economy

Happiness, Skill, or Opportunity?

Happiness, Skill, or Opportunity? 150 150 JP

What to focus on? Do what makes you happy; or, do what you’re skilled at; or, work where the opportunities are… those are the biggest questions for young people and old people alike. At least, if I think about my own life, as I get older having worked with business leaders of all ages these are the three categories to think about when looking for work. Work… that old chestnut. That chore you do to acquire capital, money in 2021 terms.

On a side note, what do you think came before money and modern society? I doubt many people think about living standards today, but in the not so distant future, they sucked. Living standards were so fucking horrible just over 100 years ago and that it was the advent of our big oil generation that allowed for all the new shit we have to be ungrateful about, or worse, hold in contempt. Sorry for the language, it’s just annoying when people seemingly think the “capitalist” class is exploiting the working class.

Work, for most people in the civilized world is at will. Meaning, you can leave at anytime because you’re not beholden to the company. The reason capitalism works better than anything else is because every person is generally taking action that is in their own self interests, as human nature demands. Also, it’s hilarious to think that the capitalists (e.g. business owners) don’t also work hard, take on much greater risk, and in most circumstances, eat last. Lest we forget that both terms socialist and capitalist came from the same mad man, Karl Marx. Liberals just co-opted capitalism and turned it into a term for good, in most cases using Marx’s own logic to prove as such.

That said, work is a chore. Humans desire leisure. We’ve been fortunate (at least in the first world) to have capitalists fund ideas allowing us to capture more leisure and greater comforts than ever before in recorded history. Maybe between the time before ancient history was written and the end of dinosaurs there was some super advanced civilization that got off the planet never to be heard from again. Alas, in 2021 AD we are at the height of human civilization and despite all the fucking fear mongering, life is pretty damn good. It’s so good that we have the ability to choose to do what you love and do what makes you happy when that was not even in the conversation just a few decades ago.

So, what’s it going to be? Pursue happiness, follow your skills, or chase opportunities? If these all align, you get people like Michael Jordan or Jay-Z or Picasso or Steve Jobs. That’s the sweet spot; however, if these align most coaching kids little league, you’re probably going to need an income from your other skills. Remember, there are many things that can make you happy and usually the highest level skills are tied to things that you like or used to like; and there are usually opportunities somewhere in the middle.

We Already Have High Inflation

We Already Have High Inflation 150 150 JP

There are over 2,000 publicly traded companies with market capitalizations in excess of $2 billion and close to 500 of them are priced at 10x current revenue with the majority of this sub group losing money.

The Russell 3000, which represents nearly 98% of public stocks in the United States, is up 110% in the last 5 years. That’s roughly 16% annualized where normally a large basket of stock would have produced around 9%.

Will Michael Burry and Peter Schiff be right with their forecast of hyper-inflation? I don’t know. What’s for sure is that when you look at a chart of the S&P 500 since 2009, it’s nothing but up up up hockey stick style.

Is that because so much value has been added to society? I don’t think so. What does seem to be happening though is a continued push of the can down the road now to a point now where the pain coming will be significantly greater than 10, 20, 30, 40 years ago.

Fairy Dust and Chinese Stocks

Fairy Dust and Chinese Stocks 150 150 JP

I think it would be interesting to put together a derivative contract that mimics the performance of certain small businesses in certain cities across the United States and let’s investors buy the instrument/vehicle/contract but never ever have ownership in the businesses themselves. This is exactly what happens when you buy stocks in Chinese listed companies.

Under Chinese law, it is illegal for foreigners to own certain big important Chinese tech companies. Almost every listed Chinese company investors can buy outside of China is through a structure called VIE — Variable Interest Entity. It’s like a derivative contract with zero real ownership in the company.

Here’s how it works. A company like Didi Global sets up a company in the Cayman Islands that can be owned by anyone. This company enters into a series of contracts with the local Chinese company, giving it certain carefully curated economic interests and control rights over the Chinese company, not real ownership. Then you list the company on the Nasdaq or NYSE and people buy its stock, most not knowing that they have no rights at all in the actual company. The company is more or less an empty shell with a loose contract.

So, fairy dust…

Of course, the fairy dust could be worth more and more as the company grows. Even in the United States, owning public equities doesn’t mean a damn thing unless you have a controlling interest. China would never allow anyone that level of control. With that in mind, there are more than 240 Chinese companies listed on US exchanges with a total market cap exceeding $2 trillion (USD) and most of these companies are tied to contracts held in shell companies in the Cayman Islands.

Do you see a problem?

Of course, there are plenty of big name investors that love these VIE’s. Charlie Munger and Monish Pabrai both hold a lot of Alibaba (BABA) and Chase Coleman’s Tiger Global Management has over 7% of their portfolio in JD.com (JD), which is perfectly fine as long as there isn’t corporate fraud or even just legal slight of hand that would be detrimental to the shareholders. This is the reason why so many Chinese stocks in the same space and generating similar revenue and profit as American based stocks sell for discounts in the market.

Know the risks…

The VIE stocks could go zero while the underlying real business remains fine. I don’t think that would happen since China would have to screw over a lot of people globally to stomach that; however, the SEC is now requiring certain disclosures to be made on IPO docs. The structure is illegal under Chinese law, which has not stopped companies from using it thus far. China is a communist capitalist country where property is allowed to be privately owned; however, if history is any indicator, how long that will last is anyone’s guess.

Things That Matter

Things That Matter 150 150 JP

I can understand why people have contempt for capitalism despite the blatant elevation of civilization through the last couple of centuries thanks to greater individual rights, private property ownership, and voluntary exchange.

Nothing has been more beneficial to the masses than this ideal. Nothing has helped more people rise from nothing. Yet, as is the nature of human beings it seems, rulers emerge to control and regulate others. It’s some malfunction we have as people. In the modern world, the elite (rulers, officials, etc.) have to balance how they accumulate power with why they want it. Let’s not get too deep down that road… this post is about things that matter from a business perspective.

Since civilization does not (yet) have an unlimited abundant zero cost source of food/water, shelter, and energy, business remains the lifeblood of progress. Some things may never get to zero cost, not because they require money under our current social structure, but in the absence of that costs would be much higher. For example, even if you were an adept farmer or hunter, the cost would be time and resources to do those tasks, or find a tribe where your skill set can be traded in return. Money simply makes this transaction easier. Barter is a primitive concept.

At a base level, humans only have a few simplistic needs: food, water, oxygen. We desire more. “There ain’t no reason why I be buying expensive chains” can be extrapolated out to almost everything anyone does. Of course, this is the basis of praxeology — the study of human action. One thing is for sure, people do stuff for their own reasons, and that’s one of the biggest reasons scientists like Donald Hoffman (not to mention Elon Musk) think we are all living in a simulation already. If you are not willing to do that thought experiment, I don’t blame you. It’s a hard pill to swallow. It doesn’t change the fact you have to live with what you have and are bound by the laws governing it all.

That’s why even if ideas of anarchy from people like Michael Malice may sound exotic and borderline ridiculous, battlefield Earth (horribly great movie) is waged around freedom with plenty of people comfortable giving up their freedoms to others claiming to help. So, what the fuck does this have to do with anything? Hahahahaha. I write for myself mostly. You just happen to be reading this. Seriously, here’s the thing.

If you buy into the idea that there are bullshit jobs, I don’t blame you, there definitely are plenty of them. However, what are the alternatives? The hashtag #doepicshit is filled with people doing nothing that epic at all. Sure, fitness is important, but it’s just not epic. Maybe I’m salty because I haven’t done anything worthwhile yet… so be it. Time to get started.

All Social Systems Need Capitalists

All Social Systems Need Capitalists 150 150 JP

It’s amazing how many people, even super smart ones, believe that socialism and communism could work — it just hasn’t been done well yet. In fact, some believe that these systems are actually the best for society as a whole.

So·cial·ism
a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

The community tends to end in the state, a dictator or supreme leader who exerts power over the entire structure. Stalin, Lenin, Putin, Mao, Hitler, Chavez, Castro, Jong-il, Jong-un.

This is the trickiness of socialism. It sounds good to the layman and uninitiated, but those that have escaped it or lived through it understand this is the end result EVERY SINGLE TIME. Yet, no one wants to admit they’re wrong for thinking it could work in some fictitious book ending that has no basis in reality.

Capitalism
an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.

Contrary to socialism, everywhere this has been implemented, the nation and its citizens have not only prospered incredibly well, but have experienced an unparalleled level of freedom. That’s the choice: freedom vs …

America has some Capitalism, responsible for the elevated standards where even people living below the poverty line have more opportunity and better lives than they would in virtually every other nation.

Keeping up with the Jones’ is what makes the emotion of our 10% poverty level or the wealth gap feel extremely negative. I get it. It has nothing to do with capitalism, because for all intents and purposes we’re not even in the top 10 when it comes to economic freedom.

The United States is a socialist country and that’s why we’re losing in so many ways at the moment. I don’t know about making it great again, but as long as government (the state) keeps getting bigger, complete socialism is inevitable.

Here’s the thing…

It doesn’t matter. Socialists need capitalists not the other way around.

Look at the most recent example of this: China. China is a socialist/communist country (same difference) that uses capitalists to fund its state agenda. They’re slick about it. Who do you think they learned it from?

What makes America great (already) is the freedom to start a business and compete in the marketplace. Even if you think the market is rigged, the ability to get started still exists.

With that in mind…

If you are thinking that Socialism is a good way for society to progress, prove it like capitalists do. It hasn’t been proven yet. Socialism has fucked up every country it touches, every single one. Whereas capitalism has raised the standard of living everywhere it goes. It’s not capitalism that’s broken in America, it’s that too much socialism has creeped in.

Socialist theory argues that the economic system would consist of an organization of production to directly satisfy economic demands and human needs, so that goods and services would be produced directly for use instead of for private profit driven by the accumulation of capital.

Capitalists don’t generate profit for the sake of capital accumulation only, but for what it means to have capital accumulated. Profit means you can keep meeting the demands of the market because you have excess capital that isn’t used up in the production of deliverables. Demands of the market typically are problems like food, energy, and shelter, etc. Profit is there when mistakes happen and savings from the past to can be deployed to survive.

Essentially, socialists are not economists or business people yet they want to do both, poorly as it might be. How would a socialist business operate? I don’t know. I don’t think many people know how to operate a business in the first place, but at least we are all free to try it. There are less than 2 million businesses in the United States with 10 or more employees generating $1 million or more. That number shrinks to just under 300,000 for businesses with 50 or more employees and $5 million in sales.

The majority of businesses are owned by one person with less than 10 employees — more than 12 million of them, not to mention the tens of millions of freelance workers who operate as an army of one. Would socialism help or hurt them or eliminate them entirely?

Where I get confused is when people talk about class divide under capitalism as if the divide doesn’t exist under socialism. It’s worse! Socialists believe the shared ownership of resources and central planning offer a more equitable distribution of goods and services. If you can’t see how that would end in dictators and fascists, learn the history because that’s what happens.

It’s funny how people who like socialism talk about how under it the country would finally be democratic. Does it matter if it’s democratic? Hitler was elected. That didn’t end too well.

Socialism purposes the collective ownership of the means of production, central planning of the economy, and the emphasis on equality and economic security with the goal of reducing class distinctions. Only it creates greater ones because the power is even more consolidated than in a capitalist system.

My absolute greatest fear is that America will embrace this evil and fully turn to it as a political and economic reality, sooner rather than later. If we do this, the world should watch out as our military power which is kept at bay today will be utilized for the wrong reasons.

History tends to repeat itself doesn’t it? Writing this as the capitol building gets stormed by protestors here in DC.