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Good morning. There are still two weeks of summer. Read this article, then for God’s sake, enjoy it. If you wish, please email me: [email protected]t.com

New and improved lawsuit against Facebook by the U.S. Federal Trade Commission

The US Federal Trade Commission recently sued Facebook, accusing the company of abusing its dominant position in the social media market. In June, a judge told the FTC that their lawsuit smell, But said they can resubmit.Federal Trade Commission Resubmit Thursday; the new complaint is here.

Facebook has always been an amazing investment, and its peer “Faangs” is also an excellent investment in the eyes of antitrust regulators. They are the core of almost all U.S. stock portfolios. If the government can change the way these companies operate, it may be very important for investors.

Reading the re-filed lawsuit, in my opinion, the key issues of the case are simple, even if it is difficult to decide.

We know that in the industries Faangs competes in-social media, cloud computing, search, mobile computing, e-commerce-there are strong network effects, and very advantageous companies will definitely gain a foothold. Only occasionally a competitor will come up with a new idea that poses a real threat to one of the leaders.

A simple question is: when competitors do appear, can the dominant company acquire innovators, thereby eliminating the threat of competition? In other words, should Facebook be allowed to buy Instagram and WhatsApp?

I don’t know any legal details here, but from a philosophical/social/economic point of view, everything else in the case is either obvious or details.

We have to argue that the idea of ??whether Facebook (or Google, Amazon, Apple, and Microsoft) is dominant is absurd in my opinion. Of course they are; look at the numbers. It is equally absurd to think that buying WhatsApp or Instagram is not to eliminate competition. Not only was it how every sane person at the time viewed these acquisitions, but CEO Mark Zuckerberg also structured the problem in this way. In an internal email, he was like this:

The basic plan is to acquire these companies and keep their products running, while integrating the social dynamics they invented into our core products over time.One thing might make [buying competitors] It is more reasonable that there are network effects around social products, and a limited number of different social mechanisms can be invented.Once someone wins in a particular mechanic [such as photo sharing] It is difficult for others to replace them without doing something different. It is possible that someone can beat Instagram by building better things to achieve network migration, but as long as Instagram continues to operate as a product, it will be even more difficult. .. One way to look at this problem is that what we really buy is time. Even if there are some new competitors, buying Instagram, Path, Foursquare, etc. now will give us a year or more to integrate their dynamics before anyone can approach their scale again. During that time, if we combine the social mechanisms they use, these new products will not get much attention because we have deployed their mechanisms on a large scale.

Allowing the leading companies in the Faang industry to disappear from the competition may or may not make us poorer, less innovative, or less free. For example, there may be a large number of young companies backed by venture capital trying to become large enough to be acquired, which will generate the needs of all innovative societies. But there is no need to complicate the problem. This case is about the M&A policy in the industry dominated by network effects.

People have strong feelings about aging and inflation

Unhedged has never received more emails than replied to Thursday’s discussion Goodhart and Pradhan’s inflation theory. Considering how long this theory has been circulating and how much attention it has received from Wall Street hackers like me, I am a little surprised.

As a reminder, G&P believes that in an aging world, the scarcity of workers will push up wages, and the non-saving of the elderly will reduce the global savings/investment ratio. Both of these changes will push up interest rates and inflation.

Some readers replied that technology will be enough to make up for the upcoming drop in labor supply. Sahil Mahtani, a strategist at Jiuyi Asset Management, wrote in an email:

technology. .. Is improving supply by seemingly curbing the price increase of certain commodities and permanently removing some middlemen. Jan Hatzius estimated in 2017 that the Amazon effect reduces the commodity inflation rate by 23 basis points each year. .. If you add the impact of new tools such as Airbnb, it will increase the return on vacant personal property and reduce hotel investment; or an online trading platform like Grail, which allows users to monetize the goods in their home; or use it like Upwork With an online freelance platform serving globalization, you can see that the total supply has increased dramatically due to technological changes. If inflation will become a race between technology and population, it is not clear in advance why you would prioritize the other.

It is worth mentioning that G&P’s own evaluation of technology.This is Pradan:

[Critics say that] Technology will cause us to lose jobs. .. We believe that people have not considered-perhaps because it has developed too slowly-the fact that as our society ages, the demand for workers to take care of the elderly will be huge. .. We will need more people [to care for the old], Which means that we do need machines to destroy jobs in other places to allow… Labor to move from one place to another.

Other common objections include the belief that over time, more elderly people will stay in the workforce, thereby reducing the impact of labor supply; demographic changes will not be large enough to have the effects foreseen by G&P; and G&P mistakenly believes The globalization of commodity production may be the root cause of deflation in advanced economies dominated by services.

But the most common response is to point to a speech Proposed last month by Gertjan Vlieghe, a member of the Bank of England Monetary Policy Committee. It’s really good (I mean even I can follow this argument, and it’s very short).

This is the case of Vlieghe. Yes, as people retire, they start to spend their savings, and when the global savings stock falls, this pushes up interest rates. But there is an offsetting factor that will be stronger at this moment in history and in the decades to come: People in their 50s and 60s tend to accumulate wealth quickly, driving up the savings stock and falling interest rates.

Therefore, when you take the average asset portfolio held by people at different ages, and then model the number of people in each age group in the next few years, you can see the total savings or wealth stock of the population over a period of time like Thus, as far as the United Kingdom is concerned:

Other developed countries look similar. Therefore, considering the number of people in the world who will enter the savings maximization period in the next 30 years, we can expect a large amount of savings to flow into every place where savings can be invested-this is the cause of low interest rates and deflation.

Vlieghe also put forward another very interesting point, namely the asset portfolio held by the elderly and its significance for asset pricing:

The elderly not only hold more assets, but also hold more safe assets compared to risk assets. This can explain why we did not observe a uniform drop in all returns as predicted by a simple model, but observed a drop in the risk-free rate of return, and the risk premium has always existed.

This is a good explanation of the observed phenomenon, and it makes me a little skeptical. The paper also includes some very clear content on how income and wealth inequality can depress interest rates. You should read it.

A good book

Business roundtable two years ago freed The much-hyped “statement on the purpose of the company” ushered in a new era of stakeholder capitalism.It is foreseeable that the statement has No significant effect How its company’s signatories run its business.

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