What's the point of billionaires? O

[muon2]

I spent some time in the USSR before its demise to work with some scientific colleagues. Seeing both their small town and central Moscow convinced me that a central bureaucracy was very inefficient at investing capital. I'll put up with a certain amount of excess wealth to get a variety of investment strategies.

[muon2]

I would argue that the cirrent solution isn't particularly efficient in figuring out its investments: investment seems to predominantly gravitate towards real estate speculation, luxury apartments, tourist traps and hoarded wealth (e.g. capital stored in private art collections) and not on relatively unsexy things like infrastructure etc. I could be wrong there as well.

This isn't actually inane at all, but infrastructure investment will be unsexy so long as people send death threats to highway builders that put up a toll or the NIMBYs do not allow new residences to be built.

And analogies like this, I suppose, illustrate the heart of the political economy of billionaires. You don't become a billionaire by just being smart, or inventing something of great value to the world: you get there by capital accumulation, preserving your right to a vast pool of assets. And, once you amass billions in wealth, you have the power to claim the right to any asset you want, even ones normal people could never imagine being held in private hands.

As Foucaulf notes, great wealth is about asset accumulation. To be useful in accumulation an asset should either be expected to appreciate in value or to provide a return in rent that more than compensates for its depreciation. Infrastructure is generally going to depreciate as it ages and needs repair so it needs to generate sufficient rent to justify its use as an asset.

One example where wealth has recently gone into infrastructure that was once public are toll roads. Some states and cities have sold these assets to private investors. The rights to the Chicago Skyway (I-90) were sold in 2005 for $1830 M to last for 99 years. The concession provided an agreed set of toll increases over the years. In 2015 the Spanish-Australian investors sold its concession to a Canadian group for $2800 M. That works out to a 53% profit or 4.3% per year compounded which exceeds inflation over the period, plus the benefit of the annual profits from the operation.

So perhaps to the OP, the point of billionaires was to enable the city of Chicago to gain a one-time infusion of cash while still insuring that the toll Skyway would be available to the public.

[muon2]

I don't see a real issue with billionaires, provided that they are largely prohibited from having an out-sized influence in politics via their wealth, and that they are also prohibited from consolidating entire industries to the detriment of everyone else. The problem these days is that both of those issues are severe problems. Money is/has been ruining government and, you could also say due to this money, corporations are being allowed to consolidate way too often. You see this issue in almost every industry - Food, IT (especially), banking, etc. This is having a lot of negative effects on society.

I don't think most people would really have it out for wealthy people if the government would take care of these 2 main issues. But yet here we are.

I don't see industrial consolidation as new or unusual, especially in communications and technology. In the 1970's communications was so consolidated that there was usually only one choice- the Bell System (the original AT&T). In the early 80's the court ordered it to break up. In the four decades since most of the pieces have come back together as either AT&T or Verizon. Cable giant Comcast provides additional competition to the wireless providers. Compared to the offerings I had in college there is less consolidation today than 40 years ago. If those big three were to merge, then we could talk about consolidation of the form I saw growing up.

Computing technology had reached the same point in the 1970's and IBM was almost broken up because of it. The case was resolved just before they released the IBM-PC or they certainly would have been broken up. When I shopped for computers in the 1980's there were very few choices:  IBM and Apple dominated PCs. Since then new companies have emerged and many have consolidated since, but today I can go to Best Buy and see a wider selection of companies on display than I could 30 years ago as a grad student.

So, in what way is IT consolidating too much? And how is that having negative effects beyond those when I was young, and wealth was not the issue it is today?

[muon2]

So, in what way is IT consolidating too much? And how is that having negative effects beyond those when I was young, and wealth was not the issue it is today?

ISPs and their regional monopolies are choking the life out of consumers and it's no wonder people hate them so much. Google, as much as I like them, has become far too powerful. They are extending themselves everywhere. It's not that I think they are particularly harmful now (in fact, it is basically only them who can/and is competing with ISPs to make service better for people). It doesn't take much to see just how much control they have, though. I could say CPU designers as well, as it seems the only real players are Intel and AMD, but I don't think they are an issue (not that they couldn't be eventually, though).

Now, I wasn't meaning to generalize everything-tech, but there are very important parts of these industries that are too big and too powerful. It just happens that ISP/Search monopolies and what they have become are either a major threat to innovation or are on their way to becoming one sometime in the future. I may have a different idea of when the government should step in, but the fact that we have what we have right now seems proof (to me, anyway) that the government is not doing its job.

Historically, I can't comment. I'm pretty young and I don't know how it was. However, if it was worse decades ago, then that doesn't make me feel better about this. Why hasn't the government broken up ISPs already when it's been obvious for years that they are critical to the development of the Internet but yet are abusing their power to try and control and manipulate their position to increase profits at the expense of others? Google, which I do admit I see somewhat altruistically (maybe naively), is very clearly in a position of power that could be just as bad as it is good, if they so chose to be that way.

Finally, I have to say that I'm not a big fan of just waiting until everyone is being gouged and pissed off by overbearing and incontestable corporations. Corporations should not be allowed to even be in a position where they can exert overwhelmingly control over entire industries, regardless of their agenda. But, that's just me, maybe.

I guess when I look today I have my choice between AT&T, Comcast, or a wireless provider for my ISP. I've switched when one got uncompetitive or I didn't like their pricing structure. I can get cloud storage and web hosting lots of places, so that's very competitive it seems. In the search world Google is big, but I've used Bing and even Yahoo at times when I didn't like the ad layers that came with particular search requests.

The government (FCC) was just in a huge fight last year with the ISPs over net neutrality, with the content providers winning over the ISPs. How much competition are you looking for?

[muon2]

But the lack of ISP competition in your area is not the result billionaires and their corporations. Going back to the time of the telegraph, telecommunication has been coupled to large infrastructure investments. There's never been a time where more than a handful could afford the investment into any one area.

I remember talking to cable providers back in the late 90's. It was during the tech boom, and I was trying to find out why we weren't seeing any competition. The answer was that the infrastructure costs were high enough that putting in cables/wires/towers required a very high market share to recover the costs. If a provider thought they would only get 20% market share it wasn't worth the capital risk to enter an area. Things improved when AT&T built Uverse and some wireless services could provide content, too.

[muon2]

That sounds a bit like telecom right after the breakup of the Bell System. The local lines were a state-regulated monopoly but long distance companies could come in and market packages to households using the regulated lines.

The system is used in deregulated electric markets like IL. The company with the wires is regulated by the state and gets a fixed return. Power producers sell in the competitive market to power procurers. Individuals can buy the state's procurement, but most get their power through alternative retail electric suppliers (ARES). The ARES can compete for individual or municipal contracts based on the power contracts they've bought from producers. The customer's bill has a line for electricity usage and one for transmission and distribution.