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Peter Thiel, squillionare, and the crisis of capitalism

From (it seems) a transcript or redaction of a debate between Thiel and Marc Andreesen:

Finance

Think about what happens when someone in Silicon Valley builds a successful company and sells it. What do the founders do with that money? Under indefinite optimism, it unfolds like this:

  • Founder doesn’t know what to do with the money. Gives it to large bank.
  • Bank doesn’t know what to do with the money. Gives it to portfolio of institutional investors in order to diversify.
  • Institutional investors don’t know what to do with money. Give it to portfolio of stocks in order to diversify.
  • Companies are told that they are evaluated on whether they generate money. So they try to generate free cash flows. If and when they do, the money goes back to investor on the top. And so on.

What’s odd about this dynamic is that, at all stages, no one ever knows what to do with the money. (Source)

10-year bonds are yielding about 2%. The expected inflation over the next decade is 2.6%. So if you invest in bonds then in real terms you’re expecting to lose 0.6% a year for a decade. This shouldn’t be surprising, because there’s no one in the system who has any idea what to do with the money. (Source: 27:35)

I could help them with that. They could give some to me. I would finish insulating the house, buy a new furnace, and buy a new roof, doing my bit for aggregate demand!

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