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dizzyorange

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He made money by betting against mortgages. To each his own, but I sure would be pretty depressed if that was how I made my living.
 
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Hous Bin Pharteen
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And you're forgetting that it takes money to make money, especially in that world
 

Blesbok

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He made money by betting against mortgages. To each his own, but I sure would be pretty depressed if that was how I made my living.
Conservation of energy

Someone has to lose money for someone else to make money. It is how any business works. You will make your money because someone is damaged and needs fixing.

Unless of course you are the government, then you can create "energy" out of thin air and screw everyone over with inflation.
 

Dakota

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Conservation of energy

Someone has to lose money for someone else to make money.

Um . . . no. We moved beyond mercantilism quite some time ago. Wealth can indeed be created.

Quick example: you run a small company that makes widgets. Computers and word processors don't exist yet. You need one person to type up invoices on a typewriter and since mistakes are sometimes made these invoices sometimes need to be retyped. Your second employee makes widgets. Now the computer and printer is invented. Since mistakes can be corrected without retyping the whole document the first employee can type invoices in half the time. You now employ person one at typing half time and making widgets half time and have the same employye two still making widgets full time. Productivity is up and not from taking money away from someone else.
 
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45408

Man, Simons has been on a steep climb the past few years. I first read about him in the WSJ when he was donating $100 million to autism research since his daughter has it, and that was when he made $680 million in a year. The next year he made a billion, and now he made $3 large? That's unreal. He actually started out as a math professor.


Then, over the next two years, Mr. Paulson established two funds to focus on the credit markets. One of those funds returned 590 percent last year, and the other handed back 353 percent, according to Alpha. By the end of 2007, Mr. Paulson sat atop $28 billion in assets, up from $6 billion 12 months earlier.
Man, I wish I could invest in those funds. Too bad you need several million (or a lot more) to invest in a hedge fund like that.
 

Blesbok

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Um . . . no. We moved beyond mercantilism quite some time ago. Wealth can indeed be created.

Quick example: you run a small company that makes widgets. Computers and word processors don't exist yet. You need one person to type up invoices on a typewriter and since mistakes are sometimes made these invoices sometimes need to be retyped. Your second employee makes widgets. Now the computer and printer is invented. Since mistakes can be corrected without retyping the whole document the first employee can type invoices in half the time. You now employ person one at typing half time and making widgets half time and have the same employee two still making widgets full time. Productivity is up and not from taking money away from someone else.
So you are telling me you run a printing press? Because unless you do, money cannot be created out of thin air. If you are making money, someone else has less of it in return.
 

ninjapenguin

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Productivity is up and not from taking money away from someone else.

This has nothing to do with investing and making money off other people. If you really want to get technical, the revenue will increase because the increased productivity allows for more sales, in which case money is coming from the consumers. As a whole, the consumers lose more money while you make more money.

In the case of the guy who bet against mortgages, he got rich while all of the financial companies, and their major investors, lost billions. Joseph Lewis is an example, having lost $1.1 billion from the Bear Stearns debacle and its subsequent undervalued sale to JPMorgan Chase.

http://articles.moneycentral.msn.com/Investing/Extra/BearStearnsPlungeTakesAlongBillionaire.aspx
 

Law2Doc

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So you are telling me you run a printing press? Because unless you do, money cannot be created out of thin air. If you are making money, someone else has less of it in return.

Agreed. Your profit is your customers' expense. You don't create wealth, you trade up and down in it. That you can be more productive means what you get from the customer is a greater net, but the wealth still comes from someone else. In fact, it could be argued that if you are charging a customer $100K for a shipment of widgets that now costs you even less to make (than when you were less productive a while back), you are profiting from him and screwing him over a lot worse than if you bet against his mortgage.
 

Dakota

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Ok, so say the widget allows the customer to produce more than he could before. All of these steps act to drive the cost of goods down and competition ensures that some of this is passed of to the consumer as an increased consumer surplus. Wealth in terms of production and standard of living are values that most definitely float and can be increased without screwing anyone else. (They can also decrease if for instance a natural resource is key to the process and that resource runs out).

Global wealth really isn't a fixed quantity. The amount of dollars in circulation might be (or the rate at which they are printed and destroyed is at least set by the government), but the value that those dollars (or euros or rupees or whatever) represent most definitely does float.

Think about this example. You have been making razor blades by hand. This takes a lot of time. You have to sell these razor blades for a lot of money due to the required input of time and effort. Now you have invented a machine to make razor blades. You can now produce razor blades for a fraction of the cost and either 1) increase your own profit margin by charging the same amount for the blades as before or 2) you can reduce the price of your blades so everyone has more money to spend on other goods and services and have thereby increased everyone else's consumer surplus. Even if you would like to do #1, competition in a free market without price fixing will force you eventually to do #2.

The idea of wealth as a fixed global quanitity really went out with classic mercantilism.

Edit: Also keep in mind that most dollar figures thrown about do not represent a physical dollar that someone is holding. Say someone owns $25M in stocks, the market takes a dive (others buying and selling stocks have set a new value to the assets the man holds) and those stocks are worth $20M. The person holding the stocks was not involved in any transactions but his wealth just decreased. No one had to steal anything from him or sneak into a vault and burn dollars for this to have occured.
 

JacobSilge

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Agreed. Your profit is your customers' expense. You don't create wealth, you trade up and down in it. That you can be more productive means what you get from the customer is a greater net, but the wealth still comes from someone else. In fact, it could be argued that if you are charging a customer $100K for a shipment of widgets that now costs you even less to make (than when you were less productive a while back), you are profiting from him and screwing him over a lot worse than if you bet against his mortgage.

I don't really see that that argument. Sure, you're not creating money, but you are creating the value that the money is being traded for. The widget itself is worth more than the raw materials from which it came. If you were really taking wealth from the consumer, then why would they voluntarily purchase it? Because both the consumer and the manufacturer are better off after the transaction, hence a net increase in wealth rather than the zero-sum game that some people seem to think is always happening.

That being said, very often one side will reap almost all the benefit from such transactions and very often there is a real loser. However, the idea that wealth can only be created by the government printing money is patently false. In fact, inflation is just a redistribution of wealth from everyone who has money to the Fed and then the banks.
 

Maxprime

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First off - the "can everyone live in puppy dog/rainbow land where people win without anyone losing"? - the answer is no.

Economics is a study of the management of scarcity. If everyone could create wealth out of thin air, then that wealth they created would be less scarce and therefore have less of a relative value.

As for the hedge fund guys, you read about a few making billions without thinking about those on the other side of the coin. You can't bet against a mortgage with yourself (and make any money/keep your sanity). He bet against mortgages with people who were betting on mortgages - they lost, he won.

Pertaining to the effects of productivity, you're not magically creating wealth there either. People don't become experts for free, computers aren't free. You're sinking more capital to get more productivity to turn a better profit.
 
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Dakota

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Economics is a study of the management of scarcity. If everyone could create wealth out of thin air, then that wealth they created would be less scarce and therefore have less of a relative value.

No, not out of thin air, but you can put resources towards their most valued use. You can even go one step further by doing something like creating a process that gives a certain resource a greater value. You can indeed create wealth.

Imagine it's the year 1600. You are sitting on a pile of uranium. Well, there aren't a lot of uses for that resource so it doesn't have a whole lot of value. So, you go about inventing a way to enrich uranium and also build a nuclear power plant. Uranium now has value because you can use it to make electricty to sell to people. Since you can now sell the uranium to other people who might want their own nuclear power plant you can assign a dollar value to it, say it's $10M. You have increased your wealth by $10M but no money necessarily traded hands you can hold on to it for your own uses, no money was printed, but that wealth did appear without taking money away from anyone else.

To take this further, now you make money selling electricity to everyone around you. Those people now uses electricity to do things like worth longer hours (because they now have lights) and they also build machines to do work that once had to be done by hand. Everyone's productivity in this little microeconomic system has now increased, and wealth has increased even if people aren't holding more physicial dollars than before. They now have things like bicycles and such that before required such an input of labor and resources that they were out of reach.
 

dd128

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I think by this point, most would be aware monetary gain isn't the main reason for one to go into medicine. Sure you'll be comfortable, but if you want to be filthy rich, you may need to start investigating alternate career paths.
 
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They now have things like bicycles and such that before required such an input of labor and resources that they were out of reach.
Agreed. I love watching the show How It's Made, and you can see how much more efficient a machine is at making something that could take days or weeks to make by hand, if at all. "This press forms the head of the bolt with 40 tons of force." *crunch* "And done." It now costs you $0.03 to buy, and it would've taken you a week to do yourself.
 
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da8s0859q

Agreed. I love watching the show How It's Made, and you can see how much more efficient a machine is at making something that could take days or weeks to make by hand, if at all. "This press forms the head of the bolt with 40 tons of force." *crunch* "And done." It now costs you $0.03 to buy, and it would've taken you a week to do yourself.

I love that show. I've even grown to not mind the horrible music.
 

Law2Doc

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I think by this point, most would be aware monetary gain isn't the main reason for one to go into medicine. Sure you'll be comfortable, but if you want to be filthy rich, you may need to start investigating alternate career paths.

I think it's safe to say nobody here is even going to pretend there is any possibility of someone becoming a multi-billionaire from physician salary. This isn't pre-allo.:laugh:
 
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da8s0859q

I think it's safe to say nobody here is even going to pretend there is any possibility of someone becoming a multi-billionaire from physician salary. This isn't pre-allo.:laugh:

I got lost on my way to pre-allo. But I know better. I'm just in it for the power and the chicks.

(Apologies for the horribly predictable, lameassed attempt at a funny.)
 

Blesbok

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I think it's safe to say nobody here is even going to pretend there is any possibility of someone becoming a multi-billionaire from physician salary. This isn't pre-allo.:laugh:
That is why I am going to come up with a vaccine for cancer AND aids. :eek:
 

kdburton

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I'd like to see what happens if every medical student drops out and works "surgery hours" trying to make it to the top in banking or running hedge fund. I'm willing to bet that over 99% of them don't fair anywhere near as well as this guy. You're better off buying lottery tickets for a living. Everyone says "business this, business that, blah blah blah" but medicine is really a great option if you want to make a comfortable living, have job security, and not cut throats at every corner to do it.
 

Doctor J

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... medicine is really a great option if you want to make a comfortable living, have job security, and not cut throats at every corner to do it.

Poor, misunderstood, maligned ENT's... someone has to do all the thyroidectomies... :laugh:
 
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45408

I love that show. I've even grown to not mind the horrible music.
I just hate how the music is on repeat, about every 10 seconds. There was this one horrible track they used all the time, but I haven't heard it in a while. Yesterday, I heard this irritating clicking, and I couldn't imagine that it would actually be part of the music, but it repeated over and over and over.
 
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45408

I'd like to see what happens if every medical student drops out and works "surgery hours" trying to make it to the top in banking or running hedge fund. I'm willing to bet that over 99% of them don't fair anywhere near as well as this guy. You're better off buying lottery tickets for a living. Everyone says "business this, business that, blah blah blah" but medicine is really a great option if you want to make a comfortable living, have job security, and not cut throats at every corner to do it.
Allow to amend that. 100% of them would not make it. To say that these guys are in rarefied territory is an epic understatement. NO ONE has ever earned this much in a year until now. George Soros is a titan of Rockefeller proportions in the hedge fund business. Simons has a small army of mathematical geniuses devising mathematical models to predict the markets - something that has been tried (and failed) many, many times.
 
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