

Is Silicon Valley a Systemic Risk?  - fallentimes
http://online.wsj.com/article/SB123923644886203393.html

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tsally
Yup, bite the hand that feeds you. Excellent plan. California has a stellar
track record of producing essential things for the rest of America. I'd be
willing to bet it's a better record than what is produced in Washington.
Please, don't fuck up the goldmine that is the Valley with uninformed
regulation like this.

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On a related note, our financial system is so convoluted that our Treasury
Secretary doesn't even understand it. His knee jerk reaction is to regulate
everything. The complexity of our economy on a national scale has grown beyond
the reasoning ability of most people.

I have an idea. How about we simplify things. Reduce the role of the
government and give states more control over the situation. Competition
between states would produce a far more optimal result than the behemoth that
is the government can produce. It's what we would (read: should) do with a
large failing company, why not with this?

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rjurney
My state can't manage to legalize alcohol purchases on Sunday, and it just
banned stem cell research. Not sure giving us more power is a good thing.

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tsally
I think the fastest way to put and end to garbage like this is to give states
more power. Businesses will just move out of states with archaic legislatures
like this one to a neighboring state that offers better incentives. Once the
state treasury is empty, the legislature will come to their senses pretty
quickly. On the other hand, if the government is handing out money to
everyone, there is no incentive to move. Most countries have no opportunity to
create internal competition. We do and we should take full advantage of it.

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rjurney
I think the big corporate money likes fundy law, because the same guys passing
these laws support deregulation and tax cuts.

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tsally
Good point. I haven't quite figured out how to address this problem yet. I
would hope that the free market would just cancel this incentive out. If the
fundy legislature in the next state over is offering low taxes, the
progressive legislature will offer low taxes as well to compete. You're right
though in that fundy law does seem to align with corporate interests quite
often.

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rjurney
From my perspective, our local politics are hopeless because my state is
controlled by religious fundamentalists. The feds exist to protect me from
those around me by limiting their ability to change my state to Jesus Land by
enforcing the constitution.

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gaius
The same people who are religious fundamentalists are often literal
constitutionalists too, tho'. To all intents and purposes it's the Book of
Jefferson to them. That sort of dynamic tension is generally a good and
creative thing (the dialectic, Marxists would call it), and of course you as
an individual are free to practice regulatory arbitrage.

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tumult
Honestly, it looks like it's a very small amount of work required on the part
of VCs – and only the larger ones, at that.

But it's still stupid. I know we're not exactly an unbiased bunch when it
comes to VC firms here on HN, but you don't have to spend too long thinking
about it to figure out that VC is about as isolated a risk as one can make. If
a firm managing a 401k is throwing money into startups, now _that's_ a WTF
scenario. But a VC firm putting money into startups? I'm pretty sure they know
what they're getting into, and I haven't heard of VC firms repackaging
investments into startups as default obligations to sell to other companies. I
mean I guess they could? That seems quite a bit more insane than the already
insane CDS stuff that was going on.

All of this knee-jerk legislation scares me. Both parties are guilty. Leave
ALONE the sectors of the economy that aren't doing anything wrong.

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rjurney
I can't believe I'm saying this but... I'm feeling increasingly guilty for
voting D in the last election, as the Nancy Pelosi 'nanny state' Democrats
take over.

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sown
I understand. Somedays it feels like I can vote for either commies or facists
and no one else.

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jacoblyles
One can always stamp out risk by reducing return.

~~~
timr
...what? That's nonsense.

You might be able to "stamp out" return by reducing risk, but the converse
doesn't hold: there are plenty of ways to risk money without having any
reasonable expectation of return.

~~~
jacoblyles
In other phrasing, return often requires risky behaviors. One is able to
reduce risk (by outlawing risky behaviors) if one is willing to except a
permanently lower level of return.

At the extreme, outlawing private investment (which is inherently risky) would
reduce bubbles. I know of no price bubbles or market panics in North Korea.

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blackguardx
This reads like an onion article in the beginning.

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philwelch
I wonder how much longer it is before the looters discover the angel investors
and seed-stage investors.

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davidw
Probably not: the .com crash didn't take the rest of the economy with it. Can
we avoid politics now?

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mindblink
I actually sympathize with Geithner. You have to look at Geithner's approach
from a system design point of view. All things being equal, financial
instruments will prefer less regulation over more. As other areas of the
financial system become more regulated, he has to be mindful of the money will
just flow to unregulated areas.

An analogy would be like squeezing a circus balloon on one end, and unless
there's equal pressure all around, the other sides will just expand.

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anamax
> As other areas of the financial system become more regulated, he has to be
> mindful of the money will just flow to unregulated areas.

Presumably he believes that the sole justification of regulation is to produce
more benefits than costs for some respectable definition of "benefits" and
"costs". One of the costs is that money goes somewhere else.

If he's applying regulation to areas where the regulation does not produce
more benefits than costs, where the "benefit" is "it reduces the costs of
regulation in other areas", I think that we've wandered into no-respectable
benefits and costs.

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smidwap
Can't wait to see Web 2.0 be the next regulated industry. Imagine the
government trying to pull off a definition of that!

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alecco
Is the Wall St. Journal becoming the new Fox News? Seriously, there is a
strong trend of articles against Silicon Valley and provoking animosity with
the Democrats.

This __opinion __article has plenty of half-truths and fallacies. Don't let
them play you.

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mynameishere
This article was certainly not "against Silicon Valley".

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biohacker42
Do bananas need airbags? And other hastily thrown together concepts for scary
sounding headlines.

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trominos
Read the article.

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biohacker42
I did but I thought that it was focusing on a one-of remark in many, many
hours of congressional testimony designed to prevent a mob with pitchforks and
torches storming wall street.

I just don't see this as something that will be policy, but I guess I could be
wrong and too trusting of the Obama administration.

~~~
anamax
> congressional testimony designed to prevent a mob with pitchforks and
> torches storming wall street.

The job of a community activist is to rile up a mob, or threaten same, and use
that threat to extract concessions.

Remember the AIG bonus scandal? The bonuses that Congress approved, the
approval that Obama specifically approved for folks who were cleaning up AIG?
(Wall-street often uses back-loaded contracts, so they're not really bonuses,
but I digress.) The bonuses that Congress and the president then used to bash
AIG and wall street?

