Are We Doing Any Good?

[watsa_is_a_randian_hero]

I haven't fully formed my opinion, but I tend to disagree (and agree with Eric). I don't know Eric's skill set, or what he did in his previous life, but I would wager there were alternative labor options seeking employment who, all else being equal in the economy, now are employed as a result of his decision to remove himself from the labor pool (yet remain a consumer not reliant upon the government).

 

Say you have a town, with 20 people, and 19 are employed.  The first 19 are employed because of the 20, those 19 are the best suited for the jobs available.  If one of the 19 chooses to withdrawal from the labor market, is the village better off because now the least qualified of the 20 can be employed?

[jschembs]

I haven't fully formed my opinion, but I tend to disagree (and agree with Eric). I don't know Eric's skill set, or what he did in his previous life, but I would wager there were alternative labor options seeking employment who, all else being equal in the economy, now are employed as a result of his decision to remove himself from the labor pool (yet remain a consumer not reliant upon the government).

 

Say you have a town, with 20 people, and 19 are employed.  The first 19 are employed because of the 20, those 19 are the best suited for the jobs available.  If one of the 19 chooses to withdrawal from the labor market, is the village better off because now the least qualified of the 20 can be employed?

 

So you're implying the 20th prefers to work, but cannot?

 

Let's hypothetically say the employee who chooses to withdraw is able to retire, maintaining their place in the economy as a consumer. The 20th now replaces the retiree as the 19th employee in the economy. I think part of your point is that this 20th person is not the best person for the job, and therefore the economy is "less efficient" because #20 is doing a subpar job in the place of #19.

 

However, what if #20 was destitute, living off a welfare system financed by the 19 employed, and now is a self-sufficient member of society? Perhaps he/she isn't quite as efficient as #19, but I think it's hard to say that economy is better off because #19 removed himself from the work force.

[watsa_is_a_randian_hero]

However, what if #20 was destitute, living off a welfare system financed by the 19 employed, and now is a self-sufficient member of society? Perhaps he/she isn't quite as efficient as #19, but I think it's hard to say that economy is better off because #19 removed himself from the work force.

 

Your welfare system comment unnecessarily complicates the example.  In any case:

1.  If you "retire," you still have to live off of someone doing work.  Think about it; if every member of society started saving half his/her income each year in the hopes of retiring early, you couldn't satisfy them all, or else there would be nobody to produce the goods/services demanded by retirees.  In both cases you have 20 people living off of the current productivity of 19.  In the first case, you have 20 people living off of the productivity of the 19 most productive members of the village, in the second case, you don't.

2.  I already mentioned my statement that profit is indicative of value add to society presupposes a free market. 

3.  Your comment and erics assume that there are a limited number of jobs and that just because eric retires someone else will be hired.  perhaps nobody else is hired.  Perhaps the company he worked for goes bankrupt and jobs are destroyed because he was such an integral part to its success.  Think about what you think would happen if the top 5% most productive smartest people all decided to retire.  Do you think their productivity could just be "replaced" by unemployed people?

[JBird]

To the extent you are rich and continue to work, (like buffett) you provide to help society become more efficient and produce productivity gains.  Even if your work is limited to investment decisions, you are helping society allocate capital efficiently. 

 

If your contribution to society is efficiently allocating a few million dollars in a multi-trillion dollar market, you haven't contributed much.

[ERICOPOLY]

To the extent you are rich and continue to work, (like buffett) you provide to help society become more efficient and produce productivity gains.  Even if your work is limited to investment decisions, you are helping society allocate capital efficiently. 

 

If your contribution to society is efficiently allocating a few million dollars in a multi-trillion dollar market, you haven't contributed much.

 

If you have one productive job in a world with billions of productive jobs, you've contributed a massive amount?

 

I think "per capita" contribution is the relative metric.  And a few million dollars on a per capita basis is statistically significant.

 

 

[ERICOPOLY]

1.  If you "retire," you still have to live off of someone doing work. 

 

I don't know if I "live off of" the people who take home my paychecks.  I write paychecks to babysitters, housekeepers, pool service guys, gardeners, electricians, etc... 

 

They live off of me more than I live off of them.

 

I could let the yard die, leave the house untidy, leave the kids alone at home... etc...

 

But can they get by without a paycheck?

[jschembs]

However, what if #20 was destitute, living off a welfare system financed by the 19 employed, and now is a self-sufficient member of society? Perhaps he/she isn't quite as efficient as #19, but I think it's hard to say that economy is better off because #19 removed himself from the work force.

 

Your welfare system comment unnecessarily complicates the example.  In any case:

1.  If you "retire," you still have to live off of someone doing work.  Think about it; if every member of society started saving half his/her income each year in the hopes of retiring early, you couldn't satisfy them all, or else there would be nobody to produce the goods/services demanded by retirees.  In both cases you have 20 people living off of the current productivity of 19.  In the first case, you have 20 people living off of the productivity of the 19 most productive members of the village, in the second case, you don't.

2.  I already mentioned my statement that profit is indicative of value add to society presupposes a free market. 

3.  Your comment and erics assume that there are a limited number of jobs and that just because eric retires someone else will be hired.  perhaps nobody else is hired.  Perhaps the company he worked for goes bankrupt and jobs are destroyed because he was such an integral part to its success.  Think about what you think would happen if the top 5% most productive smartest people all decided to retire.  Do you think their productivity could just be "replaced" by unemployed people?

 

I don't disagree with your point 3. I'm thinking of the situation at the margins, whereas you're taking it to the logical extreme.

[watsa_is_a_randian_hero]

To the extent you are rich and continue to work, (like buffett) you provide to help society become more efficient and produce productivity gains.  Even if your work is limited to investment decisions, you are helping society allocate capital efficiently. 

 

If your contribution to society is efficiently allocating a few million dollars in a multi-trillion dollar market, you haven't contributed much.

 

Lol.  Agreed the benefit is tiny at that level.  So small it would in most cases probably be the equivalent of less then minimum wage if it were measureable.  Simply put, it is unlikely the highest and best use of that person's time. 

 

However, you have contributed something.  I (think) what is being discussed here is whether it is a net positive, neutral, or net negative effect on society. 

[ERICOPOLY]

Given a world with only Warren Buffett and his billions of genetic clones, we've be totally screwed because nobody would start a new business.  Nobody!

 

Not a single one of them!

 

Never!

 

Why? 

 

Because each and every one of them would only buy a business with management intact and a long track record.

 

He is not an entrepreneur.  He does not take risks.  He does not see holes and fill them.

 

He just buys the cows that produce the best milk.  Has no idea how to create a cow that produces the best milk.  He's entirely dependent on others to get him cows that can be milked.

 

[watsa_is_a_randian_hero]

I don't know if I "live off of" the people who take home my paychecks.  I write paychecks to babysitters, housekeepers, pool service guys, gardeners, electricians, etc... 

 

They live off of me more than I live off of them.

 

I could let the yard die, leave the house untidy, leave the kids alone at home... etc...

 

But can they get by without a paycheck?

 

To the extent you are retired, your life is being sustained by the the current work of others, paid for by your deferment of spending of earnings from your past work.  IE, you are still living off of the current work of others. 

 

Think about it this way, if every other member of society aside from your family were for some reason to die overnight tonight, does it matter how many ounces of gold you have, real estate you own, or factories you own?

[JBird]

To the extent you are rich and continue to work, (like buffett) you provide to help society become more efficient and produce productivity gains.  Even if your work is limited to investment decisions, you are helping society allocate capital efficiently. 

 

If your contribution to society is efficiently allocating a few million dollars in a multi-trillion dollar market, you haven't contributed much.

 

If you have one productive job in a world with billions of productive jobs, you've contributed a massive amount?

 

I think "per capita" contribution is the relative metric.  And a few million dollars on a per capita basis is statistically significant.

 

Well I think you're right and I want to make a distinction. Elon Musk has efficiently allocated capital to create several productive businesses that have benefited society. That I think is wonderful. I would contrast that to a passive investor who trades stock certificates all his life to get wealthy. It's not to say the latter hasn't done anything for society, but in my view it's not worth much praise.

 

However, you have contributed something.  I (think) what is being discussed here is whether it is a net positive, neutral, or net negative effect on society

Yea, fair enough.

[watsa_is_a_randian_hero]

I honestly don't understand what you mean by that.  I'm not being sarcastic or anything.

 

I just milk the cows that produce milk.  "Productive" cows "produce".

 

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent.  Some are healthier.  Some are more predisposed to falling sick.  Capital allocators choose which cows to milk.

[oddballstocks]

I didn't read this thread yet, but I wanted to toss out a reply to the original post.  I'm guessing you're in finance, that's why you're asking this question.  There are MILLIONS of people in other industries asking the exact same question.  "What am I, a pricing analyst doing to help society?" 

 

I've worked at some large caps and I'd wager that at any given time 30% of the company is non-productive, literally they could be fired and nothing would change.  They aren't fired due to a number of mis-aligned incentives, but I digress.  Are any of those people doing something good for society?  They are employed, earning a wage, and spending their wage on living.  Their work contributes nothing, in many ways it detracts from society, yet they're paid and it helps the overall economy.

 

In a specialized economy it's often hard to see the impact one individual is making.  Doctors and EMT's save lives, that's tangible.  A teacher helps a student excel, that's tangible.  But a Market Analytics Analyst at a health care insurer feels like their job is futile.  Yet they might be helping to lower the cost of insurance a little bit at a time.  They alone are not doing it, but they're playing a part in a larger effort.

 

I worked for a startup years ago that destroyed shareholder capital and eventually merged with a competitor.  The products we built were all retired.  Did I waste four years of my life?  Quite possibly, I am almost certain I contributed nothing to society.  If customers didn't have our product they would have used someone else's.  Besides my tyrannical boss, I don't regret that job at all, it was a great learning experience, and I felt like I could personally contribute.  I played my part, I helped create some really cool products.  The fact that an Executive killed some of them off doesn't diminish my part, I had no control over that.

 

Here's a final thought.  You can probably do more to impact society by working at a job that you don't feel has any value, and volunteering and giving money to an organization that's making a difference.  Volunteer or give to a food bank, or a group that helps the poor.  The impact of going from hungry to not hungry can be life changing for someone.  Being employed and having an income to support things like this is world changing.

 

Nate

[ERICOPOLY]

I don't know if I "live off of" the people who take home my paychecks.  I write paychecks to babysitters, housekeepers, pool service guys, gardeners, electricians, etc... 

 

They live off of me more than I live off of them.

 

I could let the yard die, leave the house untidy, leave the kids alone at home... etc...

 

But can they get by without a paycheck?

 

To the extent you are retired, your life is being sustained by the the current work of others, paid for by your deferment of spending of earnings from your past work.  IE, you are still living off of the current work of others. 

 

Think about it this way, if every other member of society aside from your family were for some reason to die overnight tonight, does it matter how many ounces of gold you have, real estate you own, or factories you own?

 

I spent more money on taxes last year than I spent on my living expenses for my own family.

 

So if they all died, my costs would go down.

 

[watsa_is_a_randian_hero]

He just buys the cows that produce the best milk.  Has no idea how to create a cow that produces the best milk.  He's entirely dependent on others to get him cows that can be milked.

 

Ok, but he has still added value by choosing the best cow to milk.

 

Just the capital allocator is dependent upon entreprenuers to generate ideas to choose from doesn't invalidate the fact capital allocators provide a valuable service.

[premfan]

Given a world with only Warren Buffett and his billions of genetic clones, we've be totally screwed because nobody would start a new business.  Nobody!

 

Not a single one of them!

 

Never!

 

Why? 

 

Because each and every one of them would only buy a business with management intact and a long track record.

 

He is not an entrepreneur.  He does not take risks.  He does not see holes and fill them.

 

He just buys the cows that produce the best milk.  Has no idea how to create a cow that produces the best milk.  He's entirely dependent on others to get him cows that can be milked.

 

_+1

[watsa_is_a_randian_hero]

Think about it this way, if every other member of society aside from your family were for some reason to die overnight tonight, does it matter how many ounces of gold you have, real estate you own, or factories you own?

 

I spent more money on taxes last year than I spent on my living expenses for my own family.

 

So if they all died, my costs would go down.

 

And with that I'm ending this convo

[Orange]

It benefits society when one invests in a business with a useful product/service- if the business needs the capital. Buying BAC does not help society.

 

We are all just paper pushers in a massively liquid market that is over saturated with smart people doing nothing more than trying to outsmart each other. The stock market doesn't need anymore liquidity or manpower to function.

 

 

If you are accumulating wealth to donate it in the end, then that is admirable. Investing so you can become wealthy enough to live in a nice zip code and afford expensive travel, this is not morally positive no matter how you spin it. The only way to invest is if you have surplus capital that you do not need to survive. This is money that could be used by others to not die.

 

(I include myself in this criticism. It often causes me great guilt even though I do live modestly)

[ERICOPOLY]

I honestly don't understand what you mean by that.  I'm not being sarcastic or anything.

 

I just milk the cows that produce milk.  "Productive" cows "produce".

 

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent.  Some are healthier.  Some are more predisposed to falling sick.  Capital allocators choose which cows to milk.

 

I don't know where we disagree then, because I agree with all of that.

[jschembs]

I honestly don't understand what you mean by that.  I'm not being sarcastic or anything.

 

I just milk the cows that produce milk.  "Productive" cows "produce".

 

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent.  Some are healthier.  Some are more predisposed to falling sick.  Capital allocators choose which cows to milk.

 

I don't know where we disagree then, because I agree with all of that.

 

He wants you to get a job :)

[ERICOPOLY]

He just buys the cows that produce the best milk.  Has no idea how to create a cow that produces the best milk.  He's entirely dependent on others to get him cows that can be milked.

 

Ok, but he has still added value by choosing the best cow to milk.

 

This is the point I made at the beginning.

 

Passive investors benefit society by shifting capital along the spectrum from the less productive assets towards the more productive assets.

 

Then the most relatively unproductive assets become so cheap that an active investor will buy it discounted and break it up, sell off the assets, and then the capital will be unlocked and can flow to productive uses again.

[ERICOPOLY]

I honestly don't understand what you mean by that.  I'm not being sarcastic or anything.

 

I just milk the cows that produce milk.  "Productive" cows "produce".

 

I'm sure it is the same with cows as it is with companies; not all cows produce to the same extent.  Some are healthier.  Some are more predisposed to falling sick.  Capital allocators choose which cows to milk.

 

I don't know where we disagree then, because I agree with all of that.

 

He wants you to get a job :)

 

I have a job -- the guy on Downton Abbey is like an executive that stays home and order the staff around.

 

A CEO goes into the office and orders the staff around.

 

Hmmm.... I could just incorporate my family compound and then I would "have a job" as a "corporate officer".

[ERICOPOLY]

I hope you guys understand that I'm extremely polite to our housekeeper and I don't really "order" "our staff" around.

 

I overpay them by local standards.  We give them paid holidays off. 

 

I just joke around with you guys on the rhetoric.  Like for example, when I say I'm a "job creator", I'm just playing dressup in Mitt Romney's "douchy" costume.

 

I treat everyone who works for us as if I were doing that job myself.  After all, I was a software tester at Microsoft.  I was paid $36,000 in 1997 when I started.  I was never a big shot, and I never want to behave like one simply because I made some money flipping stocks around.  I just joke around with words because it's really funny to be retired with this much money at 40 and really at heart I'm still just a deck jockey that takes orders from my wife  ::)

[Parsad]

 

Assuming that you are a small time manager of your own portfolio, and so you are always a minority shareholder, do you think the time you spend (possibly full time) doing investments is doing any good for society, assuming you make a decent return.

 

Let's restrict the investments to long stocks, so no shorting, options , etc etc......

 

I think we are but wonder your thoughts..... maybe this could be a poll!?

thanks

 

This argument of moving capital from one place to another, and that it adds no value to society, is something Charlie has often said...but I disagree.  It depends on how it is done.  If you are talking about the general investment industry, where there are high fees and no added value then yes, it adds no value to society. 

 

In fact, someone commented that taxi drivers don't add value to society, which is incorrect as well.  Taxi drivers are a fundamental part of how people are transported...to work, to functions, to research facilities, to shopping malls, etc.  These are occupations that are heaped in along with housekeepers, convenience store workers, etc, and given little value, yet they are jobs that are part of the fabric of society.  Those occupations get little respect, unlike teachers who are said to add value to society. 

 

The truth is, most of my teachers were not very good, except for a handful...and the best teacher I ever had came to me in my 30's named Warren Buffett!  More has happened in the last eight years of my life, than the previous 36 years combined! 

 

What about someone like Mohnish?  He's accomplished more in the last 14 years, than his previous 34 years combined!  How has Mohnish's success as a portfolio manager not been a boon to society.  Not only is his work affecting hundreds in the United States and Canada, but his work with Dakshana is going to create a generational effect in India over time somewhat like compound interest!  What do you think he is now going to do with Dhandho?  Every dollar of wealth he now creates for himself is a dollar of wealth that will go back to society.  And with the way Mohnish's mind works, each dollar will have some sort of leverage effect.

 

So in my opinion, the value to society should not be measured by the occupation of the individual, but by the effect and consequences of their individual existence...be it whatever occupation they may hold!  Cheers! 

 

   

[ERICOPOLY]

What do you think he is now going to do with Dhandho? 

 

I'm pretty sure it's going to lead to pay increases for my "staff".