Harvard produced many of the people that built a society with staggering and increasing levels of income inequality. Consultants, hedge fund managers, architects of super addictive social media platforms, politicians who write laws favoring corporations over workers, etc. etc.
Partly, but it was Milton Friedman at the University of Chicago who helped lay the framework for the "shareholder primacy" theory that really paved the way for the poor longterm corporate management of the last couple of decades.
The real problem is that "shareholders" stopped being people and started being large funds.
When the shareholders are people with a long-term stake in the company, like the founders, they can make long-term decisions or choose not to want the absolute most profit-maximizing thing because actually they're already pretty rich and maybe some things are more important.
When they're fund managers, they want quarterly profits because that's how they get their bonus, and their fund may not even own shares in that company in a year's time.
Who says large funds don't have long-term stakes and can't help make long-term decisions?
Fund managers want perhaps to see quarterly profits for their fund, but that's not the same thing as quarterly profits at the underlying companies. Your fund can also profit, if the stock prices of the underlying companies rise.
To give some existence proofs, have a look at how Amazon, Microsoft, Google, Tesla etc had rising share prices long before they ever returned any money to shareholders.
Or how shortly into the covid pandemic market prices for stocks recovered, even though the pandemic wasn't over at all: that was purely based on investors looking to the longer term future.
> [...] and their fund may not even own shares in that company in a year's time.
For that to happen, they need to sell the company to someone else, and that other person will pay more for a company with a bright future.
> To give some existence proofs, have a look at how Amazon, Microsoft, Google, Tesla etc had rising share prices long before they ever returned any money to shareholders.
This was also true of Juicero and Pets.com.
Moreover, the people investing in small startups are generally not huge funds. The funds buy in after the company is established. Tesla turned a profit before they were added to the S&P 500.
> For that to happen, they need to sell the company to someone else, and that other person will pay more for a company with a bright future.
Most of the scam comes from information asymmetries. The current owners hire managers who they know will boost short-term prospects in a conspicuous way by damaging long-term prospects in subtle and hidden ways, e.g. by removing slack that increases short-term efficiency but is an existential risk to the company if anything goes wrong. This makes the company look like it's in better shape than it is to less than fully informed investors (also known as investors) and allows you to sell the shares to them for more than the company would be worth if they fully understood the risks they were taking.
> Moreover, the people investing in small startups are generally not huge funds. The funds buy in after the company is established. Tesla turned a profit before they were added to the S&P 500.
One reason those small startups can attract capital in the first place, is because their early investors can reasonably expect to cash out by selling to huge funds once the company gets established.
Remove the late investors, and you dry up the payouts for early investors.
> Most of the scam comes from information asymmetries.
That's hardly news. Investors take that into account.
What keeps investing from turning into a market for lemons is that companies can communicate to prospective investors and show them transparently that they eg didn't remove the slack.
As an investor, you can go by the maxim of 'guilty, unless proven innocent'. So if a company does not have that transparency, you should value them as-if they have skeletons in the closet.
(And if companies explicitly lie, that's already a crime.)
Which only makes the problem worse, because the early investors then have the incentive to create and prop up garbage companies as long as they think they can sell them to do the next guy before the crash. Which is more possible the less the funds need to pay attention to each stock, i.e. the more "diversified" each person's investments are.
> One reason those small startups can attract capital in the first place, is because their early investors can reasonably expect to cash out by selling to huge funds once the company gets established.
The funds are an abstraction over the underlying investors. Right now you have Joe Middle Class who has a retirement account which is invested in thousands of companies he has no incentive to pay any attention to because none of them individually affect his savings by a significant amount. If it was four or five companies, he would have the incentive to keep track of management decisions there. He may even be working for one of them, because he is then using an information asymmetry to his advantage when he knows from the inside how well that company is managed. But then we try to inhibit this kind of thing even though it would make markets more efficient.
The bigger cause of the problem is that companies are huuuge, so that they can't be owned by any reasonable number of people. A trillion dollar company has to be owned by millions of separate individuals because even the 99th percentile individual doesn't have enough wealth to own a significant fraction of a company that size. But why do we need companies to be that big? Break them up. They could have the same total valuation as many separate companies, without each being so unmanageably large.
Potentially even higher total valuations, because the need to do the following is less when each company is smaller and less complicated:
> As an investor, you can go by the maxim of 'guilty, unless proven innocent'. So if a company does not have that transparency, you should value them as-if they have skeletons in the closet.
And that's the point. The transparency isn't possible, not because the company doesn't publish the numbers, but because it's not worth deep diving into their conglomerated operations when they're only 0.2% of your portfolio. And when investors will be doing this regardless of whether the company is actually sacrificing long-term prospects for short-term numbers, the company has the incentive to do just that.
Huh? Shareholder primacy might be a good idea, but it's an aspiration at best.
In practice, companies are run for the benefit of their managers.
Especially when they talk about something like 'stakeholder capitalism', because it's inevitable the managers that decide which stakeholders to listen to and how to balance their interests.
I'd say it leads to things like an average overinvestment in things that benefit shareholders rather than things that might benefit the company or society over the long term.
Weirdly timed stock buybacks instead of money going to R&D or attracting talent and the like.
Do those account for a significant portion of the effect, or are you just cherry picking a couple nice instances? The word modern is doing some heavy lifting as well; shareholder primacy certainly isn't responsible for most of the overall benefit from vaccines.
> They didn't do the foundational research. They licensed a patent that came out of research from University of Pennsylvania and applied it to COVID.
Incremental research is still research. Application research is still research.
The over-emphasis on foundational research from the media & the general public has led to a myopic view of "revolution"-ism, wherein incremental progress in science is considered to be worthless relative to incremental improvements.
The discovery of penicillin was a medical breakthrough, but that doesn't mean that the industrial scale-up of penicillin production was comparatively worthless. In fact, in this specific case, the opposite is true: The benefits of penicillin wouldn't have been received if everyone thought that research into scaling up its production was worthless.
Moderna spent a few months on it before they had a vaccine ready for trials. The lab spent just under a decade building on decades of prior research. It's pretty clear who did the bulk of the work when it comes to the mRNA discoveries, and it wasn't Moderna or its shareholders.
In almost every sector of the economy, companies partner with suitable university departments and then oddly enough the universities never get any patents, but the companies do. This is due to how our intellectual property laws work, not any special kind of magic that having shareholders will yield.
Harvard also taught John Franklin Enders Nobel Laureate and “The Father of Modern Vaccines.” Granted they handed him his PhD in 1930, but he played a pivotal role in developing a measles vaccine and Salk was heavily dependent on his work when developing the polio vaccine. That’s rarefied air in terms of net benefit to humanity.
More recent examples aren’t as impressive by comparison, but graduates of Harvard school of medicine has collectively done a great deal of critical medical research. And of course many recent graduates have their best breakthroughs ahead of them.
and yet, the problem remains that the US has the worst income inequality of all G7 nations and has been on the rise since 1980, regardless of what happens elsewhere
Global inequality has sort of fallen, insofar as China has reportedly lifted 800 or 900 million people out of extreme poverty. I suspect that's not what their were referring to though..!
However keep in mind that China is still only about as rich as Mexico or Russia in terms of GDP per capita. So hasn't joined the rich world, yet.
Ethnic Chinese people are very successful around the world. Mainland China actually has on average the poorest Chinese people. Compare eg Singapore, Taiwan, or even the ethnic Chinese populations in Thailand or the US.
(Not completely sure about the Chinese people in Thailand. Need to dig up stats.)
I myself migrated to Singapore a few years ago, as I agree with their pro-market policies. We also have great food here. Just the weather is a bit muggy.
Not yet, you're right - but if the World Bank is to be believed, it has raised 900 million people out of extreme poverty. That's astonishing compared to how everywhere else seems to be doing.
> weather is a bit muggy
On a rainy day in England, I can very much sympathise!
Just because eg inequality in the US might have increased, and inequality in China might have increased, doesn't mean that the inequality in their combined population has increased.
I'm talking about the combined population of all humanity.
Because our local society is the society against which we, as humans, tend to measure ourselves, and inequality within our in-group is the strongest predictor of crime, perhaps?
Why wouldn’t you? The fact that Chinese people are much better off than they were a few decades ago has almost no bearing on the well-being of me, my family, relatives, friends or almost anyone I know.
Increasing inequality in the country I live (or countries I have the right to live in or would ever consider moving to) does.
Probably he means that by giving money to an “elite” school, it just makes it more likely that it will end up hurting the “non-elites”. I don’t necessarily agree with that point by the way because there are students who will have their cost of attendance potentially offset by this donation.
I never said trickledown economics. I just said that inequality doesn't hurt people. Some rich person having a 5 star steak dinner doesn't take anything away from how much I enjoyed my own dinner. It's not a zero sum game where a rich person enjoying something takes away from what I enjoy.
You ignored the part where money buys power, and ends up tilting the focus of an entire society towards benefiting the rich instead of ensuring the prosperity of its populace.
There are many zero sum things people want. Costal beaches are more accessible to the general public when their rental property rather than empty billionaire vacation homes.
