common retort is that something ‘new and better’ will replace Facebook, Google, and Amazon. Fat chance (or at least not for a verrry long time):

People said the same thing about Google in 2004 ‘Anyone can make a search engine; Microsoft has so much money they can crush Google’ (Despite dozens of iterations and expensive marketing campaigns, Bing never grew.)

Same thing about Facebook in 2010 ‘Anyone can build a social network’ (Many have tired and failed.)

Same thing about Apple in 2003-08 ‘Sony/Microsoft/ etc can make a music player/phone’ (Zune anyone?)

In the 80′s, how would have guessed that Microsoft, decades later, would still be the dominant player in operating systems? Apple and Linux never got above a couple percent. Only thirty years later has Microsoft become ‘slightly less relevant’, but the company continues to generate enormous profits, and has diversified its business substantially beyond Windows.

The ‘Big Three’ (Ford, GM, and Chrysler) enjoyed a reign that lasted over fifty years until foreign brands gained a foothold.

Too many people are trying to extrapolate the future from the past, using the tech crash of 2000 (a single data point) for predicting the future, when the empirical evidence suggests that successful, profitable companies with market dominance can have decades-long uninterrupted expansion in growth and share prices. Walmart…anther example. Only recently, after nearly half a century of uninterrupted growth, have things finally begun to slow down. But part of the reason why companies like Google, Facebook, and Amazon are so successful, even more so than Cisco and Microsoft in the 90′s, is because of their huge network effects and market dominance. Snapchat is another one. Air BNB. These are not flashes in the pan, but have enormous, entrenched userbases that are not only loyal and will stick around, but the advertising potential is also significant. Just look at Facebook, and the power of advertising and market dominance (quoting from a comment):

Facebook will be doing $16 to $20 billion in profit within five or so years. They’ll have accumulated $60 to $80 billion in cash. They’ll have a half trillion dollar market cap in the next few years. They’ll liberally use the cash and market cap to buy into any market they’re missing out on, just as Microsoft purchased LinkedIn and Skype to try to stay in the game.

These types of companies do not dislodge so easily such that they get “eaten for lunch” in the mere span of ten years. It’s the exception for one of them to implode. This is especially true given that Facebook is still ramping, their sales growth is still extraordinary and their daily actives are still growing just fine for their size. They likely won’t even peak on users for a few years, at a minimum; and afterward, they still have years to grow their non-US ad business a lot, because that part of their business is wildly non-optimized.

In ten years, Facebook will just be reaching the equivalent business plateau that Microsoft hit circa 2000-2003. They’re still a very young business in the first half of their growth phase, they haven’t even reached mild stagnation yet. A business doing $2 billion in quarterly profit, growing sales at 50%, and they’re going to get eaten for lunch within a decade? It’s extremely unlikely, as the mountain of cash they’re accumulating will buy their continued place in the ecosystem, whether the anti-FB crowd likes it or not.

Compare that to the 90′s when you had much higher PE ratios and much weaker earnings. In 2000, the Nasdaq 100 had a PE ratio above 100; it’s only 20 now. The S& 500 had a PE ratio of 35; now it’s only around 17. There are real fundamentals at work here behind these high share prices, not just euphoria.

Correct Predictions

Predicting the future is notoriously hard, and that seems to have so far discouraged potential authors and readers alike.

Predicting is not as hard [1] as, say, understanding theoretical physics or algebraic geometry. There is a simple heuristic I use: assume past trends will continue. Stocks will keep going up, wealth inequality will keep widening, world peace and stability will continue, etc. It also helps to have fundamental understanding of the subject matter of the prediction, as well distancing yourself from personal biases and wishful thinking when making the prediction.

My predictions about finance, the stock market, the economy (both domestic and foreign), bitcoin, and web 2.0 have all come true.

When writing about web 2.0, I knew almost exactly which companies would fail or succeed, owing to my knowledge of the area. I’ve written about two-dozen articles about web 2.0 since 2011, correctly predicting that the valuations of Uber, Dropbox, Pinterest, Facebook, Snapchat, and AirBNB would continue to rise. Not only that, but I knew which companies to avoid. I never praised a company that subsequently failed.

HBD is my guiding principle of investing and predicting: smart people are the engines economic growth and technological progress, and rising real estate and stock prices reward smart people for the economic value they create.

Bay Area real estate, for example, which keeps going up despite the left’s insistence of it being a bubble or due for a crash:

Also Amazon.com, Google, and Tesla stock. In 2013, I was bullish on Tesla when it as at $40; the stock is above $200. Facebook – was bullish in 2012 in the $30′s; now above $110. Amazon – now above $700 on its way to $1,000. Google was $800 not too long ago; recently, it split into two classes of shares worth over $700 each. Nuts.

Now it’s Bitcoin, which as of May 30th, 2016, has already surged 20% in the past week on its way back to $1200:

I emphatically believe it’s going much higher, leaving all the doubters miffed and bemused.

All too often, people will see a chart for something like Bitcoin, Amazon.com stock, or Bay Area home prices and immediately think, ‘This is unsustainable!’ without considering the fundamentals underpinning the rally. Maybe it’s a bubble that will end badly, but in many instances it’s not.

The S&P 500 also gained 3% in the past week on its way to 2300-2500.

[1] A distinction should be made between hardness and tractability. The act of guessing lotto numbers is easy but getting them right is intractable. Playing chess is easy but solving the game is intractable. The act itself of predicting may be easy, but the difficulty in getting predictions correct may be attributable more to the intractability of randomness than insufficient brainpower.

The Daily View 3/8/2016

Homework is wrecking our kids: The research is clear, let’s ban elementary homework

And the Reddit discussion, which is more valuable than the article.

A common thread among commenters, growing up, is that homework was tedious and useless, yet scored high on tests, which is a common trait among smart people, who tend to test well. Salon is right, and I recommend homework be replaced with competency tests, which would not be as heavily influenced by patents nor waste hours of time. Or base grades only on tests. This is similar to the solution proposed to replace costly, time-consuming college diplomas with SAT and IQ tests, which are more accurate at assessing learning potential. Employers want employees who can learn quickly, and IQ and learning speed and job performance are highly correlated.

America has locked up so many black people it has warped our sense of reality

Black people are twice as likely as white people to be out of work and looking for a job. This fact was as true in 1954 as it is today.

That’s what happens when an achievement gap is an IQ gap. War on poverty, civil rights movement, and hundreds of billions of dollars spent on public education, entitlement spending, and other programs have not closed the crime gap, incarceration gap, nor the achievement gap. This is discussed in more detail here, here, here, and here.

How low will interest rates go?

They are going much lower. Would not surprise me to see the 10-yr bond go to .4% should the US economy enter another recession. All it takes is some weak data or the market falling a bit, and those bond yields drop like a stone. Low rates good for homeowners. James is right about deflation, not inflation, being in store for the future.

As more evidence of a SJW-backlash, Time magazine, a liberal publication, is being ridiculed on Twitter for putting Evelyn Waugh on a list of female writers. This also helps dispel the myth that liberals are more educated than conservatives.

It’s the left who are against web 2.0, calling it a ‘bubble‘ and ‘racist‘, when neither are true.

I mean, it wasn’t exactly the price. A mutual fund valuation committee’s decision that, say, Zenefits is worth 30 percent less than it was a few months ago doesn’t necessarily mean that anyone bought or sold shares at the new lower price.

Exactly. Fidelity and T. Rowe Price ‘markdowns’ are NOT the same as shares changing hands at a lower price, and there is no evidence shares of the hottest, most successful web 2.0 companies have done so. Valuations for Snapchat, Uber, Air BNB, and Pinterest keep rising. Only low-quality start-ups have seen valuations fall. Not a single web 2.0 company or stock I have praised has done poorly, and my predictions keep being right over and over, owing to my extensive knowledge about the consumer internet technology industry.

Related: Not Worried About Tech Valuations: Why It May Be Different This Time

Why he left

Why are so many smart people such idiots about philosophy?

Philosophy is important for more than just a while, and has serious, practical uses for all of society. There are countless examples of philosophy of mind theories’ relevance to neuroscientists, or cases where political philosophers have shaped politicians.
Historically, physics and mathematics have often overlapped with philosophy, and many great scientists engaged with philosophers to advance their own thinking. (Einstein’s work can be studied alongside that of Kant, for example.) The physicist behind the theory of relativity was also a philosopher of science and, as Hall points out, Einstein reconfigured our concepts of space and time—itself a philosophical undertaking.

This is further evidence we’re in a philosophy ‘boom’, with philosophy almost becoming a ‘STEM’ subject, with applications ranging from computer science, to quantum physics, to neurology.

Related: Neil deGrasse Tyson and Philosophy

And from Nerd Culture: Here to Stay:

I actually thing we’re in a philosophy boom, with recent developments in quantum mechanics and the synthesis between the two subjects. There is a lot of research in this area, about quantum mechanics, thought experiments (Chinese room), turing tests, complexity/computational theory of mind (Bostrom simulation argument, singularity) and connection to free will and other philosophical concepts. Philosophy becoming more STEM-like

He’s right: Learn To Code, It’s Harder Than You Think

All the evidence shows that programming requires a high level of aptitude that only a small percentage of the population possess. The current fad for short learn-to-code courses is selling people a lie and will do nothing to help the skills shortage for professional programmers.

It’s hard enough teaching kids algebra, let along coding, which is many magnitudes harder. And, no, HTML or ‘drag-and-drop’ doesn’t count.

People who are good at coding are ‘wired for success’ in today’s economy and will continue to earn more money than most people. Coding is the ‘new literacy’, but a lot harder and pays much more.

This story about being a fat passenger on a plane went viral. The viralness is evidence of the power of stories and narratives over consumerism and low-information pandering, even though I don’t agree with the article.

Southwest famously let director Kevin Smith board, then publicly escorted him off the plane for looking too fat for his seat. United will refuse to board you unless you agree to purchase an additional ticket at the day-of price, and who has $600 to spare? I check first class prices, where seats are slightly wider and put me at less risk of passenger complaints. $1000. I move on.

If you can afford to overeat, you can afford to buy an extra seat. I’m sure you pay in other ways such as an increased food bill, higher insurance premiums, and more doctor visits for obesity-related health problems. If you were really concerned about saving money, you would lose weight.

In that way, air travel is sadly familiar, a microcosm of what happens so often as a fat person. I am watched — and judged harshly — as I try — and fail — to fit into a space that was made for someone else.

This is part of the culture of ‘self’, where personal problems becomes vectors for sympathy and status seeking. It’s not the same as narcissism since this is often used in self-deprecating manner.

Web 2.0 & the Economy: It’s Different This Time, Part 2

In the past month, there have been a plethora of doom and gloom articles about web 2.0, Silicon Valley, the economy, and start-ups. In this series, I address some of the major concerns, arguing that perhaps the negativity is not all warranted.

Part 1

From Amerika.org: The coming dot-com 3.0 collapse: Google, Apple, Facebook, Amazon and Twitter

Everyone has been predicting tech bust 2.0 since 2009, and they keep being wrong. The post-2008 tech boom – which includes web 2.0, Facebook, Google, Uber, Amazon, and Silicon Valley – is more permanent than cyclical or transitory. Like the Bitcoin boom, it has also defied all predictions of it demise. It’s not like 2000 or 1929 where the is going to be a deafening implosion. Instead, the exiting trends that are established, such as valuations going up, will continue. The arguments for tech bubble 2.0 are less convincing than the arguments for a continuation of the boom.

Fred Wilson, in his predictions for 2016 writes:

Markdown mania will hit the venture capital sector as VC firms follow Fidelity’s lead and start aggressively taking down the valuations in their portfolios. Crunchbase will start capturing this valuation data and will become a de-facto “yahoo finance” for the startup sector. Employees will realize their options are underwater and will start leaving tech startups in droves.

As a VC expert, I’m surprised Fred doesn’t realize these markdowns are strategic (possibly tax related), not because of reduced investor demand. There is zero evidence of Snapchat shares changing hands at reduced valuations.

Crunchbase will start capturing this valuation data and will become a de-facto “yahoo finance” for the startup sector. Employees will realize their options are underwater and will start leaving tech startups in droves.

Fred is being sensationalist here. I don’t see any of that happening, except for the deterioration low-quality ‘unicorns’ like Jawbone, GoPro, and Fitbit.

A someone who has followed financial markets for years and written thousands of words and hundreds of essay on the matter, I’m pretty good at being right, at separating doom and gloom hype from reality

In an earlier article about Theranos, I give examples of how the media predicting failure:

Whether it’s Tesla, Uber, Theranos, or or any other successful start-up, the left are like bloodhounds drawn to the scent of failure of the successful, even when such failure does not actually exist. The liberal media is so desperate for the successful to fail that they have to make stuff up, turning molehills into mountains.

There are many more…

In 2005-07, the leftist media dismissed Facebook as a fad like Myspace. After being wrong there, then, in 2012, the left said Facebook was doomed because the stock fell after the IPO, and that Facebook would not be able to monetize mobile users. The stock is up 300% since then, and mobile advertising growth is crushing expectations:

In 2011, the liberal media sensationalized a story about an AirBNB renter vandalizing an apparent. What was overlooked or ignored in the anti-AirBNB sensationalism is that the vast majority of rentals are without incident.

The event happened, which is a terrible blow to the company’s reputation. The confusion seems to be around whether or not Airbnb will compensate her for her losses. The company at first said no, then said yes, and clarified that they made the offer last month when it happened, not in response to the PR storm yesterday.

Terrible blow? lol more like a hiccup. The valuation of AirBNB has since surged 500%. So has growth.

The problem is there is no accountability. Pundits can just shoot their mouths off, making unsubstantiated comments that are later proven wrong and no one calls them out on it.

Google has some obvious weaknesses. Its ad revenue per page has been declining for years because the internet is now coated in ads, and very few people on the internet actually buy anything. This has caused sites to become clickbait in order to draw in enough traffic to get a decent income from the lower-paying ads they now run; this in turn causes a concentration of traffic on relatively few sites. That puts us right back in the place where we were with old media where six big companies ran the show, and this has decreased the value of the internet as a news source.

Google has been unstoppable since launching its ad platform in early 2000, with a monopoly contextual ads and duopoly in mobile advertising (shared with Facebook). Cost per click keeps rising, and it seems like virtually all commercial websites have Google ads. As for ad blindness, what a lot of skeptics don’t understand is that adverting is most effective for 60% or so percent of the general population who have IQs between 80-110 and will keep clicking ads, which is a lot of people and a lot of clicks.

Second, there are two people who buy ads: small buyers who are looking for a quantifiable ROI (sales, leads), and large buyers that are looking for ‘mind share‘, where the ROI is harder to quantify. An example or the former is someone selling an ebook report or collecting emails, and the latter is, for example, a movie studio buying ads to promote a Summer blockbuster. The studio doesn’t care if visitors buy anything or not (the movie trailer doesn’t have any way to buy anything); they just want to blast their movie promo everywhere, and will pay a lot to do so. Same for those expensive car ads you see everywhere. Ford doesn’t expect anymore upon seeing their ad to immediately rush out and buy a truck, but instead to merely consider Ford as an option when shopping for a new automobile.

Right now, as of February 9th 2016, Snapchat announced a deal with Viacom – a very deep-pocket advertiser looking to spread ‘mind share’. Now we can see how Snpachat will live up to its $15+ billion dollar valuation, which I predict will rise as high as $30-60 billion within the next year or two.

Facebook wallows in weakness as well. It has tons of users because people can access it from at phones or on the job. The problem is that these people, beyond a few product categories, do not represent consumers. They are there to screw around. As a result, while Facebook and other social media have many users, they do not have many buyers. It’s not even clear that ads on these sites attract eyes from people who want to buy the products, which is why the ads are getting more random and more frequent, becoming a genteel form of spam. Twitter suffers the same problem.

Hardly, as I show above regarding Facebook’s huge growth in advertising revenues. Facebook, unlike the doomed Myspace, appeals to an older demographic who have more purchasing power than teens. But even sites such as Snapchat and Instagram, that appeal to younger demographics, are not having trouble finding advertisers, who are willing to spend millions of dollars promoting clothes and other products to this large demographic (mind share). As part of the boom in mobile and video advertising, Instagram revenue is projected to surge:

Also, as I explain above, a lot of online advertising is to build ‘mind share’, with the intent of merely nudging people to consider a brand, not to actually make an immediate purchase.

And from the WSJ: Tech Startups Face Fresh Pressure on Valuations

The one for Square is off only 20% from the private round vs. the Dec. 31st close. It hasn’t moved that much, and it’s too soon to assume it’s under pressure. Most of the valuations gains were made in the years leading up to the IPO, as companies are going public later and later. That could explain why some of the post-IPO gains seem stunted.

The author mentions the worst companies that even I, web 2.0 bull, would never invest in. He mentions box.net but ignores dropbox. No mention of Air BNB, Uber, Snapchat, Slack. Although these aren’t public, there is an investor bias against hardware, but such a bias is warranted given the storied history of once high-flying hardware companies eventually soaking investors due to profit margin compression, competition, or becoming fads or obsoleted, examples being Sony, Atari, Garmin, Nintendo, Sega, Fitbit, Nokia, Motorola, Gopro, Jawbone, Skull Candy, Research in Motion, and many more.

Yeah, there is valuation pressure, but for companies that aren’t very good. This is evidence investors are becoming smarter and more selective, whereas in the 90′s a company like Fitbit would have had a PE ratio of 500 instead of 50, which is what it is right now.

Some more shoddy reporting for the from the WSJ: As Angel Investors Pull Back, Valuations Take a Hit

On AngelList, a crowdfunding site aimed at such investors, the average valuation for a company receiving funding reached $4.9 million for two quarters last year, its highest level in five years. But valuations dropped to $4.2 million in the fourth quarter, the lowest level since early 2012. Dow Jones VentureSource data shows that deals involving angel investors fell by 16% last year.

It seems like a big deal until you realize there is a huge variance in prices and that 2012 isn’t very long ago. The biggest and most successful ones such as Snapchat, Uber, Air BNB, Dropbox, and Pinterest seem to be doing just fine.

It’s easy to separate the potential winners from the losers. As mentioned before, start-ups that deal with hardware and other physical stuff tend to fare much worse than apps, websites, and software. For example, Fitbit, Skullcandy, Jawbone, and Gopro have all performed poorly. Now jawbone got the axe, raising money at half its 2014 valuation. Had VCs heeded my simple strategy of avoiding hardware, a lot of pain could have been avoided. Hardware is just too difficult to get off the ground. Costs are too high, and tangible products are vulnerable to becoming fads of commoditized.

From the New York Times: Expect Some Unicorns to Lose Their Horns, and It Won’t Be Pretty

Haven’t we been ‘expecting’ this since 2012, yet the biggest, most successful unicorns keep going up in value.

For all the hype and doom about Square stock, the price is back to where it was when it began trading a month ago, although it has fallen 20% in recent weeks.

But this is a good opportunity for employees to understand the risks of stock options, but it’s not like the world is coming to an end. Such risks have always existed.

My prediction is by the end of 2016, we’re still going be seeing record high valuations for the top unicorns.

Not Worried About Tech Valuations: Why It May Be Different This Time

In the past month, there have been a plethora of doom and gloom articles about web 2.0, Silicon Valley, the economy, and start-ups. In this series, I address some of the major concerns, arguing that perhaps the doom and gloom is not all warranted.

Big-Cap Tech Stocks Are a Sucker Bet

We’ve been hearing these ‘tech stocks are overvalued!’ arguments since at least 2012, yet prices keep going up.

There are a couple things to keep in mind. We’re seeing a flight to quality, with fewer yet high-quality names like Facebook, Tesla, Amazon, Microsoft, and Google participating in the post-2009 tech bull market whereas in the late 90′s, during the tech bubble, the buying was indiscriminate, which ended badly. Now Wall St. and VC is not making that mistake again, choosing instead to pile into the best of the best and selling the rest.

The aforementioned stocks (Facebook, Tesla, Amazon, Microsoft, Google, etc) have market dominance, rapidly growing earnings, strongly positive cash flows, high profits margins, and few viable competitors. In the web 2.0 scene, Air BNB, Snapchat, Dropbox, Uber and Slack also qualify as having strong growth (or projected growth) and market dominance, which is why they are valued so richly and will continue to become more valuable in coming years, especially that internet and app companies are riding the tailwind of the booming mobile advertising advertising market.

As for web 2.0 unicorns, profitability right now is less important than the demonstrable ability to generate profits down the road, when the timing is right. Many successful web 2.0 companies, like Snapchat, are intentionally delaying revenue to build their userbases, but inventors are confident that should Snapchat ‘flip’ the switch and go ‘live’ with their ad platform, Snapchat will succeed at mobile advertising as Facebook and Instagram have.

PE ratios are not that important if fundamentals remain strong. Amazon has done so well, for example, that someone who bought in 1999 at the very peak would still have a 13% compounded yearly return if he sold today. Pretty amazing. Google had a PE ratio of close to 100 in 2005 after its IPO; is has surged 1,300% since then and the PE ratio is only around 20. BIDU had a PE ratio of 1600 shortly after going public in 2005; the shares have since rallied 1,500% and the PE ratio is only 40, as well as many other examples. Contrast that to the late 90′s when companies such as Pets.com and Theglobe.com, which had inherently flawed business models, were bid to the stratosphere. These were companies with business models that had negative cash flows, with no hope of profitability. As part of how capitalism is getting smarter, nowadays, such companies wouldn’t even get past the VC seed round, let alone go pubic.

Also, the PE ratio of the Nasdaq 100 is less than 22 (weighted PE ratio of the QQQ as of Jan 2016), versus over 100 during the late 90′s:

So right now I’m not too concerned.

Also

The year we welcome squirrels – Unicorn Bubble

And from Business Insider 90% of the billion dollar unicorn startups are in trouble

I’ll believe there’s a unicorn crisis when I see actual secondary shares for major companies like Uber, AirBNB, Snapchat, Dropbox and Pinterest see substantial declines. Until then, this is all speculation. There’s a bubble in bubble predictions. Everyone wants their ‘I told you so’ fame, for some reason. I guess it’s human nature to want to be right or to see the successful stumble back to earth.

He says there is “blood in the water,” and we are entering a 90-10 situation for the unicorn class of startups with billion-dollar valuations in which 90% of the startups will be repriced or die and 10% will make it.

Well, that’s kinda how it’s supposed to be. That’s why expected value is more important. A few $200+ billion Facebooks and Googles can compensate for a lot of smaller $1 billion failures.

A lot of market speculators lose money by believing that trends that seem unsustainable must reverse or that history must always repeat, when there are factors that can cause wildly diverging outcomes even if there are many similarities between the past and present. You can have a situation where the past matches the present with 99% accuracy, but that 1% makes a huge difference in outcomes. This is related to Chaos Theory, where small adjustments to the initial conditions can cause the evolution of a system to change dramatically. Many people lost money shorting Amazon and Facebook stock between 2012-2015, believing that we are in another tech bubble, and while there are many similarities between 2000 and now (such as high stock prices) there are some subtle differences, too, such as better fundamentals. And those subtleties can make the difference between a profitable trade and losing your shirt. Or, another example, many people got burned betting against the post-2009 stock market recovery, believing that there would be a double dip recession, that there would be a ‘Great Depression’, or that America would become ‘Japan 2.0′, when, in fact, neither happened despite the many similarities between Japan’s recession and America’s such as high unemployment and deflation.

These short-sellers grievously underestimated the propensity of the consumer undaunted by the doom and gloom in the news to keep consuming, the ability of the economy to quickly bounce-back, the efficacy of TARP and other programs to stem the bleeding, and the unimpeded ability of S&P 500 companies to keep generating record profits and earnings quarter after quarter:

What about the fed? Aren’t they playing a major role in inflating the economy and stock market. Yes, to some degree, but not as much as commonly believed, as I explain here. The fed alone cannot account for all of the earnings growth since 2009. if this were a fed induced bubble we would expect stock valuations to be much higher, but the PE ratio is still only 15-17 for the S&P 500, which is around the historical average. QE and monetary policy is more of a band-aid than a lifeline (which is how blogs like Zerohedge interpret QE), which is is the market didn’t fall much when the fed officially ended QE in 2014.

Also, people have tendency to see patterns such a bubbles – even in a random walk – due to confirmation biases, a phenomena called Apophenia.

What it does show is that people are very receptive to data that supports their preconceived bubble theories. And this is a part of my anti-bubble theory. I’ve done posts on how the Economist magazine once bragged that it correctly predicted a bunch of housing bubbles, whereas the article it cited was actually totally, spectacularly WRONG about the future course of house prices in a number of countries. Prices actually rose in markets where they predicted declines. And yet the Economist put their “successful” prediction into an ad for the magazine. Someday China will have a big crash, and the people who have been predicting it for a long time will say, “I told you so.” And I’ll say, “Market prices rise and fall, that’s what markets do.”

Economies have booms and recessions. If talking about bubbles makes you feel good, go for it. But don’t think it’s telling us anything useful about the world. When prices are high they might crash, or they might go higher. That’s what history shows.

People complain that bubbles destroy wealth and that the government should try to prevent bubbles from forming. But it’s not like the government does a better job at managing money, which is why the concept of ‘exit’ is appealing to some in Silicon Valley. New technologies emerge from bubbles, and the only way to do away with the boom bust cycle is probably to do away with capitalism itself. If bubbles represent excess, then the bursting of the bubble removes the excess, meaning than while wealth may have been destroyed, the price level is only back to where where it was before the bubble. People who bought on the way up sell on the way down and it cancels out, which is the cornerstone of the functional stock market theory and the inflow/outflow theorem.

The Daily View: 1/17/2016 (lots of stuff)

From Fred Reed: The Inevitability of Eugenics

I predict within 50 years America will start giving Eugenics a serious consideration as a way to tackle the growing entitlement spending problem, which by then will be much bigger than it is now if trends persist. Liberals and conservative alike need to get over this squeamishness of genetic engineering, which like masonry or computers, is a tool that can be used to improve society. A hammer can break but it can also build.

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Jim and XS have some thoughts on bitcoin.

As some may already know, I have been a Bitcoin optimist for awhile, here and here for example, as well as an investor in the cryptocurrency.

I’ll believe there’s a crisis when the price crashes and doesn’t recover; until then, ‘coin on’. One thing I’ve learned from following bitcoin over the past three years is that everyone has their ‘theory’ for why it will fail, and all have been shown wrong. Bitcoin just keeps coming back, rising like a Phoenix from every adversity thrown at it. The FBI seizure of Silk Road didn’t stop it, neither did price crashes in 2011, 2013 and 2014, or the failure of Mt. Gox in 2014. Now Bitcoin is booming because because of China. Wealthy Chinese are using Bitcoin to circumvent capital controls. As China’s economy slows and in anticipation of a falling Yuan, the wealthy are looking for anywhere to park their money.

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The internet has made defensive writers of us all

Perhaps ‘defense writing’ has become so commonplace nowadays because there is less tolerance at both the individual and societal level for mistakes than in the past. In an era where an abundance of information can be found instantly online for free, ignorance has become inexcusable. With the government spending tens of billion of dollars a year on public education, no one should be ignorant, and ignorance is seen as both a personal failure as well as an institutional or societal one. This dates back to the ‘enlightenment’ ideals of centuries ago, when we expected science and reason to explain everything, and that still carries on today. Failure or ignorance is seen as un-enlightenment. But the problem is the majority of people are simply not smart enough to benefit much from mass education, forgetting much of what is learned beyond the basics of reading and writing, rudimentary history and geography, and some math.

Also, thanks to the internet and other factors, we’re in an era of fact checking, which means writers have to be especially assiduous to buttress against all possible holes that can be poked into their thesis. Hedging means being open the possibility of being wrong, so instead having to create a thesis that is impervious to factual criticism, just use verbal disclaimers in the form of hedging language so that you’re covered.

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More American exceptionalism: Cancer survival rates higher in USA than UK

Long wait times, scarcity of drugs for NHS patients, and poor screening regimens may be to blame.

Related:

Some Thoughts on Healthcare
Universal Healthcare Not So Great
Affordable Housing, Healthcare, & Tuition: Putting Things in Perspective

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From Social Matter: Unless You’re An Atom, Principled Libertarianism Is Not For You

This invokes the slippy slope argument: what if instead of a plumber it’s a butter churn business and now technology has made churns nearly obsolete. Should the government ban automated churners to save his business too? Cheaper plumbing (and cheaper butter production) means more people can afford plumbing and butter, which boosts standards of living. 100 years ago, automobiles were a luxury item; now they are everywhere, thanks to globalization, free market capitalism, and other factors. That’s the free market argument, but it does not take into account the individual who may lose his job when technology becomes obsoleted, or his job is replaced by someone who can do it cheaper. New technologies and markets create new jobs, replacing the lost ones, although there is no guarantee the Luddite Fallacy or Lump of Labor Fallacy must remain fallacies.

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Hmm…but private investment has risen substacially over the past six years:

Dividends are worse than buybacks, due to tax issues and other inefficiencies, but no one attacks dividends. Somehow buybacks have become the scourge of the left.

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The Trouble With Fascism

Kinda, but fascism is predicated on race whereas communism is predicted on class, the later which is obviously leftist. Fascism means maybe some government control over certain industries,but it’s not leftist like Marxism, which has more control over businesses, to the point of almost total confiscation of private property.

On a somewhat related note, the problem with populism is that it tends to promote bad policy (particularly economic policy) for the sake of getting votes by exploiting the fears and ignorance of the masses (especially about economics), which is one of the fundamental flaws of democracy. In that regard, both left-populism and right-populism may be the different sides of the same coin. For example, many on the right support low taxes, but it’s less realistic promise both a smaller deficit and lower taxes, but republicans have to promise both to get elected.

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Everyday Economics: The Rise and Fall of the Chinese Economy

Am I the only one who is still on the fence about China? It’s too early to say there is actually a mess. There is evidence maybe growth is glowing, but it’s far too early to call it a catastrophe, even though the doom and gloom media has been calling it one for the past year. The debate is over 7% GDP growth vs. 5.5%.

The Rise and Fall of the Chinese Economy.

If by ‘fall’ he means 5.5% GDP growth instead of 7%. Alos, low oil prices should help China as well as other Asian economies.

Maybe a lot of this doom and gloom comes down to a a simple math misunderstanding, which is that ‘slowing growth’ is not the same as shrinkage. Slowing growth implies the second derivative is negative, but the first one is still positive, meaning the size of the economy is still expanding. An example is the function ln(1+x)

Rather, his video does a good job of explaining what could go wrong, but I’m not sold on the idea that there’s a crisis now. I would not be surprised if this blows over in a a couple months like it did in the past during past concerns over China.

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The Handicap of a High IQ (Guest Writer Matt Baldoni)

He’s probably right on all accounts, but take issue with this:


Okay, more good science, kids! There is a negative correlation between involvement in organized religion and IQ numbers. Dumb people go to church, basically. Smart people don’t.

I’ve heard this argument, but I’m not buying it, and its not like the correlation between IQ and religiosity is incontrovertible. No one really knows. This is similar to the leftist ‘knuckle dragging’ stereotype of Conservatives, which by my own empirical observations is also false. Liberals, particularly welfare liberals, are prone to reductionism and oversimplification more so than Conservatives. This is due to tribe mentality, as well well as general ignorance of complicated issues.

Maybe offline this is the case, but online some of the smartest, well-written people I’ve encountered are religious and or identify as Christian – blogs and writers like Free Northerner, Vox Day, Bruce Charlton, Nick B. Steves, Mark Citadel, Zippy, WM Briggs, and more. It’s many avowed atheists, people who watch Colbert or Daily Show, who seem dull and conformist.

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Interest Rates, Unicorns And What The Fed Means To Silicon Valley

Low interest rates helps America’s best and brightest innovate and create wealth, and is an example of pragmatic/utilitarian/consequentialist polity that helps the ‘greater good’ even if such policy is unpopular with a lot of people. TARP, QE, and ZIRP were ‘lifelines’ for America’s most productive, as a way of containing or mitigating the the damage from the weak, inept sectors (banking, housing) so that the healthier portions could thrive. It was a success, with TARP three years later returning a profit to the treasury, and the economy & stock market now in its sixth year of expansion. Although the private sector and the consumer deserve most of the credit, TARP helped too.

A common argument is that low interest rates create bubbles, but the end result is still better than if bubbles are never formed. Risk taking is necessary for an economy to grow technologically and not become stagnant.

Second, compounding this run up in asset prices is the appreciation of the dollar on the global currency markets. Because the world was anticipating an increase in U.S. interest rates, the value of the dollar has been increasing for the past two years, since the Fed started signaling that it would eventually raise rates.

This is due to the ‘flight to safety’ and the insatiable demand for safe, low yielding US debt. The dollar is so strong not only because of the flight to safety, but because foreign countries that don’t have reserve currency status are running up deficits to try to grow their economies. Other reason are given here.

The Daily View: ‘Longest Depression’, Basic Income, Pinterest

From Huffingtonpost: Future Economists Will Probably Call This Decade the ‘Longest Depression’

Sounds like goalpost moving, where slightly mediocre growth becomes a ‘depression’.

The 2008 recession, while deep and sudden, was narrow, only lasting about 16 months until growth picked up, where it has remained. Hardly a decade.

Also, the authors seem to be cherry picking the bad data (weak wage growth, China, shrinking labor force) and ignoring the good data such as exports, consumer spending, robust S&P 500 profits & earnings, technological innovation, stock market & real estate gains, etc.

Even China is not settled. It’s too early to say there is actually a mess. There is evidence maybe growth is glowing, but it’s far too early to call it a catastrophe, even though the doom and gloom media has been calling it one for the past year. The debate is over 7% GDP growth vs. 5.5%.

Yeah, if you pick the absolutely worst data out of all of the metrics, the economy is going to look worse than it really is. That’s why averages are so important.

From Why America is Not in Decline

Right now, we’re in a Goldilocks economy of modest growth, no stagnation, tame inflation, and no meaningful economic headwinds. Some pundits like Summers and Krugman bemoan how America’s economic growth is too anemic, especially compared to the 40′s and 50′s, and that its best days are behind it, but as I show here and in the graph below, US GDP growth has broken from the pack, since 2008 exceeding pretty much all g-20 nations. Yeah, 2-3% GDP growth ain’t great, but compared to pretty much everywhere else that has either no growth (Japan, UK, France) or high-inflation growth (Turkey, India, Brazil) – it’s pretty good.

And that is especially impressive for an economy as large as America. We’re never going to get back to 40′s era growth, and that’s fine. Law of large numbers and diminishing returns. It’s harder to grow an economy that is 5x larger at the rate it was growing when it was 5x smaller.
Post-2008 GDP growth is pretty much back to the historical average, or at least back to where it was in the late 90′s and 2000′s. Not hyper-speed growth, but certainty not recessionary.

Recent real GDP doesn’t deviate too much from historical performance:

Real US GDP growth is roughly back to where it was between 1997-2007, and no one was complaining about stagnation back then. It seems like the terms ‘depression’ and ‘recession’ have now been redefined by the left to mean ‘economy is not how we want it to be’ – too much wealth inequality and not enough job creation.

Inevitably, the UBI (universal basic income) comes up in any online economics debate. The UBI is a bad idea that refuses to die. When you consider SNAP is being abused to buy drugs, cigarettes, and alcohol, It’s implausible how a UBI without preconditions could work, which is why I propose the high-IQ basic income – or at least drug testing and or mandatory birth control/abstinence or even sterilization, to prevent further abuse of these programs. As to be expected, civil libertarian and other leftist types play the ‘Nazi’ or ‘racism’ card, but when your lifestyle involves public goods and or has externalities, your personal freedom becomes secondary.

EBT Cards Used in Illegal Drug Trade

Attorneys in the case say that the EBT cards are “a common currency for drugs.” The problem according to Sam Adolphsen, chief operating officer for the Maine Department of Health and Human Services, is that “the state cannot deactivate benefits regardless of how many times recipients lose their cards or say they are stolen.”

At FGA we have cataloged plenty of examples of the fraud that plagues America’s welfare system. The use of taxpayer assistance for the purchase of illegal drugs is possibly one of the worst abuses we’ve seen. Unfortunately, “the two crimes increasingly intersect.”
Adolphsen mentioned that “the presence of EBT cards in drug busts has become so commonplace that welfare fraud investigators at DHHS now regularly check the arrest logs in local newspapers for drug crimes and cross-reference suspects to see if they are also receiving state welfare benefits.” When agents from the Maine Drug Enforcement Agency find these cards, “they report that fact back to DHHS so the fraud unit can investigate.”

Entitlement spending is so high that it almost acts like a UBI.

The lowest quintile of households have a negative effective tax rate:

Some estimates are that a UBI would cost $3 trillion vs. $860 billion for social security. But the problem is existing entitlement spending programs won’t just go away with the ratification of a UBI. If people squander their UBI on non-essentials, which is guaranteed to happen as we’ve seen with EBT abuse, the government will have to step in and provide those essential services as they are doing already. Proponents of the UBI make the charitable, unrealistic assumption that the average American is as careful with money as they are. A UBI without preconditions would just compound existing entitlement spending.

From Businessinsider: Insiders say what’s going on inside $11 billion Pinterest — and it’s not all good

Businessinsider is a notorious click-bait aggregator, spinning minutia into hype and ad impressions.

Reminds be of the Uber California court case they hyped last year, that predictably didn’t go anywhere. Businessinsider incorrectly reported that the ruling would affect all California drivers:

It’s left to Judge Edward Chen to decide whether California Uber drivers will be covered by a federal class-action lawsuit that threatens to reclassify the entire state’s Uber-driver workforce as employees of the company.

Even though the judge ruled the driver was an employee, nothing really came of it, as I correctly predicted. The reason is because the ruling only affected the one employee, and Uber has prevailed over similar lawsuits before. Just another example of this blog being right more often than not.

The ruling does not apply beyond Ms. Berwick and could be altered if Uber’s appeal succeeds. Uber has also prevailed in at least five other states in keeping its definition of drivers as independent contractors.

That was seven months ago and Uber didn’t die, much to the disappointment of the left.

Some people so badly want for this to be 2000 all over again they they have to make things up. They have to turn molehills into mountains.

Back to the Pinterest article:

The visual scrapbook platform should be printing money. Its predominantly female audience browses Pinterest’s various boards for inspiration about their next fashion purchases, vacation destination, or on how to decorate a house — and they also act as free brand representatives by “pinning” their favorite products, making them visible to others.

It may come as a surprise to some, but making money is not important. That’s why so many people lost their shirts shorting the ‘unprofitable‘ Amazon.com

Rather, it’s the the demonstrated ability to make money, which is more important. Should the time come to turn on the advertising money printing press, Pinterest and Snapchat, like Facebook, should have no difficulty making money. There’s already a huge line of advertisers ready to plow hundreds of millions of dollars into Pinterest ads. Investors are patient, knowing that Pinterest will start printing money when the time is right. But right now, Pinterest is still building the userbase and perfecting their ad platform. Like Facebook, Pinterest’s profit margins will be extremely high, and it would not surprise me if this company is worth $50 billion soon. But right now, Pinterest, like many web successful web 2.0 companies, is more interested in taking its time to build positive user and advertiser experience, than milking every user for every last dime.