7 ms·

> the top 1% of users capture 76.5% of profits This seems to be similar to OnlyFans, and the economy at large...

vcf 4mo ago
Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.
- amelius 4mo ago
  Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong that I'm starting to wonder if we should have laws against power laws, like we have in engineering when we try to make things stable.
  - Balgair 4mo ago
    I mean, do we want the economy to be stable? Not in a 'oh the rich don't so they control the media and so we don't' sorta way. But like in a 'lets educate people on the pluses and minuses, debate a while, and then come to an informed conclusion' sorta way. Like, deep down, does the average person actually want a stable economy? Because it seems to me that there is an even split historically between the folks that want stability and a little patch of land and weekly rhythms, and the folks that just want to drunkenly burn couches in the street every full moon, or some such thing. Not to be glib here at all. I like, would actually like to know the answer. Sorry if this comes off the cuff seeming.
    - pstuart 4mo ago
      I have a dumbed down version of this question as variant of the Voight-Kampff test (Bladerunner) that goes like this. You have 2 choices for how the world is shaped, pick 1: A. You have a modest but comfortable home, a job that pays you enough so that you have what you need and can afford occasional luxuries (e.g., an annual holiday abroad), have good health insurance, access to education and childcare, etc. Everybody else has the same thing, and because of this you live in communities where the arts flourish because nobody has to worry about becoming homeless or destitute. B. You live in magnificent mansion, one of dozens you own around the world (accessible via one of your personal Gulfstream jets). You have more money then you could ever spend in a lifetime (even recklessly). Your homes are staffed with obedient servants who cater to your every desire. I mean anything. You own them. Your mansions are on palatial estates with secure walls and guards to keep out the rabble outside -- who fight for scraps and are desperate enough to do any kind of work to keep your factories humming and printing cash. I wouldn't hesitate to choose A because that's a world I'd love to live in and the world of B horrifies me. I don't say this as virtue signaling, it's my innate reaction. I think that a significant portion of the population would love to choose B. And in some ways, some already have.
      - amelius 4mo ago
        I think most people want to earn more the harder they work, and I think that is fine. However, power laws basically spoil it because it gives a hard worker an exponential advantage, where they can (and will) use that money against other people who made different life choices.
        pstuart 4mo ago
        I agree that people want to be rewarded for their effort, and should be. But putting in 12 hour days being an EMT and saving peoples lives vs 12 hour days working with Claude to boost conversion pipelines have wildly different economic rewards. I'm not suggesting a Harrison Bergeron economy but its also clear that the current system is trending towards B and the game is rigged to ensure that. We don't live in a meritocracy -- there's a fair amount of luck involved (being in the right place at the right time).
        4mo ago
    - Aurornis 4mo ago
      If you ask people what they want, they'll request some impossible combination of attributes without consideration of any tradeoffs. They will also try to push all negative externalities on to people wealthier than themselves. Most people see themselves as middle class or lower middle class, even up to relatively high income levels. If you ask each of them where the tax rate should be increased, the answer is usually a few steps higher than their own income. UBI is a topic where this becomes very obvious. When you explain UBI to most people they assume they will be receiving the UBI and some abstract combination of billionaires and corporations would pay for it. Then you show them the math that it wouldn't work and they start to become less enamored with the idea. (Or lately: They just don't believe you and retreat to their imagined ideal free of pesky economics)
  - bee_rider 4mo ago
    Sigmoid wealth tax maybe?
    - trgn 4mo ago
      that's what progressive taxation is
      - amelius 4mo ago
        Maybe, if you get the coefficients right.
  - nonethewiser 4mo ago
    >The effect is so strong that I'm starting to wonder if we should have laws against power laws This is literally and unironically communism.
    - amelius 4mo ago
      Why? You want to earn exponentially more than other people the harder you work? Instead of just linear?
      - nonethewiser 4mo ago
        Let me be more specific. Communism constitutes one way to combat the power law via law. Not all forms of law combatting power law are communism.
        amelius 4mo ago
        Hmm, I don't follow.
  - skywalqer 4mo ago
    I believe a power law acts differently from an exponential distribution. I think wealth distribution is commonly approximated by a Pareto distribution. In your model, the exponential distribution is caused by the fact that you cannot go below zero; otherwise, it would be a normal distribution. I don't agree with your opinion about laws against power laws, but that is another matter.
  - hammock 4mo ago
    Seems like a good argument against flat taxes
  - Ferret7446 4mo ago
    That sounds semantically equivalent to legislating the value of the traditional gravitational constant.
fantasizr 4mo ago
these apps should load with this pie chart showing your likelihood of ever making a profit based on what they know about you. "YOU WILL LOSE MONEY ON THIS APP". Like the cigarette packs.
- solarkraft 4mo ago
  This is (possibly what you’re thinking of) a requirement in the EU for CFD trading providers. Providers have to (somewhat prominently) state in all of their ads what percentage of traders loses money using the product.
  - fantasizr 4mo ago
    Interesting, would love to see that applied here. Every third ad is about how I can make money on the weather.
  - tencentshill 4mo ago
    >99% CHANCE OF LOSS Yeah but I'm not a sucker like those other 99 guys!
- AlienRobot 4mo ago
  Just look at lotteries. I don't believe in them because when you consider operational costs, less money comes out of the lottery than goes in, so if everyone simply didn't bet on the lottery, they would have more money than if they bet on it. But everyone who bets thinks "but what if I win?"
  - fantasizr 4mo ago
    at least the lotteries and las vegas publish their odds. Losing to the terrible math is probably better than playing against someone with inside information.
  - evenhash 4mo ago
    That ”but what if I win” is realistically what you’re paying for if you buy a ticket. Maybe the sum of enjoyment lottery participants get from daydreaming about winning is >= the cost of running the lottery?

vcf 4mo ago

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.

amelius 4mo ago
Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong that I'm starting to wonder if we should have laws against power laws, like we have in engineering when we try to make things stable.
- Balgair 4mo ago
  I mean, do we want the economy to be stable? Not in a 'oh the rich don't so they control the media and so we don't' sorta way. But like in a 'lets educate people on the pluses and minuses, debate a while, and then come to an informed conclusion' sorta way. Like, deep down, does the average person actually want a stable economy? Because it seems to me that there is an even split historically between the folks that want stability and a little patch of land and weekly rhythms, and the folks that just want to drunkenly burn couches in the street every full moon, or some such thing. Not to be glib here at all. I like, would actually like to know the answer. Sorry if this comes off the cuff seeming.
  - pstuart 4mo ago
    I have a dumbed down version of this question as variant of the Voight-Kampff test (Bladerunner) that goes like this. You have 2 choices for how the world is shaped, pick 1: A. You have a modest but comfortable home, a job that pays you enough so that you have what you need and can afford occasional luxuries (e.g., an annual holiday abroad), have good health insurance, access to education and childcare, etc. Everybody else has the same thing, and because of this you live in communities where the arts flourish because nobody has to worry about becoming homeless or destitute. B. You live in magnificent mansion, one of dozens you own around the world (accessible via one of your personal Gulfstream jets). You have more money then you could ever spend in a lifetime (even recklessly). Your homes are staffed with obedient servants who cater to your every desire. I mean anything. You own them. Your mansions are on palatial estates with secure walls and guards to keep out the rabble outside -- who fight for scraps and are desperate enough to do any kind of work to keep your factories humming and printing cash. I wouldn't hesitate to choose A because that's a world I'd love to live in and the world of B horrifies me. I don't say this as virtue signaling, it's my innate reaction. I think that a significant portion of the population would love to choose B. And in some ways, some already have.
    - amelius 4mo ago
      I think most people want to earn more the harder they work, and I think that is fine. However, power laws basically spoil it because it gives a hard worker an exponential advantage, where they can (and will) use that money against other people who made different life choices.
      - pstuart 4mo ago
        I agree that people want to be rewarded for their effort, and should be. But putting in 12 hour days being an EMT and saving peoples lives vs 12 hour days working with Claude to boost conversion pipelines have wildly different economic rewards. I'm not suggesting a Harrison Bergeron economy but its also clear that the current system is trending towards B and the game is rigged to ensure that. We don't live in a meritocracy -- there's a fair amount of luck involved (being in the right place at the right time).
      - 4mo ago
  - Aurornis 4mo ago
    If you ask people what they want, they'll request some impossible combination of attributes without consideration of any tradeoffs. They will also try to push all negative externalities on to people wealthier than themselves. Most people see themselves as middle class or lower middle class, even up to relatively high income levels. If you ask each of them where the tax rate should be increased, the answer is usually a few steps higher than their own income. UBI is a topic where this becomes very obvious. When you explain UBI to most people they assume they will be receiving the UBI and some abstract combination of billionaires and corporations would pay for it. Then you show them the math that it wouldn't work and they start to become less enamored with the idea. (Or lately: They just don't believe you and retreat to their imagined ideal free of pesky economics)
- bee_rider 4mo ago
  Sigmoid wealth tax maybe?
  - trgn 4mo ago
    that's what progressive taxation is
    - amelius 4mo ago
      Maybe, if you get the coefficients right.
- nonethewiser 4mo ago
  >The effect is so strong that I'm starting to wonder if we should have laws against power laws This is literally and unironically communism.
  - amelius 4mo ago
    Why? You want to earn exponentially more than other people the harder you work? Instead of just linear?
    - nonethewiser 4mo ago
      Let me be more specific. Communism constitutes one way to combat the power law via law. Not all forms of law combatting power law are communism.
      - amelius 4mo ago
        Hmm, I don't follow.
- skywalqer 4mo ago
  I believe a power law acts differently from an exponential distribution. I think wealth distribution is commonly approximated by a Pareto distribution. In your model, the exponential distribution is caused by the fact that you cannot go below zero; otherwise, it would be a normal distribution. I don't agree with your opinion about laws against power laws, but that is another matter.
- hammock 4mo ago
  Seems like a good argument against flat taxes
- Ferret7446 4mo ago
  That sounds semantically equivalent to legislating the value of the traditional gravitational constant.

fantasizr 4mo ago

these apps should load with this pie chart showing your likelihood of ever making a profit based on what they know about you. "YOU WILL LOSE MONEY ON THIS APP". Like the cigarette packs.

solarkraft 4mo ago
This is (possibly what you’re thinking of) a requirement in the EU for CFD trading providers. Providers have to (somewhat prominently) state in all of their ads what percentage of traders loses money using the product.
- fantasizr 4mo ago
  Interesting, would love to see that applied here. Every third ad is about how I can make money on the weather.
- tencentshill 4mo ago
  >99% CHANCE OF LOSS Yeah but I'm not a sucker like those other 99 guys!
AlienRobot 4mo ago
Just look at lotteries. I don't believe in them because when you consider operational costs, less money comes out of the lottery than goes in, so if everyone simply didn't bet on the lottery, they would have more money than if they bet on it. But everyone who bets thinks "but what if I win?"
- fantasizr 4mo ago
  at least the lotteries and las vegas publish their odds. Losing to the terrible math is probably better than playing against someone with inside information.
- evenhash 4mo ago
  That ”but what if I win” is realistically what you’re paying for if you buy a ticket. Maybe the sum of enjoyment lottery participants get from daydreaming about winning is >= the cost of running the lottery?