5 ms·

if these companies go bankrupt, they will have spent (not lost) all their money, the large amounts of money that they got from investors. That money generated p

by fsckboy 4mo ago

if these companies go bankrupt, they will have spent (not lost) all their money, the large amounts of money that they got from investors. That money generated profits for other companies they bought stuff from, and income for their employees, and capital gains for other people if AIco acquired other companies. the market cap of a company is computed by the current price of a company's shares, the last price paid; not all the shares of the company were bought at that price, the ones who got shares cheaper are showing paper profits, unrealized. Those who have already cashed out have money in their bank accounts that was transferred from people who wanted to get in. If the company goes bankrupt, their shares will be worthless, but the money they paid for them still remains in the accounts of people who sold their shares: the money was not lost even if some people lost money. I'm not going to keep going through it but the reason it works to value things the way we do is that the values are comparable and they frequently work out, so snapshots of the economy and the participants are comparable. But "losses" are not like taking gold and feeding it into some deep fold in the earth where it will disappear into the molten middle of earth. Stock valuations are "expectations for the future". Those expectations weren't money, they were lottery tickes where the lottery consisted of human creativity and human effort. People buying and selling share are moving real money around to trade the expectations. The money didn't go anywhere, it's still there, it's just that expectations for the future have been reduced. It all boils down to humans trading some of their time and potential on a bet that things work out. Some people's effort gets more rewarded than others. Not every team wins the world cup, but people like to play and like to watch.

conradkay 4mo ago
That's one way to look at it, though it feels like you could say the same about the dot-com crash or 2008 which isn't too helpful. At the very least (extremely high-paying) jobs can be actually lost
idiotsecant 4mo ago
This is way, way more neat and tidy than reality. When these stocks start to sink there is going to be an enormous evaporation of value from the overall market because people in riskier investments will get scared that other people will get scared. This will scare people with slightly safer investments, on up the line. Capital will dry up and velocity of money will drop. The market is not made by rational robots, it's run by barely sentient apes just minutes from reverting to crushing things with rocks. The markets run on vibes and fever dreams of hitting the next big thing.
Retric 4mo ago
That’s an overly simplified model. AI companies spending results in infrastructure beyond the company such as manufacturing capacity, power lines, software systems, and even individual expertise. If they fail then the negative impact ripples through the economy due to misallocation of resources.
- fsckboy 4mo ago
  >infrastructure beyond the company consider all the companies in a market and those that feed that market to be one virtual mega company, add up all the valuations and revenue streams, costs, etc and aggregate all the investors into one. Nothing changes about the picture I drew. We simplify models to make the real world understandable. >negative impact ripples through the economy due to misallocation of resources free or relatively free financial markets are the only way, the best way, the ne plus ultra of ways we know to allocate capital, we have no better way than for the owner of the capital and the reapers of the loss or reward to make a considered opinion that is risk "impedance" matched. By definition, the market does not "misallocate" capital, it optimally allocates it. your theory is that we could somehow know the future, but that's a fallacy.
  - Retric 4mo ago
    > one virtual mega company Free market efficiency is inherently tied to having multiple companies. Treating the entire economy as a single company gives nonsensical results because it fundamentally differs from what actually occurs. You might as well compare the economy to a game of tick tack toe, inherent complexity isn’t something you can simplify it has meaningful consequences. Your ideas like many other ideas are simply wrong. > could somehow know the future Perfect accuracy isn’t the only possibility here, there’s levels of error. Our system involves intermediaries between the actual owners of capital and the allocation of that capital who have very different incentives. When the worst possibility is missing a bonus there’s little difference between losing 10% of an investors money and 100%. That results in inefficiency through the misalignment of incentives. That is actually true, and thus there’s no way to gloss over that truth without simply being wrong.

by fsckboy 4mo ago

conradkay 4mo ago

That's one way to look at it, though it feels like you could say the same about the dot-com crash or 2008 which isn't too helpful. At the very least (extremely high-paying) jobs can be actually lost

idiotsecant 4mo ago

This is way, way more neat and tidy than reality. When these stocks start to sink there is going to be an enormous evaporation of value from the overall market because people in riskier investments will get scared that other people will get scared. This will scare people with slightly safer investments, on up the line. Capital will dry up and velocity of money will drop. The market is not made by rational robots, it's run by barely sentient apes just minutes from reverting to crushing things with rocks. The markets run on vibes and fever dreams of hitting the next big thing.

Retric 4mo ago

That’s an overly simplified model. AI companies spending results in infrastructure beyond the company such as manufacturing capacity, power lines, software systems, and even individual expertise. If they fail then the negative impact ripples through the economy due to misallocation of resources.

fsckboy 4mo ago
>infrastructure beyond the company consider all the companies in a market and those that feed that market to be one virtual mega company, add up all the valuations and revenue streams, costs, etc and aggregate all the investors into one. Nothing changes about the picture I drew. We simplify models to make the real world understandable. >negative impact ripples through the economy due to misallocation of resources free or relatively free financial markets are the only way, the best way, the ne plus ultra of ways we know to allocate capital, we have no better way than for the owner of the capital and the reapers of the loss or reward to make a considered opinion that is risk "impedance" matched. By definition, the market does not "misallocate" capital, it optimally allocates it. your theory is that we could somehow know the future, but that's a fallacy.
- Retric 4mo ago
  > one virtual mega company Free market efficiency is inherently tied to having multiple companies. Treating the entire economy as a single company gives nonsensical results because it fundamentally differs from what actually occurs. You might as well compare the economy to a game of tick tack toe, inherent complexity isn’t something you can simplify it has meaningful consequences. Your ideas like many other ideas are simply wrong. > could somehow know the future Perfect accuracy isn’t the only possibility here, there’s levels of error. Our system involves intermediaries between the actual owners of capital and the allocation of that capital who have very different incentives. When the worst possibility is missing a bonus there’s little difference between losing 10% of an investors money and 100%. That results in inefficiency through the misalignment of incentives. That is actually true, and thus there’s no way to gloss over that truth without simply being wrong.