Agreed. If you want more Zebras, raise interest rates. The capitalist system isn’t the problem, it’s the cheap money handed out by fiat from the government to banks that funds the madness and the impending fiasco as investors chase ever more fleeting returns. Zebras die when Unicorns have access to nearly unlimited cheap capital to chase after markets with subsidized products being sold at negative margins. It’s price dumping on a massive scale. ZIRP turns the economy into a lottery favoring those with the best access to the trough. Raising interest rates will be painful, but it’s the only way to fix the current situation and goes against the overwhelming Keynesian consensus. Central banks are great when you need to fund a war, but other than that, they can’t take their foot off the gas and simply distort the economy, increase economic inequality, and exacerbate business cycles instead of smoothing them out. We never should have removed political from political economics. [1]
Re:Zebras Fix What Unicorns Break
by jimmywanger on Wednesday March 08, 2017 @09:57PM
(#13826543)
> Their values are in the right place
I don't believe so. Their values are "Hey, let's promote a system of motivations that we think is objectively better rather than the reality we are currently in, that hasn't changed much in the past 2000 years."
Sure, if you can change human nature or the prisoner's dilemna, have at. Otherwise, writing articles like this might as well just end with "and they lived happily ever after".
Literally most of the American economy, most of the GDP, used to be made up of "zebras," maybe still is. People sensibly and boringly making dependably useful goods and performing useful services at reasonably transparent prices.
What's great about that from an investor's point of view is that you can buy in and expect a reasonably solid rate of growth, especially when you optimize for the long term and ignore the short-term fever-dreams and diaper-crappings of the market.
Nowadays though, that part of the economy (the real part, the "zebra" part) has been faltering for several reasons I won't get into. That means you can't count on those steady or even decent returns in traditional places anymore. Which in turn means there's a lot more money out there circling the block, looking for a place to park where it won't lose value.
That is how the Silicon Valley venture capital ecosystem exists at its current size. When rich people can put their money in traditional places like refrigerator manufacturers, and confidently earn a decent return, they don't (not as much) go looking so hard for something better. They might take a small bit of their their portfolio and play around with it, but there won't be a huge "bubble" like you've got now.
SV is a market all right, only the good being "demanded" (by VCs) and "supplied" (by startups) is "growth potential." High demand in that market is possible only because the rest of the economy, the zebra economy, is so lackluster. And because everyone plausibly believes computers can extract value from a system in a disproportionate way that might pay off --- which is true by the way!
Anyway, all that easy money looking for a place to park, means at least some of the deals are fake and some of the startups are fake, and most of the valuations are fake, and all the fakery leads to all sorts of rampant doucherie to use the French term.