Dalio compares capitalists to socialists using the old saw: one has trouble slicing up the pie, the other has trouble growing it. More appropriate today from my experience working as a commodities trader: the financial sector eats the pie that the real economy bakes. I retired comfortably after only 10 years on the Street ... but I'm not proud of what I accomplished. And neither should you be, Mr. Dalio.
His main thesis here seems to be that modern capitalism, including the financial sector, is not serving the people as well as it should, or as well as it did during the middle third of the 20th century. It sounds like you agree with him, but want to criticize anyway?
The financial sector provides the work of analyzing economic need to better allocate capital. It is real work, that adds real value to the economy. The problem with the financial sector is that barriers to entry, created to "protect retail investors" and "mitigate systemic risk", result in the vast majority being excluded from the industry and a small elite capturing the majority of profits.
Any development that threatens to disrupt the regulated financial sector is dealt with harshly by regulatory agencies, as in the case of the token sale market and the SEC's enforcement actions against token sale organizers.
My "real work" largely consisted of what is sometimes called "chartism" today. Technical analysis is ridiculed by the academic community, but in certain markets it sure as hell works. I don't think, however, that I ever "created value" in anything I did as a commodities trader, in the sense that cancer researchers or teachers create tangible value. If anything, I felt that I was exploiting supply/demand shocks using capital from investors that I was lucky enough to know. The strategies were never that complicated or innovative either. Today its even simpler: constant rebalancing between a couple of high market-cap ETF's.
Technical analysis is exploiting inefficiencies in market behaviour to profit, and in doing so, reducing those inefficiencies. It is not value-less work, no matter how far removed it is from the end-product that people consume.
>>If anything, I felt that I was exploiting supply/demand shocks using capital from investors that I was lucky enough to know.
This helps with the allocation of physical resources. The faster prices are aligned with supply-demand dynamics, the more efficiently those physical resources will be consumed.
When there is a major shortage of a commodity, you want people to start conserving that resource as soon as possible, and that is what an increase in prices brought about by traders like you results in.
> created to "protect retail investors" and "mitigate systemic risk", result in the vast majority being excluded from the industry and a small elite capturing the majority of profits.
Most Americans don't make enough to have anything left over to invest in the markets. This isn't a regulatory failing, this is a labor regulation failing.
It shouldn't cost anything to invest in the markets. The markets should be nearly frictionless, with no fixed costs for making an investment, making it possible to invest $2.50 at your local convenience store in a company or product that you like, the same way the poor buy lottery tickets in mass (currently 9% of the income of the poorest households is spent on lottery tickets).
> It shouldn't cost anything to invest in the markets.
Hyperbole. It costs something to maintain the infrastructure (data centers in NY, NJ, and IL) to execute and settle trades. We're just arguing over how much.
It costs something, yes. I think Vangaurd demonstrates how efficiently the whole system could run.
Investors own the infrastructure, co-op style; Executives running the exchanges could be more like Jack Bogle than Ken Griffin. Both were effectively IT executives doing finance and connecting buyers and sellers. One took a tiny salary, one is worth 9 billion. Of course market making is slightly different but is a middle man just like an exchange.
Now that crypto exists, there are many blockchains that are federated and require a fraction of energy as bitcoin and are working very securely. Bitcoin is an exception to energy required and therefor not indicative of the real cost.
It should cost almost nothing. It's an information technology, as cryptocurrency is demonstrating. The cost per transaction should be extremely low. That it isn't is a result of regulatory overhead.
That's a result of the mining subsidy, that is there to provide security until transaction fees are sufficiently large to secure the network. Actual energy consumption for a network of a few thousand computers to propagate and validate a transaction is minimal:
Without the mining subsidy, and without an artificial 1 MB per 10 minute throughput limit creating scarcity in block space, fees would be extraordinarily low.
Also, Ethereum and other blockchains are-moving/have-already-moved to Proof of Stake, which eliminates all of the additional energy consumption that comes from generating proof of work.
> Most Americans don't make enough to have anything left over to invest in the markets.
This assertion is not supported by demographic statistics. The median US household has ~$12,000/year in investable cash, after all ordinary expenses. Whether or not they actually invest any of this cash is another matter.
Glen Weyl's RadicalXChange movement is the most sensible alternative to capitalism out there, imo. The Herberger tax/COST and liberal radicalism are great ideas.
