While we wait for the verdict on Anthropic’s Claude Sonnet 3.7, today seems like a good day to catch up on the queue and look at various economics-related things.
While I agree that capital gains taxes are generally not efficient (more of the tax burden should be on lan etc etc), if you have to tax them taxing unrealized gains is more efficient, at least in theory. It prevents lock-in and also treats it like the income it is (since you can eg borrow against stocks). A point of evidence for this is that this is the solution that private markets have converged on, i.e. hedge fund fees take unrealized gains (with some caveats).
Taxing unrealized gains leads to a sort of reverse lock-in effect, the forced liquidation effect, where appreciating assets might be sold prematurely. This leads to its own liquidity-driven distortions, beyond the valuation and administrative issues, as well as investment disincentives.
That is true, I wonder if there are any Econ papers that find a theoretical optimal mix for a given level of wanted taxation or expected revenue or something.
taxing unrealized gains doesn't really make sense for startups. your company can be worth $100m on paper, and nominally you own $20m of that, but it's not liquid at all. there's no way to force liquidation. there's not necessarily any buyer in the next year. you maybe can't even sell any of it without board approval. you yourself could be making $200k/yr. you're supposed to pay a multi million tax bill?
if it's a completely liquid asset, it makes more sense, but if you treat liquid and illiquid assets differently then it is very strange.
Regarding I Will Not Allocate Scarce Resources Via Price, the value of a line out the door is marketing. You will earn considerably more selling $5 bagels with a long line than $15 bagels and no line. Without the line, people may not value the bagels as much at any price.
This doesn't just work with queues. There's a reason that so much of children's cereal marketing is about one marketing character trying to steal another character's cereal. Children know that if other people are taking pains to acquire something, it must be worth having.
I suspect it's also an unstable equilibrium. Say the bakery raises prices a bit to shorten the queues, but they increase too much or people overreact to a small increase, and the queues end up disappearing entirely. The bakery then reverts to the old prices. Will the people who left come back? I doubt it.
Some other stories about Delaware causing trouble have come out recently too. Zynga guy for example. I dunno if it’s worth moving existing startups from Delaware to Nevada but anecdotally some are starting in Nevada or Texas now. Whereas 10 years ago US tech startups were like 100% Delaware.
One benefit to Delaware is that it has well understood precedence because there have been so many corp lawsuits litigated and ruled on in that state relative to anywhere else. While corp laws may be similar across states, with fewer rulings, there's more uncertainty in how the law would be applied in Nevada or Texas relative to Delaware. Matt Levine discussed this consideration in Feb 2024, https://www.bloomberg.com/opinion/articles/2024-02-01/texas-tempts-tesla
Yeah, personally if I had to incorporate a new startup in the next 15 minutes I'd choose Delaware. Stripe Atlas only supports Delaware, which is nice. But chatting with founders recently I have heard some Nevada. Also some Texas but rarer than Nevada. Haven't heard anything besides those two.
Regarding the groceries / restaurant budget, that is not far off from mine, and I live in a much cheaper place than the valley. Some people just chose expensive food. Good point about it being almost entirely drive by the Housing Theory of Everything.
> It’s a hell of a lot to pay for that shorter commute.
There is a solid argument that shorter commute is the best value for money out there. I’d rather have (and do have) a smaller house + good school distract rather than a long commute and it’s life changing.
If you spend time working in normie offices (as you have and most here probably have) this is so clearly true (or Dilbert is true if you're feeling cynical) that it's hard to understand how it could be (in the face of IRL experience) ever be argued against. But, I think there's an extension to the Peter Principle that's much needed.
People aren't 1 step beyond their competence, they're promoted until "simply working longer and harder" stops working. Maybe for a lot of industries this is the same issue.
I see is a bunch of people get promoted to the final level of worker bee/beginning management based on their willingness to accept long hours/night/weekend work for no extra pay or only more straight time. The problem is they get promoted to the first real management level and instantly crash out b/c suddenly they need Technical Skills, Job Skills, People Skills and Delegation Skills.
All their steps before simply required applying tons of hours to Job Skills and maybe 1-5 hours a month helping on Technical Skills.
Of course they crash and burn, because duh, they don't know how to do 75% of their new job and their only tool is "working longer" which doesn't actually fix a soft skills deficiency or inability to do the technical side of our job or have any of the soft skills that are suddenly vital.
This also explains why companies struggle to promote around it. All the individual level data (performance reviews, manager feedback) says these hard workers are the best they have (which they are, at their jobs). Going into a room and arguing "if we broaden our promotion net to include a lot of the middling performers with other skills" causes a few issues.
1. They aren't trying to promote/find an average person, they often want someone with legs to go much further. Better to promote and burn out 5 or 6 people to find the diamond in the rough.
2. Most of the people got their jobs by working super hard and lucking into having the other skills, they can't see how hard this is for other people.
3. The knowledge that someone is willing to accept a crap deal is often very powerful when hiring for middle management, you want (in Ribbonfarm terms) good Clueless people or future sociopaths, you must avoid hiring losers for middle management.
4. I think this also explains why it's so much easier to lateral at this level. You can fuzz your hours worked and people only seem accomplishments/interview skills and it's harder for someone on the hiring board to argue "they're great, but only billed 1.7k hours last year".
5. Also in favor of lateral hires: Hiring someone well rounded, but only working "normal +" hours vs someone working crazy hours without any other skills pisses off the crazy hours people, you have to select from that group or select a lateral to avoid depressing the employees too much.
I'm in the London with 2 kids in nursery situation right now, it is terrible and disincentives the people you want to be having children from having children.. It's actually even worse than that because you lose child benefit payments, then childcare tax rebate, then the 15 free hours per kid, then your personal allowance (the first bit of untaxed income, which is what drives the higher marginal tax rate bump). I'm just out the other side of "worth it" on that graph, but it's an overall insane situation. On paper I'm (just) in the 1% from a gross income perspective but my net income after childcare is nowhere *near* what you would expect from that.
If we expect rapid growth due to AI, we most certainly should borrow from the future to make today better. The future will be much more abundant and the size of our loan will be miniscule compared to it.
When it comes to taxes I am reminded that incentives drive outcomes and that politicians don’t understand this.
While I agree that capital gains taxes are generally not efficient (more of the tax burden should be on lan etc etc), if you have to tax them taxing unrealized gains is more efficient, at least in theory. It prevents lock-in and also treats it like the income it is (since you can eg borrow against stocks). A point of evidence for this is that this is the solution that private markets have converged on, i.e. hedge fund fees take unrealized gains (with some caveats).
Taxing unrealized gains leads to a sort of reverse lock-in effect, the forced liquidation effect, where appreciating assets might be sold prematurely. This leads to its own liquidity-driven distortions, beyond the valuation and administrative issues, as well as investment disincentives.
That is true, I wonder if there are any Econ papers that find a theoretical optimal mix for a given level of wanted taxation or expected revenue or something.
taxing unrealized gains doesn't really make sense for startups. your company can be worth $100m on paper, and nominally you own $20m of that, but it's not liquid at all. there's no way to force liquidation. there's not necessarily any buyer in the next year. you maybe can't even sell any of it without board approval. you yourself could be making $200k/yr. you're supposed to pay a multi million tax bill?
if it's a completely liquid asset, it makes more sense, but if you treat liquid and illiquid assets differently then it is very strange.
Was that a Chrononauts joke?
funny how all economies are declining and stagnating and stalling everywhere looking towards long-term collapse
but simultaneously we are making digital gods
Podcast episode for this post:
https://open.substack.com/pub/dwatvpodcast/p/economics-roundup-5
Regarding I Will Not Allocate Scarce Resources Via Price, the value of a line out the door is marketing. You will earn considerably more selling $5 bagels with a long line than $15 bagels and no line. Without the line, people may not value the bagels as much at any price.
This doesn't just work with queues. There's a reason that so much of children's cereal marketing is about one marketing character trying to steal another character's cereal. Children know that if other people are taking pains to acquire something, it must be worth having.
But to do so they’re imposing a cost on others, such as the landlord and other tenants
I'm not suggesting that's not the case. But it's obvious why they prefer to not simply raise their prices to meet demand.
I suspect it's also an unstable equilibrium. Say the bakery raises prices a bit to shorten the queues, but they increase too much or people overreact to a small increase, and the queues end up disappearing entirely. The bakery then reverts to the old prices. Will the people who left come back? I doubt it.
What a depressing roundup!!!
Some other stories about Delaware causing trouble have come out recently too. Zynga guy for example. I dunno if it’s worth moving existing startups from Delaware to Nevada but anecdotally some are starting in Nevada or Texas now. Whereas 10 years ago US tech startups were like 100% Delaware.
One benefit to Delaware is that it has well understood precedence because there have been so many corp lawsuits litigated and ruled on in that state relative to anywhere else. While corp laws may be similar across states, with fewer rulings, there's more uncertainty in how the law would be applied in Nevada or Texas relative to Delaware. Matt Levine discussed this consideration in Feb 2024, https://www.bloomberg.com/opinion/articles/2024-02-01/texas-tempts-tesla
Yeah, personally if I had to incorporate a new startup in the next 15 minutes I'd choose Delaware. Stripe Atlas only supports Delaware, which is nice. But chatting with founders recently I have heard some Nevada. Also some Texas but rarer than Nevada. Haven't heard anything besides those two.
"New SBF interview from prison" link seems broken
Regarding the groceries / restaurant budget, that is not far off from mine, and I live in a much cheaper place than the valley. Some people just chose expensive food. Good point about it being almost entirely drive by the Housing Theory of Everything.
That’s 4x my food budget and I thought I ate out a lot!
> It’s a hell of a lot to pay for that shorter commute.
There is a solid argument that shorter commute is the best value for money out there. I’d rather have (and do have) a smaller house + good school distract rather than a long commute and it’s life changing.
The part I don’t understand is $3m house and still so far from BOTH adults’ jobs that they need two cars.
Peter Principle Stuff:
If you spend time working in normie offices (as you have and most here probably have) this is so clearly true (or Dilbert is true if you're feeling cynical) that it's hard to understand how it could be (in the face of IRL experience) ever be argued against. But, I think there's an extension to the Peter Principle that's much needed.
People aren't 1 step beyond their competence, they're promoted until "simply working longer and harder" stops working. Maybe for a lot of industries this is the same issue.
I see is a bunch of people get promoted to the final level of worker bee/beginning management based on their willingness to accept long hours/night/weekend work for no extra pay or only more straight time. The problem is they get promoted to the first real management level and instantly crash out b/c suddenly they need Technical Skills, Job Skills, People Skills and Delegation Skills.
All their steps before simply required applying tons of hours to Job Skills and maybe 1-5 hours a month helping on Technical Skills.
Of course they crash and burn, because duh, they don't know how to do 75% of their new job and their only tool is "working longer" which doesn't actually fix a soft skills deficiency or inability to do the technical side of our job or have any of the soft skills that are suddenly vital.
This also explains why companies struggle to promote around it. All the individual level data (performance reviews, manager feedback) says these hard workers are the best they have (which they are, at their jobs). Going into a room and arguing "if we broaden our promotion net to include a lot of the middling performers with other skills" causes a few issues.
1. They aren't trying to promote/find an average person, they often want someone with legs to go much further. Better to promote and burn out 5 or 6 people to find the diamond in the rough.
2. Most of the people got their jobs by working super hard and lucking into having the other skills, they can't see how hard this is for other people.
3. The knowledge that someone is willing to accept a crap deal is often very powerful when hiring for middle management, you want (in Ribbonfarm terms) good Clueless people or future sociopaths, you must avoid hiring losers for middle management.
4. I think this also explains why it's so much easier to lateral at this level. You can fuzz your hours worked and people only seem accomplishments/interview skills and it's harder for someone on the hiring board to argue "they're great, but only billed 1.7k hours last year".
5. Also in favor of lateral hires: Hiring someone well rounded, but only working "normal +" hours vs someone working crazy hours without any other skills pisses off the crazy hours people, you have to select from that group or select a lateral to avoid depressing the employees too much.
I'm in the London with 2 kids in nursery situation right now, it is terrible and disincentives the people you want to be having children from having children.. It's actually even worse than that because you lose child benefit payments, then childcare tax rebate, then the 15 free hours per kid, then your personal allowance (the first bit of untaxed income, which is what drives the higher marginal tax rate bump). I'm just out the other side of "worth it" on that graph, but it's an overall insane situation. On paper I'm (just) in the 1% from a gross income perspective but my net income after childcare is nowhere *near* what you would expect from that.
I've just been playing around with Claude Sonnet 3.7.
1) Sensible naming! Hooray!
2) Seriously, wtf, I'm usually the AI skeptical one here, but wtf. It builds things one shot. Fast. Off of a vibes prompt. Wtf.
If we expect rapid growth due to AI, we most certainly should borrow from the future to make today better. The future will be much more abundant and the size of our loan will be miniscule compared to it.