In a post on LinkedIn the other day, Ray Dalio, one of the world’s richest and most successful hedge-fund managers, offered some thoughts on the incoming Trump Administration. If “you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset,” Dalio, the founder and chief executive of Bridgewater Associates, wrote. “This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power.”
.. his unvarnished post reflects the reality that Donald Trump, after running as an economic populist and tribune of the working stiff, has stuffed his Cabinet with billionaires, bankers, and conservative political ideologues. “This will not just be a shift in government policy, but also a shift in how government policy is pursued,” Dalio wrote. “Trump is a deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around. Similarly, the people he chose are bold and hell-bent on playing hardball to make big changes happen in economics and in foreign policy (as well as other areas such as education, environmental policies, etc.).”
.. “Animal spirits” is a term from Keynes, not Rand. In his 1936 book, “The General Theory of Employment, Interest and Money,” the English economist used it to describe “a spontaneous urge to action” on the part of business people, one based on a general outlook of optimism rather than an individual cost-benefit analysis. One reason the U.S. economy has grown relatively slowly over the past eight years is that corporations have been sitting on their cash rather than investing it in things like factories, offices, and new equipment—a failure widely attributed to depressed animal spirits. Once Trump takes office, the mood may change dramatically, Dalio argued.
.. It is the sort of Randian analysis long favored by many people on Wall Street, and recently promoted by some of Trump’s closest economic advisers: if you want capitalism to work more effectively, offer greater rewards to the capitalists. Cut taxes, rein in regulation, and create an environment that incentivizes financial risk-taking. The free market—or, rather, the John Galts who inhabit the free market—will do the rest.
.. Because the U.S. tax code is riddled with loopholes, the tax rate that big businesses actually pay isn’t anything like thirty-five per cent. Between 2008 and 2012, according to a recent study by the nonpartisan Government Accountability Office, they paid a tax rate of about fourteen per cent, on average.
.. Surveys by the Federal Reserve Board and other organizations indicate that the main factor depressing corporate investment has been weak demand.
.. In many cases, companies’ overriding goal is to raise the prices of their stocks, which feature heavily in the remuneration packages of senior executives. Making costly long-term investments can depress earnings and stock prices in the short term.
.. In the twelve-month period that ended in October, companies in the S. & P. 500 spent $556.6 billion on buybacks, according to the research firm FactSet.
.. “the 2004 repatriation tax provision was followed by an increase in dollars spent on stock repurchases and executive compensation.”
.. Goldman predicted that three-quarters of the money that big corporations bring back to the United States next year under the Trump tax plan will end up being spent on stock buybacks.
The Facebook of ecommerce
That particular story is perfectly well written, but it’s read because it’s in that magazine and that magazine is bought because it’s on the rack, and now people don’t come to stories like that anymore. And equally, that particular product is bought because it was ranged and placed at eye level, and now it’s not going to be being bought like that either. Today, those stories get their traffic, very often, from Facebook ..
.. Amazon is great at selling you what’s on the table in the front of the bookshop, and at selling one copy a year of a million or so obscure titles, but it’s not very good at showing you what’s on the shelves at the back of the bookshop. It’s not so good at selling the mid-list – things that you didn’t know existed, or didn’t know you wanted, before you saw them. It does have a recommendation product, but it’s not clear how well it works, and indeed an interesting question for Amazon is how far it can grow before running into categories for which its commodity merchandising model doesn’t work so well.
.. we’ve now reached the point that it’s not clear that there is anything that cannot be bought online. But actually, the real barrier now is often not touching it, but knowing about it.
.. Without that, we’ll have more of the polarisation one can often see in ecommerce today, between bestsellers on one hand and the long tail on the other with the middle squeezed.
.. So, someone needs to do the demand generation – to tell you there’s something you might want.