Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.

What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?

They might have. However any look at generational wealth dynamics quickly dispels that idea. Any above market performance rich people have are simply able to have better managers because managing bigger pools pays more and maybe an education which focuses on maintaining and building wealth. This education could be widely available but it is not made widely available. I am not going to imply a conspiracy here or appeal to class interests for explanation and just leave it as a statement of fact.

This is well put and I would only add that the wealth trapping is occurring in a viral way, which means there should be some type of inoculation for the more harmful effects of it.

Not relevant. Part of the main point was that even in the case of equal opportunity/equal starting points, bad luck readily overcomes talent, good luck rewards even the less talented, and so talent isn't any kind of guarantee, contra many people's claims.

> - Every 6 months you have the possibility of doubling or halving your capital. -- nothing like the real world.

I don't think this is relevant either. You can pick any progression you want and it won't affect the final results. The point is to simulate regular opportunities of dramatically increasing one's wealth. So again, even when faced with equal opportunity, dramatic wealth inequality just due to luck seems inevitable.

> - Chance of doubling capital is proportional to talent. -- nothing like the real world.

The claim that wealth is proportional to "talent" is widely believed. This paper puts it to the test and refutes it. That's one of the main points.

> In my experience people seem to move a little bit up or down from their baseline, but I have never personally seen a swing from rags to riches or the other way around.

I addressed this in the post you replied to: small swings up and down are probably wage-driven. This doesn't explain wealth disparity, because dramatic swings in wealth will largely not be wage-driven. These events thus aren't of interest.

> If they had begun by drawing parallels to the ways in which we see the real world and letting the model simulate it into the future it would be more compelling.

Not as easy as you think. We have no idea what factors are involved. That's why we study models, and see how closely the results match with reality. That then gives us insight into how some parts of reality might work.

You mean the theory of...mathematics? More money in one place necessarily means less money in another.

If I sell a product for 100€ but only pay my worker 20€ to make it, I'm becoming rich. If my worker wants to buy that product, it costs them 5x their salary, but only costs me 1.4x. If all my CEO friends do the same for their products, the workers are becoming poor because of us becoming rich.

Now let's stop trying to be rich. Let's lower the margins and sell the product for 40€. Now it's 2x my salary (marginally worse for me), but also only 2x my worker's salary (much better for them). Let's say all of us CEOs do that. By not being rich, we've allowed our workers to be less poor.

Commonly stated, but any real data to support it?

I think what kills the economy more is when the barrier to entry is high. This impacts mostly non-wealthy folks. In the US, it is ridiculously trivial to set up a "company". I've heard in some countries, you need to apply for a license, which could be expensive (say $2000). And along with that a lot of regulation that is quite affordable to big companies, but not to the average Jane.

The rich easily absorb all these costs, and it barely hurts their motivation. Poorer people trying to make a living and grow their wealth somewhat are most impacted.

The person must be trading with others somehow to be gaining those 4% returns; they could only end up with all the wealth if literally nobody else saved any money. And if nobody else saved any money, there'd be no economic growth at all if not for the person with all the wealth.

>Have you considered second order effects here? What if additional wealth allows "Jo" to increase their per annum return because they invest it in a business or education?

Jo started with the same amount of wealth as Jane; he had no less opportunity to invest it in a business/education, invest it in something to increase in something that increased his investment returns, than she did.

>In this case, the condition assumes that the rate of wealth creation is fixed and unalterable on a scale of 50 years. It also falsely assumes (just world fallacy) that wealth is already allocated in such a way as to belong to people with high (unalterable) wealth creation potential.

It doesn't assume the latter, it assumes Jane and Jo started with the same amount of wealth, and shows that given this condition it will result in more wealth being allocated to the people with more wealth creation potential. Starting from the same point, Jane and Jo have equal chance to increase their ability to create wealth.

It has nothing to do with wealth inequality. Whether you're pooling $100 from a million people, or $20 million from 5, the economics of venture capital are the same. Wealth inequality has nothing to do with this.

The purpose of venture capital (for investors) is diversification. It is an uncorrelated, positive (hopefully) return stream. Investors want to combine uncorrelated return streams as much as possible, due to the AM-GM inequality. The geometric mean of a series with a given arithmetic mean is higher when that series is less volatile.

The claim is that poor people’s use is better for society (positive externalities) not for the poor person. That billionaires are better at assuring that any negative impacts of their transactions are externalized, and insuring internalized gains, is clear, but not the point.

I think you have the causation backwards. Rising income/wealth inequality is what leads to capital chasing the lucrative top x%.

I would say automation and technology and their resulting economies of scale inevitably lead to income/wealth inequality, and wealth redistribution is a political problem with political solutions. There is nothing a VC fund is going to be able to do about it.

I don't think that's what he said. He said that inequality increases when wealth is created for the company's owners/investors while NOT creating value (or even reducing value) for everyone else (customers, the public, employees).

There are lots of examples of huge wealth being created at the expense of others without also creating value - for example: bad mortgages being bundled, obfuscated, and upsold. Tim actually proposes that bad startups are somewhat analogous to these sorts of financial instruments - i.e. there's a sucker at the end holding the bag.

At least some of this wealth is completely inherited (maybe even most of it). There's not a good mechanism to determine how much someone should inherit, but I bet wealth being limited to the lifetime of one person would certainly change the model and make it not-so-inevitable.

If you think that having wealth should be rewarded more than creating wealth then nothing I guess.

Geometrically increasing wealth is caused by the "compound interest effect" where wealth begets wealth.

In other words, it's a signal that creating wealth is steadily diminishing in importance while owning it is increasing in importance.

The idea that in that circumstance you've suffered a loss is the concept of the opportunity cost, one of the most basic ideas economics has to offer.

The idea that by doing so, you've made the world poorer is on less firm ground, but it's not exactly arcane reasoning. It's the same logic that backs the claim that high-GDP countries are richer than low-GDP ones -- they have more money. The general idea here is that if you start with $812 billion, and you turn it into $755 billion, you've lost money ("become poorer").

For what it's worth, people have studied this a lot. While it's true that bad choices can get you in financial trouble, it doesn't seem to be true that most people who are are financial difficultly got there due to poor choices.

It contributes, but on the whole a) it's way more complicated than that and (b) the general narrative around this stuff has very poor SNR.

In general "I did [path dependent thing] and so did my friends, so anyone should be able to" isn't a very good argument for nearly anything. It works as a solid existence proof, but has little to no value for anything else - too much selection bias and path dependence".

Note that previous works regardless of the negative/positive aspects of what you are claiming. Literally none of us have a good idea of how things work in general based only on observation of our own lives and those we know. To get anywhere real on this you have to go vastly broader (i.e. study real data, but first fight the uphill battle to figure out if you can get any that isn't fatally compromised). It's hard work.

Another point is that in general, unless you know someone incredibly well and intimately, your observations of them are by nature pretty weak. Drawing strong conclusions from any of it a dicey proposition.

That’s how it’s always been and that’s how we got to where we are today. Because person A wants to make millions or billions of dollars for himself, he creates a company and a product that improves life or solves a problem for people in a community of his choosing, be it everyone or parents or mothers or children, or anything like that. This is how we got to where we are today and that hasn’t changed, the only thing that’s changed is the government influenced trying to control and micromanage the entire system.

> Compounded by rising inequalities

Yeah sure, the rich get richer for sure, the poor do too. The rich get richer faster as well, but why does that matter as long as everyone else is also getting richer and better living conditions and qualities? This is flawed because it works under the assumption that our economy is a zero sum system when it certainly is not, as while money cannot be created from nothing, wealth absolutely can be. When Apple was evaluated to be 2 trillion dollars, they didn’t steal that money from other companies or people, that wealth was created by them, their investors, and the people who bought their products

Why do you think this should happen? That doesn't sound very rational to me. If you have more than you could possibly ever need then why would you choose to risk that? This is one reason why we should never reward people with these ridiculous levels of wealth in the first place.

> The best way to redistribute wealth is wealthy individuals overplaying their hand.

This sounds like a very wasteful and unreliable way to redistribute wealth to me. Unreliable because as you say it often doesn't happen. Wasteful because if it does happen it involves wasting enormous amounts of resources on a failed project.

IMO the best way to redistribute wealth is to not allow people to become as ridiculously wealthy as they are in the first place.

I see this repeated so often but people fail to grasp the nuance. If you buy stocks, someone else gets your money and they have the inflation problem. If that someone else is part of the middle class or below then you already won because rich people sent their money to less rich people. If that someone is another rich person, then that person will be stuck with the inflation problem. The only way you can avoid the inflation problem by buying stocks is if the company whose stock you are buying from sells you the stock, and then uses the money to do business, which usually involves hiring people and most people care more about having good jobs (i.e. a 20% raise), than seeing the rich gain 4% on their portfolio.

This isn't actually true; it's one possible explanation that seems OK under cursory examination of the evidence, and it's compatible with American university social "science" dogma, but it falls apart under careful inspection. The overwhelmingly more likely (but incompatible with field political dogma) explanation is that income is most strongly mediated by intelligence, which is mostly genetically heritable. This is why people tend to have similar incomes to their parents. (This persists through adoption; try to explain that as a socially mediated effect.)

Now, that said, this has nothing to do with the fact that people who would most benefit from welfare schemes are the least likely to be efficient capital allocators. We can make the observation that they are not allocating efficiently independently from asking why they are not allocating efficiently.

> Putting $1m into a 50-50 chance that will produce $10m of value if it works out but leave you destitute if it doesn't is a positive for society, but irrational at an individual level

The market already efficiently addresses situations like this which actually exist, using schemes like business loans and outside investment. There is no way in hell some financial knob the government can blindly turn would do as good a job at performing this function as banks and investors who are actually making a conscious decision and putting their own money on the line. In other words, for every marginal good bet this scheme enables, it's going to enable 1000 marginal stupid bets.

> (e.g. rich families/friends) tend to be more entrepreneurial

You've made the same (understandable) inversion of causality as before. In reality, the latter tends to drive the former. Obviously the causality is bidirectional to some degree, but I think people tend to vastly underweight the primary direction.

I agree that society could do a better job enabling outsized performers without means to get access to capital, but we already do a pretty good job and there is no way that some simple welfare system would do a better job than the intentional systems we have now.

> Organised society has always meant some level of support for those on the bottom.

This may or may not be true (I'm not much of a historian), but I do know that "some level of support" doesn't mean "far-reaching government welfare infrastructure". It can mean churches, waqfs, and so on.