
Hedge-fund billionaire Ray Dalio says capitalism needs urgent reform - starbugs
https://www.marketwatch.com/story/founder-of-worlds-biggest-hedge-fund-says-capitalism-needs-urgent-reform-2019-04-05
======
hbcondo714
Previous discussion from a couple days ago:

[https://news.ycombinator.com/item?id=19582562](https://news.ycombinator.com/item?id=19582562)

------
plainOldText
> “So there need to be powerful forces from the top of the country that
> proclaim the income/wealth/opportunity gap to be a national emergency and
> take on the responsibility for re-engineering the system so that it works
> better.”

And what if the system turns out to work worse? Who shall bear the
consequences of the re-engineering? Being a successful hedge fund manager,
doesn’t magically make you an expert in complex systems, such as the economy.

The amount of people wanting to re-engineer society these days is staggering.
The desire to make the world a better place for more people is commendable,
but people need to understand the limitations of controlling complexity.

IMHO, we need to teach more people about complex systems and the limitations
of top down engineering approaches to such systems, as they exhibit emerging
properties unaccounted for in one’s modeling.

What we need is to give power back to the individual, decentralize the control
over the economy and lower the barriers to entry, so that everyone can have an
equal chance of trying their luck.

We need to evolve a better system, bottom up. See localism. [1] [2]

[1]
[https://en.m.wikipedia.org/wiki/Localism_(politics)](https://en.m.wikipedia.org/wiki/Localism_\(politics\))

[2]
[https://www.academia.edu/38433249/Multiscale_Localism_Politi...](https://www.academia.edu/38433249/Multiscale_Localism_Political_Clarity_under_Complexity)

~~~
outlace
Yeah only a billionaire like Dalio can afford to recommend massive top-down
re-engineering of the economy. If it doesn’t work he’ll just have a few less
billion and the rest of us may not have jobs.

~~~
njepa
Maybe I am a bit cynical. But from my perspective this, and similar calls for
change, doesn't come from suddenly longing for America at its best. But
because they increasingly realize that China is coming for their lunch.

~~~
akhilcacharya
That’s very valid reasoning to support change!

------
SamReidHughes
I think the most practical problem of wealth disparity isn't between the rich
and the poor, but between the growing upper middle class and lower middle
class. First, that's more visible to the lower middle class than a few distant
billionaires. Second, it's a much larger volume of wealth and influence
overall. Much of what squeezes the poor -- housing, land, education,
healthcare -- are the result of common voters, not billionaire interests. The
ACA, for example, is a great law for entrepreneurial software developers, not
so for the lower income small businesses, because of the increased costs.
Nothing holding back the working class is caused by plutocrats.

Edit: Lyft is another example of this. Abstractly, wealthier riders are
colluding (via Lyft) to drive down margins of unskilled workers.

~~~
Barrin92
>Nothing holding back the working class is caused by plutocrats.

Rich opaque individual families, particularly since Citizens United, have
played an important political role in enabling the redistribution towards the
upper middle class and the politics responsible for it.

So yes, while in material terms the bigger squeeze for the working class and
the poor is the "petite bourgeoisie" rather than Jeff Bezos, the political
corruption to a significant degree can be traced back to donors and shouldn't
be neglected.

This is especially relevant in the context of Dalio's criticism because he is
not just identifying problems, but also demanding that there is a quick, top-
down solution to those problems. That requires us to ask why institutions
allow bad policy in the first place. You can have the best, most wonkish
proposals for how to solve every problem, and there's no shortage of people
who propose to have found them. What is lacking is clearly the ability to
execute them.

~~~
SamReidHughes
What do you think would be different about the situation right now if the
Citizens United decision had gone the other way?

~~~
Barrin92
The influence of superPAC's would not be present in politics. CU was often
associated with the fear of corporate money, which hasn't come to pass, but
the real result was the creation of a sort of private, shadow politics that
has been facilitated by it. And that is in my opinion even more dangerous.

As a result you have families like the Mercer's influencing the entire
political spectrum through side channels that are quite unprecedented in any
modern democracy.

~~~
SamReidHughes
I was asking what would be materially different about the situation under
discussion, because it's a good exercise to think in terms of that -- what
would be different about outcomes -- instead of reciting generalities about
political influence.

~~~
Barrin92
I wanted to stay away from concrete issues because it is just speculation, but
I think one material impact would be much less money going towards political
campaigns against public transport. The Koch's for example have been running a
long run, private campaign against it.[1]

And if there's one thing which many people agree on that palpably improves the
conditions of the working class, then it is urban public transport.

[1][https://www.nytimes.com/2018/06/19/climate/koch-brothers-
pub...](https://www.nytimes.com/2018/06/19/climate/koch-brothers-public-
transit.html)

~~~
SamReidHughes
Correct me if I'm wrong, Citizens United did not affect the ability of
individuals like the Kochs and Mercers to spend money on ads naming
candidates.

~~~
germinalphrase
The difference is that they don’t need to attach their name to it. There are
natural social pressures that prevent people/organizations from publically
supporting unpopular or obviously self-serving causes, but then if no one
knows it’s _me..._

------
paulpauper
Wealth inequality is inevitable in any advanced, meritocratic society. I think
a better approach is trying to create opportunity for talented people of all
income levels, to create companies, arts, and innovation, which boosts GDP and
livings standards and benefits everyone. Imagine federally-funded versions of
the MacArthur Fellows Program, or the Theil Fellowship, or YCombinator , that
would have many more applicants than such programs already have. There are
probably a lot of gifted talented young people of low and middle-class that
are being underutilized, underserved with current policy.

~~~
AlexTWithBeard
Why do we concentrate on wealth inequality so much? What's wrong about some
people being ultra rich and just well off? Would it be better if everyone
we're equally poor?

~~~
eightysixfour
We concentrate on it because it appears to be an unchecked positive feedback
loop in a zero-sum game. Historically, extreme concentrations of wealth have
led to unrest and/or collapse.

~~~
AlexTWithBeard
Sorry but manufacturing of goods and services is not a zero sum game.
Humankind has been making something from nothing since the dawn of the ages.

~~~
freewilly1040
Many things are, like property and spots in elite colleges (which serve as
gatekeepers it the upper echelons of society)

~~~
AlexTWithBeard
Should the answer be to build more houses and open more good colleges?

------
goldcd
Something is clearly going wrong - and unless we have a correction, then it's
going to take us all down with it.

My suggestion for discussion:

"Stock Options for all" \- or something that provides a similar motivation. If
you work for a company, you get a salary - but each month you progressively
get a bit more skin in the game. Currently we have traders who'll switch
allegiance in a moment, Cxx's who are motivated over a quarter/defined period
and workers who just take their pay-check. I can't see how it wouldn't be
beneficial if everybody involved had an overriding goal of ensuring the
company they were involved with had a healthy long-term goal to increase
value.

~~~
0815test
Unfortunately, most workers won't actually _want_ anything like this -
especially the lowest-income/wealth workers. "Skin in the game" at the firm
you're already working for (thus involving quite a bit of relationship-
specific capital, which would lose its value real quickly if the firm went
under) is just putting all your eggs in one basket.

~~~
njepa
What you would probably do is create some sort of fund, and spread the risk
that way. In general it is one of the more realistic ideas, where you could
build on existing systems. The problem is that many countries have gone so far
the other way that it can't be implemented.

A search for "meidner" on Jacobin will give a bunch of reading:
[https://www.jacobinmag.com/search?query=meidner](https://www.jacobinmag.com/search?query=meidner)

~~~
goldcd
Indeed it does - Got to sleep, now, but bookmarked for tomorrow.

Thanks for the pointer - Sounds precisely in the ball-park of my "I've had a
beer" thinking, and I look forward to seeing how it failed for obvious reasons
tomorrow :)

------
roenxi
He makes a number of excellent points; but I have to laugh wryly at his
treatment of my personal pet peeve, interest rates.

Boil his 'diagnosis' section down into 3 points - the economic equilibrium is
moving away from employing American workers to do work (1 & 2), the central
banks are printing money (3) and government is ineffective (4).

Call me a cynic, but (4) on this list is probably a structural problem in that
the people who vote governments in are a diverse crowd and lining them up is a
bit more challenging than herding cats. Maybe something can be done.

(1 & 2) are issues of genuine concern. I've got nothing to add.

(3) is the laughable one. The problem is that there is money printing afoot
and the money is going to wealthy people (see graphs). The billionaire
solution is 'shifting money and credit into the hands of those who have a
higher propensity to spend'.

What ever happened to the philosophy that we should shift money and credit to
the people who have a propensity to build stuff that will be useful in the
future? The thing capitalism is actually good at?

We should not want to funnel resources to the rich. We should not want
resources to go to high spenders. We should not even want to funnel them to
the poor. We want to funnel resources to people who create more resources.
That way we will have more resources and can solve our problems using them.

Good old-fashioned flexible human thinking is needed to talk about how the
system needs to change but in the same text say that quantitative easing is
necessary when its purpose was, essentially, to prevent the system from
changing.

~~~
afarrell
How do the builders know what is important to build unless those who are
suffering can vote for solutions to their ills?

Thats my argument for funneling resources to the poor: so that entrepreneurs
can earn revenue fixing poor people’s problems.

Or (and this is a reason to use markets) so entrepreneurs can earn revenue
fixing the problems that entrepreneurs encounter when trying to fix poor
people’s problems.

~~~
Terretta
What are “poor people’s problems”? Do such problems go away simply by not
having poor people? In that case, do you solve the first order problems, or
try to solve not having the poor?

Would you try to differentiate the under-moneyed from the under-inspired? Are
their problems the same?

If you want to use “markets”, how do you avoid Idiocracy?

[https://en.m.wikipedia.org/wiki/Idiocracy](https://en.m.wikipedia.org/wiki/Idiocracy)

~~~
YawningAngel

      What are “poor people’s problems”? Do such problems go away simply by not having poor people? In that case, do you solve the first order problems, or try to solve not having the poor?
    

There is a general correlation between a wide range of malignancies, including
lower educational attainment
([https://onlinelibrary.wiley.com/doi/abs/10.1080/014119295021...](https://onlinelibrary.wiley.com/doi/abs/10.1080/0141192950210404))
and lower life expectancy
([https://jech.bmj.com/content/59/2/115.short](https://jech.bmj.com/content/59/2/115.short)).
While it's plausible that these problems could be addressed by radically
revising the structure of society (for example, if parents could not influence
the educational institutions attended by their offspring, educational outcomes
might be much more equal), the necessary revisions don't seem plausible in
most Western societies as currently constituted. Thus, simply reducing gross
inequality seems like a reasonable suggestion.

    
    
      Would you try to differentiate the under-moneyed from the under-inspired? Are their problems the same?
    

No. Who cares, anyway?

    
    
      If you want to use “markets”, how do you avoid Idiocracy?
    

The existence of the film Idiocracy is not an argument for believing that such
a society is a plausible or likely outcome of massive redistribution.

~~~
m0zg

      > There is a general correlation between a wide 
      > range of malignancies, including lower 
      > educational attainment and lower life expectancy
    

Or you could draw the arrow of causality slightly differently and say that
life kind of sucks for people who didn't listen to the teacher in high school
and didn't do their homework. Which, at least in my case, is supported by
reams of evidence. It wasn't because they were poor (I grew up in the USSR, so
everyone was poor), it was because they didn't give a shit.

~~~
akhilcacharya
This isn’t a binary. I cared quite a bit in high school but my outcomes are
quite a bit worse than many of my peers, a lot of whom didn’t.

~~~
m0zg
Of course, it's a probability distribution, as just about anything else in
life. But finishing high school is a predictor of good health, long lifespan,
and a host of other things:
[https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2099272/](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2099272/)

Another powerful predictor is having both parents, and forming a family.

------
mrleiter
He is a very keen observer. Yet he argues capitalism needs reform because it
could lead to real conflict between people in a country and not because it is
unfair. He wants to be safe, so do I, but I'm not a hedge fund billionaire. I
want societal change because every human has a worth and seeing inequality
among equals makes me sad.

~~~
jessaustin
Piketty has argued persuasively that conflict, chaos, and tumult are
historically among the primary drivers of equality. It's no surprise the
billionaires don't want any of that!

Someone more conspiracy-minded than myself might suggest that this is why the
wealthy support all these high-expense low-payoff wars in distant lands, to
use up all the fighters who would more properly be home rearranging this
society toward more equal circumstances.

------
Anon84
Posted a link to the actual post a few hours ago...
[https://news.ycombinator.com/item?id=19596590](https://news.ycombinator.com/item?id=19596590)

------
RickJWagner
Dalio is a smart guy, but regarded by some as a bit of a flake.

His success in finances is undeniable. His 'All-Weather Portfolio' is
completely at odds with what most advisors consider sound fiscal practice.

On this one, I think he should be listened to. At least it should start a
national discussion.

------
tim333
If you look at his actual article rather than the marketwatch story
[https://www.linkedin.com/pulse/why-how-capitalism-needs-
refo...](https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-
parts-1-2-ray-dalio/?published=t)

then what he is saying is more capitalism in the US is mucked up by comparison
with how it works in other countries.

------
m0zg
I'm fully in favor of "dividing" Ray Dalio's "pie" in particular. Dude is
worth $14.8 billion. If we're at the stage of divvying things up, I want my
"fair share". Unfortunately, as it often happens, that's likely not what Ray
has in mind. He'd rather pay for his virtue signaling with other people's
money.

