For SpaceX (and possible the others):

Yes it can, since they changed the rules to force over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.

From https://x.com/Hedgeye/status/2060435253928604065:

"Rule changes for the SpaceX $SPCX IPO:

Index providers waived the profitability requirement and cut the seasoning window from 90 days to 5.

This forces over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.

Bloomberg Intelligence estimates S&P 500 funds must absorb 19% of SpaceX's float within 6 months.

Russell 1000 and Nasdaq 100 funds will absorb 24%.

The rules built to protect passive investors:

1. S&P 500 has required 12 months of trading and 4 quarters of GAAP profitability since 2002. Both waived.

2. Nasdaq cut its inclusion window from 90 trading days to 15.

3. FTSE Russell cut its to 5.

All three benchmarks are now structured to buy SpaceX at IPO pricing."

This should be a 5 alarm fire. It reminds me of nothing more than organized crime rackets that targeted control of union retirement funds

I've been told the following (obviously negative) narrative. Can someone verify/refute some of these? I've put (?) next to questionable claims.

1. Twitter is purchased with debt

2. Debt is transferred to xAI via acquisition of X/Twitter

3. Debt is further transferred to SpaceX via acquisition of xAI

4. SpaceX IPO offered at extreme valuation

5. Index fund inclusion rules waived for SpaceX IPO: profitability requirement, inclusion period cut from 90 to 5 days

6. Index funds are largely held by passive investors such as pension funds.

7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?)

8. Holders of original X/Twitter debt (banks) incentivized to support the rule waiver since post IPO, SpaceX will have liquidity to service/pay the debt.

9. Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?)

10. SpaceX is in Texas jurisdiction, where shareholder lawsuits are not possible and must instead go for arbitration. (?)

> 7. Index fund managers are not incentivized to exclude a SpaceX from their indexes. (?)

Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.

side effect: they'll have to sell other stocks, pushing their prices and weighting in market cap weighted indexes down.

> Passive investors are unable to rapidly respond to these types of changes because liquidating portfolios will incur capital gains taxes. (?)

For some active investors, yes. For passive investors (say you through your employer's pension fund), the tax isn't the problem. It's that the market has such a short time to adjust the price of these companies before indexes are forced to include them--and so might buy them at wildly inflated prices. Then, not too long after, the early investors can sell at still-high prices as soon as their lockup periods end. It's a massive transfer of wealth from pension funds and index investors to the early investors in those companies.

> Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.

Maybe, most indexes do not have to follow the index. they just need to match the returns. An index fund manager has choice of what stocks to buy. However an index fund doesn't have enough managers to make many choices and so they normally buy just what is in the index. However all index fund managers know they are large enough that if they change their holdings "instantly" when the index it self changes the market will collapse and so the fund will under perform. Thus index fund managers are always trying to figure out what the index will do so they can start buying/selling stocks in smaller amounts before the change happens.

How each fund handles this is up to the managers. (and "total market" funds have less ability and need to do this)

The whole point of index funds is that you don't have to pay management fees to managers. It's very expensive to hire a team of people to analyze the entire stock market in detail and chose the best 500 companies, and historically people who did that on average didn't beat the S&P500.

Just look up the performance of Mutual Funds vs S&P500.

That is the point, and index funds pay many less managers. However they all have a few managers to handle the various paperwork needed and those managers do make some decisions. They have much less influence vs a traditional funds, but it is slightly above zero.

I think the point is that they don't have the influence to intentionally deviate from the index because they think they know better. If your mandate is to be passive, then you need an index to follow. If you are that sure the S&P 500 index is wrong for some reason, or whatever other index you follow, then you need to invent a new index. Then, you can follow the new index.

At least my index funds do that. They don't get to constantly trade like non-index funds do, and they typically stick with the index, but every index fund I own has a line about "we select stocks that we think will match the index", which is different from buying the stocks from the index.

Again, the vast majority of the time they are matching the index stocks. However they have the right.

I guess that's true but put yourself in the position of a major fund manager. Would you rather explain "We lost 3% this year because of a dumb IPO because we track an index that includes dumb IPOs," or would you rather say, "We lost 3% this year because I decided, as a passive fund manager, that the index was wrong and I knew better"?

Your career would be over.

Or at least, you would have to transition over to an active fund!

No, that's not how it works. The resource managers who hire and promote fund managers are well aware of how trading large blocks too quickly can skew pricing. No one expects performance to exactly match the index. Read the prospectus.

I'm willing to buy the idea that most fund managers have the lattitude to give SpaceX the standard seasoning period, instead of buying in right when they hit the index. Which funds will do that? If it's all or most of them, that'd be nice.

I don't know what to tell you guys because I am not a fund manager. If any of you are, then I'll go with what you're saying. But I do know how large organizations work first hand, and I'm sure lots of us do on here.

Who exactly do you think wants to stick their neck out and say, "I work for a passive index fund. The whole premise of our career is that we don't try to play the market. But just this one time, I'm going to play the market anyway, and I'm going to use your money to do it."

Sorry, not happening. If you don't like the fact that this stuff is going to be included in the index, then your only option is to stop buying the index. Of course they think they would think they're right. Everyone doing active investing always, every time, thinks they're right. They will buy the index the way they always do, and then they will say, "If you don't like it, take it up with the index."

Watch the scene in Big Short at the bond rating agency for an indication of what's really going on here, is my guess.

Yeah, it's a 24 year old company that controls space Internet and is the most competent company building data centers. If a passive index doesn't include it they are taking a much stronger opinion on the stock than if they do include it.

If it's a poorly run fraudulent company the regulators and the banks are at fault for letting it go public not the indicies

The problem is, if you deviate too far from the index, your head is on the chopping block. There is no incentive to outperform the index, and every incentive to not meaningfully underperform it. Anyone bought into an index fund expects exact index performance (whether or not the prospectus technically allows for deviation).

So any manager who values his pay check will say "the index may go up, may go down. The investor's paper wealth may increase or decrease. That's not my problem! And in a market like this, I risk underperforming if I don't own this asset. So of course I'm going to buy it!"

> Maybe, most indexes do not have to follow the index. they just need to match the returns.

This is a great technical point, and in a scenario where a constituent has a lot of obvious correlations it might be relevant, but when you've got something that is effectively a meme stock with erratic leadership and a huge range in possible outcomes from bankrupt to most valuable company ever in the universe [claude tells me I should say 'idiosyncratic returns' instead of this rant], I don't see how you promise to match the performance of an index where it's a significant component except by buying it.

They'll buy it, but they'll build a position gradually over months to approximately match the index. It won't be huge block buys on the IPO day.

but any upside to second guessing the index gets allocated to the management, right? just like any downside, so its kind of immaterial for the end users, they're effectively bought into to SpaceX anyways

They are judged by how close to the index their returns are. If there a significant deviation either way they are judged harshly. Each fund is different, but they typical thing they will do is buy a competitor of some company in the index once in a while.

Typically managers pay is such that they don't get awards for guessing correctly, so they won't get any upside from a correct second guess, and they will see downsides from incorrect guesses.

Also unlike traditional funds, there are not enough managers to follow every company, so they can't pick stocks that will win just because they don't have enough to time research the stock. When they pick a stock they are just looking at the high level will this company perform like the other peers in the industry long term.

They do track the index. The leeway to deviate is not intended to make bets on individual equities, but to - for example - match index returns with fewer execution costs.

For example an index fund that tracks a global equity index may not find it practical to own shares in every listed company globally, but absolutely will be judged on its tracking error vs the benchmark index.

So are they incentivized to allow an obvious grift and let the index have middling returns so they can skim the difference?

But surely the managers of those pension funds can see this happening, and will not likely take on the risk of shares that are that young, no? The index funds hands are tied, i agree, but passive retirement funds are largely managed by people who are motivated for them to succeed. If this were not the case, then pension funds could have been looted long ago...

Pension funds that are actively tweaking the mix of stocks they hold likely might decide to play it safe.

On the other hand, do you want to be the one who says, "As a rule we follow the index, but this time we decided to break our own rule, and as a result we lost X% of returns"?

Better wrong with everybody else than wrong on my own.

The reason pension funds include index funds in their mix of investments is because those funds have two features that are exactly what pension funds are aiming for: (1) broad diversification, and (2) conservative inclusion rules that avoid undue exposure to highly volatile firms.

Changing one of those features undermines the reasons for including the index. Doing it specifically for the purpose of including a firm where large pension funds have also been extraordinarily critical of the governance structure as a particular source of risk [0] even moreso.

[0] https://www.reuters.com/legal/government/new-york-california...

I was looking at it from a more institutionalized perspective I guess. At least in my field, I know how this works because I see it play out. People are conservative and sometimes would rather be wrong with the herd as long as it means they're not risking being wrong on their own.

Having said that I guess you have a valid point. Once major institutional investors decide an index has basically gone corrupted, then they won't actually buy the index fund anymore. They will just buy all the stocks in the index, and underweight the parts they think are tainted. That's what I would do, anyways.

>Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.

Right, if they've advertised as an S&P 500 index fund, they have to robotically follow the S&P 500, stupid inclusions and all. Changing that strategy would require ... a lengthy process involving input from shareholders.

However, someone can still start e.g. a "classic S&P 500" fund that follows the old rules for inclusion, and I suspect we'll see that in response to these recent decision.

It's not the advertising that matters, it's the prospectus. Read the prospectus for any index fund and you'll find that out gives the fund managers a lot of leeway.

Sure, I was simplifying a bit with the technicals. But you're sure their leeway is enough that they can say "nah, we don't like what the index is doing now, we'll do our own deviations from it?" That seems implausible but I don't know enough about mutual fund/ETF regulations to say for sure.

I'm aware I can read the prospectus. And, to the extent that I found the relevant portion of the prospectus (that you could have done yourself and posted) here's what I see:

>The Fund employs an indexing investment approach designed to track the performance of the S&P 500 Index (the “Target Index”), a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the stocks that make up the Target Index. The Fund attempts to replicate the Target Index by investing all, or substantially all, of its assets in the stocks that make up the Target Index, holding each stock in approximately the same proportion as its weighting in the Target Index.

That doesn't sound like a lot of leeway to arbitrarily ignore major new additions that make up a few percent of the index. They'd have to say "no, we're not holding each stock anymore".

It would be more informative to see SEC or court rulings on a mutual fund that tried something like this.

Or, we could just go the way HN normally works, and settle it by who can write the most confidently.

I’m an index investor. I still need to sell to see the gains. So that’s a tax penalty. What am I missing?

A large fraction of index funds are held in tax advantaged retirement accounts such as Roth 401(k).

The twitter debt is a negligible portion of the money at stake here. It’s a footnote compared to the trillions of dollars in wealth that are moving around. We are only talking about it because the internet commentariat has special interest in twitter. Not worth wasting time thinking about it if you are deciding how to allocate your portfolio.

Nevertheless it is part of a pattern of weird deals in Elon’s companies. He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross.

Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.

These are indices created by private entities. They are free to change their rules are they not? Maybe this is the wake up call to the risks of concentrated passive investment vehicles the public needed.

If you think it's a wakeup call about passive investment I think you're asking the wrong question. The vast majority of people do not want to become experts in the financials of 800 different companies in order to maximize their account return on investment over the next 20 years. It's a part time job to do that. Some people do that successfully but most people recognize that they won't. Passive investment was supposed to be a tool for those people. If you ignore all of that, then sure they can just change the rules whenever they like. But that totally ignores the reason a lot of these rules exist in the first place. In my book we're about to get a taste of why we don't want private enterprise responsible for this stuff in the first place.

Exactly all this. The whole idea of passing investing is "hardly any of us know better than the market as a whole." If you don't agree with that, then you don't agree with passive investing. Which, whatever. Live your life.

But the story is not about all indices being wrong, the story is about index management being corrupted. Like bond ratings on mortgages in the run-up to 2008.

> Passive investment was supposed to be a tool for those people.

And it was, for a while. Then financial vultures realized there's huge pots of money tied up for 40+ years in funds that the person doesn't directly manage or have a say in. And if the investments are in indices then the index gets to vote on company matters across the economy on your behalf. What could go wrong?

If you dont like it, you need to choose something else. I dont know how people can keep throwing money at the thing they dont like and then complain it isnt doing what they want.

"Im too busy to spend 30 minutes to move my retirement somewhere I trust" just doesnt cut it.

I'm happy for you that you're always the perfectly informed player in every transaction you ever make having the most up to date information, ensuring that you're getting the best deal possible at any given second, groceries and all.

Sadly, some poor slobs are too lazy to be as informed as you.

I do none of those things, but I understand that there is a chance of losing money gambling in the stock market. Its not a free lunch with 100% upside.

I'm not arguing for myself, I'm arguing for the tens of millions of people who do not understand this system, are not aware of how it works, and are constantly pressured through employer plans, tax deferment, and other aspects of the system to choose the path of least resistance and put their money into a 401k. For a system to work properly it has to account for all of the users and not the top 5% or 1% of the users.

> For a system to work properly it has to account for all of the users and not the top 5% or 1% of the users.

The system doesn't work properly. Retirement is fundamentally broken in the US. The sooner people realize and wake up to that the sooner things might change.

It was never safe, he's exposed the system's design was never intended to be safe for anyone but those in charge.

This. People are locked in their 401k and penalized when taking it out says a lot about what it is.

People should honestly read Killing the Sacred Cows it’s an eye-opener for anyone invested in 401k.

A "401(k)" is not a monolithic entity. In practice, most employers offer a choice of funds, with the most popular being a year-targeted fund that rebalances between equities and bonds as you get closer to retirement. Having said that, you can probably dump your entire portfolio into government bonds, small cap stocks, or euro futures.

I have had jobs with good 401ks and terrible ones. The terrible ones usually have some bond/ saving option. When you leave the job you stick the money in a full service brokerage IRA. The problem is when you are at the same job for too long.

> …says a lot about what it is

Doesn’t it say that it’s a retirement fund, intended to be saved until retirement age? The 10% penalty is little more than a wrist slap level deterrent, too. It’s usually like ~1 year of returns. Not a huge deal if you need to dip into it.

(There’s plenty to criticize about the whole 401k system of retirement accounts. But these criticisms seem misguided)

I mean put it in context of the OP.

People putting retirement funds in a pile of companies that often have little impact on local communities they live in.

They’re changing laws to fast-track sketchy IPOs, putting hard earned money at risk why? So we can send people on a death-mission to Mars?

Point being, they are doing what they will with other people’s money and won’t suffer the consequences. Removing the checks and balances is exactly how financial disasters happen.

Exactly right, there's even ones so conservative they market themselves as cash equivalent. Basically zero gain/loss in those funds. If you're so worried then go login to your 401k and change it.

“Basically zero gain/loss in those funds”

Right so what’s the point then? Doesn’t that prove the point: zero gain/loss with a 10% withdrawal penalty to boot.

If I could pick from any possible retirement plan, I'd want in on the UK pension system that's guaranteed to beat inflation and earnings growth. Until the money runs out, at least!

Because it's not an actual investment and can't run out. Like US Social Security and many other national schemes, the UK is pay-as-you-go. Money coming in is immediately paid out.

Any funds lying around are supposed to be for temporary imbalances, but became significant due to a major demographic imbalance: the Baby Boom.

But they're not significant. The National Insurance Fund is supposed to keep a minimum overfund of £24B (at current spending).

It's now at £79B. It's significantly overfunded.

You can buy i-bonds in the US. You are limited in how much though. They are pegged above CPI. You never hear about them because no one makes money on it. And maybe it isn't that great of an investment.

I believe the (apparently AGI-pilled?) folks running the indices are more afraid of the public’s pitchforks in the scenario where the AI stocks go public at $3T value, then increase to $30T before the index rules dictate they buy in. Hence the rule change to prevent that from happening.

Changing the rules for a speculative investment is the type of things to get pitchforks, not sticking by them.

For a moment step into the theory of mind of the AI believer. That’s the common mindset in finance today. You believe that AI is displacing white collar work, and soon with robots it will displace physical work. Your personal job is to help set the rules for stocks to be included in the index. You believe that the point of indices is for passive investors to automatically be invested in the diversified set of top public companies (weighted by market cap). During previous economic shifts, where companies went public early and were already in the index during their growth phase, passive investors broadly benefited from that growth. These new AI companies have stayed private much longer, meaning that the index has missed the opportunity to “buy low” and build up a stake so far.

You believe that the owners of the leading AI companies stand to become owners of most wealth. Furthermore, that we are at an inflection point where the value of these companies rises so rapidly that delays in index investment will set in stone a permanent inequality, where early tech VC and other private funds own a huge portion of the economy. The few-$T downside risk of AI bubble popping this year feels to you like a minor concern compared to index funds being shut out of this wealth due to some arbitrary rules, which have been changed before and can be changed again. Delaying investment in these huge public companies feels like a more dangerous decision than buying in when they become public.

In short, there are two possible stories here:

1) Wall Street is AGI-pilled and thinks AI companies will be worth many trillions of dollars

2) Wall Street expects the AI bubble to pop and is trying to make the public into bag holders by selling a few hundreds of billions of dollars in the IPO

I think the second story actually doesn’t hold together, because Wall Street is making a bunch of correlated bets. The IPO cash is just one more source of capital, and much of it going to be used to make investments which are also correlated bets.

It doesn't matter what individuals believe. The rules exist to prevent people from doing dumb things that destabilize the market and when those rules are bypasses for belief reasons then the market will take that into account and discount the rules and the market loses its integrity. At that point you have signaled that the rules exist in order to facilitate corruption not oppose it, and you end up who knows where, but it certainly isn't better.

My predictions:

1) If the AI companies do end up running half the economy, we will have discussion for the rest of the human history about how the public got scammed by not being able buy in earlier at a lower price and how the late IPOs set in stone the oligarchy.

2) If the AI companies crash and burn, we will have discussion for several years about how everyone involved in running and financing them is a scoundrel who needs to go to jail for scamming us by selling us stock.

Picking winners in the stock market is a fools errand on a long enough time scale.

This has been proven time and time again. That’s the whole reason we diversify risk.

So, we will not have conversation 1, because that is not what index funds are meant to do.

Index inclusion rules have changed repeatedly over the years. The current rules are not some fundamental law of nature.

"It's a big club... and you ain't in it."

No, they absolutely don't fear prison (but they should).

It's just the aggregate behaviour of a group of people optimizing for short term profit and self-enrichment over everything and without any need for long-term careful planning because for various reasons they are pursuing the short term at all costs.

The people in charge of stock markets are mostly not the same as the people who create stock indexes. Those are run by different companies.

This was always the endgame of moving away from managed pensions to 401k's. First you get everyone's retirement income into the stock market, and then you use the stock market to take it all away from them.

Twitter was 40 billion ish overpriced purchase and SpaceX is seeking to raise 75billion

Let’s not make billions into a footnote?

Space is raising $75B at an expected valuation of $750B so the Twitter value is just 5% of SpaceX’s IPO valuation and if it goes up then the fraction gets smaller.

Is 5% a footnote, maybe.

It’s a footnote because SpaceX is going to be worth trillions. If Twitter were fully written down right after IPO SpaceX’s shares might not even have a bad day.

It may or may not be worth trillions. But the valuation right now based on the IPO sale price is .75 trillion. Which makes it vastly bigger than Twitter regardless.

It could nonetheless be worth trillions by the end of the day.

"Worth" here means market cap. Which is almost completely divorced from its potential earnings.

Space is the next great frontier and right now every single other company, and even country, remain orders of magnitude behind SpaceX. This could change in the future and viable competitors could emerge, public ownership could ruin SpaceX, or humanity's further entry into the cosmos could be delayed (Americans circa 1969 certainly probably also felt they were on the cusp of something great). But at current trajectories you're looking at something akin to there being one company that made ships better way better than everybody else, right before the Age of Sail kicked off.

Bro, they make 99% of the revenue providing internet connection where markets and governments have failed to provide good options. A trillion dollar valuation competing with the commodity cost of running fiber. Supporting off-grid internet is not a trillion dollar industry even combining it with all the revenue from other uses of satellites. It’s the next step in rockets which is more equivalent to better horse shoes than the age of sail.

I think most people, especially in this topic, know essentially nothing about SpaceX and are just going off political stuff. SpaceX have dropped the price to get stuff to space by about two orders of magnitude already, and there's no apparent reason Starship might not succeed in which case you're looking at even more orders of magnitude cost deduction.

Space is not, and cannot be, a frontier when it costs thousands of dollars to get a bottle of water into orbit. That suddenly changes when costs reach a sufficiently low threshold, and SpaceX is not only leading the race there but really the only significant player. Even China, with their vast resources, won't be able to compete unless they can reach near to technical parity with SpaceX. And, for now at least, they don't seem especially close and are, by far, the closest competitor SpaceX has, bro.

A similar path to Microsoft. Being the primary gate holder to a developing market segment aka space. In our modern overvalued stock indexes they are worth 750 billion before considering future growth.

The idea that companies can corner entire markets has been proven false time and time again. Every "tech" unicorn has their valuation propped up by the idea they'll be the "primary gate holder" to some billion or trillion dollar industry. For Uber it was Taxis, for Tesla basically all ground transport, etc. None of them have been borne out and competitors are already well established. Blue Origin is already nipping at their heels with the recovery of Never Tell Me the Odds last year.

UFO soft-disclosure is already underway (the Pentagon releases more and more evidence). The USA will go full disclosure before the end of Trump's second term. SpaceX will be granted monopoly on the reverse-engineered alien spacetime propulsion tech, becoming the most valuable company ever. The SpaceX IPO is the final act of the plan that was set in motion when president Eisenhower signed the pact with the Zeta Reticulans (aka "the greys") at Holloman Air Force Base in 1954.

Simple as.

Oh man, I really hope this is sarcasm :)

To explore this (hopefully parody) alt history, I don't know why the us gov wouldn't waited 70 some years for spacex to reach this point to grant that monopoly versus handing it off to the usual collection of defense contractors, eg raytheon (or whatever they're called now), Rand, etc.

The Holloman Pact made the alien technology transfer contingent on launching an alien-human hybrid program. You see, the Zeta Reticulans mandate their technology to be stewarded by hybrids (similar to how China requires a 50% Chinese joint venture to gain access to their markets). The two species' geneticists started working together, and in 1971 the first viable hybrid was born: Elon Musk. Then we had to wait for the hybrid to mature, before it could be given stewardship of this sensitive technology. Meanwhile a generations-long cultural manipulation program was also underway, to prepare humanity for disclosure.

No joke the actor who played Cigarette Smoking Man (William Davis) has said that he got all kinds of mail from people who had "proof" of aliens and for some reason thought he'd be the right one to share it with.

Let's see, maybe we'll be the Chinese for them, and they'll be hitting us with tarriffs once King Reticulani XVII gets into power.

Of course it's sarcasm, but if it WAS true, it would be because the government was working in cahoots with all those defense contractors all along, until the Trump administration came along and decided to privatize it, at which point SpaceX seized its opportunity.

It’s a category error to compare the equity value of Twitter during its purchase to the amount of cash to be raised by SpaceX during its IPO.

Twitter has about $13B of debt, and about $1.5B of annual interest payments (that’s how much cash it actually needs to come up with this year). SpaceX has a planned IPO market cap of $2T and plans to raise $75B cash during the IPO.

"He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross."

Unfortunately, if you really start digging in to what is going on in the financial world, you will find he has violated no norms here. This is not a defense of Elon; this is a condemnation of the entire financial industry.

The whole thing scares me, honestly. It has never been a clean happy market where lots of honest people get together and are just honestly trying to make a better world for each other, there is no golden past where people were just nice or anything, but damn if computers don't let people build some structures that the robber barons of old could only have dreamt of. I'm really concerned that "index and chill" doesn't just have a "best by" date but that the best-by date could be in the past; I've heard of an awful lot of ways of exploiting it and other retirements schemes we have, this is just one. I find it implausible that these ideas exist but nobody is doing them.

It was much safer before the indexes decided to throw off all the safety hurdles designed to make sure stocks were relatively healthy and the price was reasonably well settled before they were included. And the core idea that a random investor probably can't reliably pick stocks that will out perform the broad indexes is probably going to remain true, even at the high evaluation SpaceX is a relatively small piece of the total index, it's just disasterous for public trust to see the safe guards thrown down like this imo.

if you're invested in a broadly diversified index you can be annoyed by this thing, but it won't impact you a lot.

E.g. if you owned something based on MSCI ACWI, which is free float weighted and global, SpaceX will end up being less than 1% of your portfolio even at a trillion dollar valuation.

It's just NASDAQ which is complicit in this scam by overweighting SpaceX.

6. Pension funds tend not to exclusively hold index funds. Individual retail investors do in their 401ks or personally. Pension funds tend to be fairly sophisticated and can easily insulate themselves from SpaceX/OpenAI/Anthropic if they want either by owning index funds and shorting the other companies or by not purchasing the stock. Also, pension funds are immune to (9) as taxes are handled differently for them.

7. ETF managers that track an index aren't allowed to put discretion into what they buy. They offer much lower fees because they don't have to do any thinking, just executing on an algorithm.

8. SpaceX servicing the X/Twitter debt isn't really a question. The total amount of debt is equal to about one year of revenue at the moment, and it's under 3% of the expected market cap of SpaceX. It's less than a third of what SpaceX's IPO is expected to generate selling new shares to the public. It's a non-issue. On the other hand, the fees the banks will get for the IPO could easily convince them to support the rules waivers.

9. This is true of some passive investors. It is not true of pension funds (which are usually not passive) or 401ks or other tax-advantaged retirement accounts. It is likely to be partly true for any individual depending on how much of their assets is in a tax-advantaged account vs a regular account.

10. Yes to Texas. It seems like the arbitration part is likely to be true (SpaceX is certainly claiming it in the prospectus), but there is not the certainty of having a long history of litigation.

Returning to 2+3: The rolling up of all other private Musk companies into SpaceX certainly impacted the investors in those companies, and how much Musk owns vs other people. But the equity adjustments there would be interesting, not the debt.

> can easily insulate themselves from SpaceX/OpenAI/Anthropic if they want either by owning index funds

> ETF managers that track an index aren't allowed to put discretion into what they buy.

I detect a contradiction here.

Pensions are not ETFs, they are very different purchasers of securities. Pension funds are sometimes referred to as relatively passive investors, but even to the extent that there may be a sense where that is accurate, they are not the same kind of passive as ETFs. They do actively make decisions about what to invest in and alter those with changing curcumstances, and they do at times actively engage with the governance of the firms that they directly invest in (and they definitely engage about the governance structures, in part to manage risk and minimize the need to engage with governance details.)

Pension fund managers are not ETF managers. They both buy securities in a fund, but that's about the extent of the similarities.

> Index funds are largely held by passive investors such as pension funds.

Pension operators are not typically passive. It's a different story to say that maybe they should be given that their returns don't always match up with index funds.

The twitter purchase was "only" 44 billion dollars. Thats a lot of money, but compared to the apparent valuation of the xAI branch of ~1 trillion (based on SpaceX being considered ~800B valuation last funding round), the vast majority of the new value seems to be coming from xAI, which is the least profitable of the labs spending on that scale. So its probably worse than that.

All the big banking players are in on this IPO

Morgan Stanley, Goldman Sachs, JPMorgan, Bank of America, and Citigroup

They all know how idiotic Tesla investors are, and they all want those idiots to pick up their bags.

Also: Musk's shares have 10x voting power, he can not be overruled by anybody (he will retain ~80% of the votes).

Also: SpaceX debt is $20 billion.

There are many valid complaints about public markets undervaluing businesses in comparison to private markets, now that everyone is putting their money on the line we start to see a different view being taken

which is exactly why public markets have always been a superior price discovery mechanism in comparison to private markets

If Al Capone were alive today he'd seem like an honest man compared to these crooks that are running rackets on a global scale.

But the SPCX float is a small fraction of its overall shares. So it will end up being around 0.08% to 0.12% of the weight of the SP500 [1]. Nothing to write home about.

Personally, I do think SpaceX is overvalued at these proposed IPO numbers and I will trade accordingly. So should anyone else who is confident and competent at taking appropriate market positions.

1. https://www.investmentnews.com/practice-management/spacexs-i...

Have you contacted your government representatives yet? I will be doing so. The federal government can probably stop this but we need to act now.

Okay before we set off the alarm though, can someone tell me What percentage of these index funds will be SPCX and TSLA?

Like if both these stocks become penny stocks what happens to the indices?

Isn’t the whole point that they are hedged across the whole market?

Ya, but this is a proof-of-concept rip-off. The fact that the indexes don't have our back is a huge problem.

It's only a problem for the ones left holding the bag. I'm at an all-time low allocation percentage in the US stock market and considering pulling more out still. Full on casino vibes at this point.

It's doubled in five years while inflation's gone up by 30+ percent. Where exactly is there to hide? Not gold - that peaked and went down a lot. Let's not talk about BTC, either.

Real estate? You've got taxes on that in the US, it's how our governments can pretend to not tax us as much as in Europe while still taxing us as much as in Europe (property tax goes to schools)

What's left?

I mean, gold is up significantly more than then broad market since Trump took over, but that doesn’t mean you should gamble on it continuing.

I don’t trust real estate either. Seems like anything with a middleman is setting record levels of grift right now. I don’t trust the industries reports. No one is regulating or checking numbers.

I shifted into more bonds. Probably a bit early, but I’m not a pro. I’ve just lost trust in the market which no longer seems tied to reality or at least my limited understanding of reality. Staying in it just feels yolo atm.

> The fact that the indexes don't have our back is a huge problem

how could an index fund possibly have anyone's back? It's in index of the top 500 publicly traded companies. that's all. If SpaceX or Tesla or Anthropic or anyone else fall out of the top 500 then they fall off the index by definition.

I think a lot of these comments are coming from extreme emotions associated with AI and Elon Musk and not so much the way things work and will play out.

Because they are breaking all their own rules by removing the seasoning and profitability requirements to fast-track this stock in.

No, that's not all. They had additional criteria that they changed right when big-name companies wanted to get added. Now, if they had historically gone by pure market cap, and these companies met that, then you'd have a point.

Assuming $75B float for SpaceX

* S&P500: 0.08% – 0.12%

* NASDAQ-100: 0.47% – 0.70%

* Russell 1000: 0.1%

A key point to look out for is how much money Anthropic and later OpenAI will go for in their IPO, which will utilise the same (updated) rules.

Definitely not.

What Spacex/Elon are doing is sketchy as hell. But the numbers involved here are not terribly meaningful for your portfolio.

At IPO, $75B of Spacex shares will be bought/sold. The S&P 500 uses float-adjusted weightings, and the current float-adjusted total is $54T. If you are 100% invested in SPY, then about 0.14% of your holdings will be spacex on IPO day (75B/54T~=0.14%).

Obviously Musk and friends will start dumping some of the locked up float (~1.65T) when they can. But they definitely will not be doing so in a way that crashes the price or the market. That's in nobody's interest.

If you assume that half of the shares end up as float eventually (post-lockup), you'd end up owning around 1.6% of spacex in your S&P 500 etf (875B/~55T~=1.6%). That's not nothing but it's not significant enough that you should consider liquidating your 401k.

I'm picking on Spacex specifically because they are the biggest and imo, have the sketchiest/worst finances of the 3.

I think the idea here isn't the absolute numbers, but that if Elon manages to successfully fleece everyone's retirement, it will collapse confidence in the market, which could wipe out far more value than SpaceX alone.

IF SpaceX is actually worth 400-500bn and it's a few hundred billion dollars of fleece, sure, that's a "small" amount (still.. lord almighty it is never enough for these people). But the hazard is that it is a fleece. That would shake confidence in the system, the bear case is basically unlimited at that point.

I dunno won't index funds be forced to sell other stocks to buy these IPOs? Won't that possibly trigger a market crash if the IPO stocks loses a lot of value very fast after the IPO on top of investors predicting this fact and selling shares of other companies?

I dunno, the logical explanation makes sense, but markets don't work on logic especially on the short term. People fearing what other people will do and act in anticipation is known to happen.

Read the find print, but probably not. Index funds are aware of the issue you raise and they all have plans to handle it. Plans range from "not a problem, ignore", to "we don't even try to have the same stocks as the index, just similar stocks that we think will match the index performance". Most are someplace in between those extremes.

Yes selling will happen, and in the case of the S&P 500, it will be weighted selling across the whole index.

Spacex/Anthropic/OpenAI almost certainly won't crash the market. The most probable thing to happen is that all 3 of these rally a surprising amount on their opening day, because there will be so much forced buying of the shares.

In my opinion, the most likely bagholders will be any retail traders that buy these stocks before the lockups expire.

I think it's very likely that we see the following:

IPO day -> all 3 close higher than opening price.

1 month -> price settles into a range 20-30% higher than IPO price.

6-12 months -> price is back near IPO price +-5%. Anyone who bought and held in the first 3 months has unrealized losses.

Didn't every single large IPO in the past 15 years tanked the stock in the short term compared to the IPO time? Why wouldn't that happen again?

Not completely sure what you mean by "short term compared to the IPO time"

IPO's fairly reliably pop on day one. The performance in the first 6 months is mixed but skews slightly negative.

But the size of these 3, combined with the rule changes that are allowing them to be included in the indices much quicker than normal, means this time is very different than what we've seen before.

In general you should never "sell your 401k." Period. (Short of using it for income during retirement.)

What you should do is have an Investor Policy Statement[0].

This should contain at least two things:

- your desired Asset Allocation (e.g. 30% U.S. stocks, 30% International stocks, 20% U.S. bonds, 20% International bonds) which should be decided upon based on specific, personal goals and risk tolerance

- your strict policy rules for if and when to do anything, if ever, e.g. (don't sell anything ever, or... rebalance your portfolio if one of your allocations is more than 2% from the desired goal)

Now... if say U.S. stocks took a big dump in the next 6 months (while other asset classes either grew, held steady, or simply didn't drop as much), when it would drop below 28% of your allocation, and you'd open a spreadsheet and figure out which other asset classes to sell a few percentage of, to buy the reduced price U.S. stock funds. (This is a policy-driven buy low, sell high strategy.)

[0] https://www.bogleheads.org/wiki/Investment_policy_statement

Thanks for being the voice of reason here. So many people make their investment/allocation decisions on the fly... it's only going to get magnified by these 3 big IPOs. (and their unexpected consequences)

Firms will look at your $600k 401k AUM, Investor Policy Statements, and laugh you out the door. They won't care, you have no say. Your 401k plan is between them and your employer.

A few things:

- yes 401k fund options are negotiated by people that don't know I exist, or care

- but... how I allocate my contributions to those funds is under my discretion

- and... I've never stayed somewhere long enough to have a $600k 401k balance. As soon as I'm gone, I roll it over to a private account that I have full control over (and much lower expense ratios.)

So I don't really care if I'm in the door or laughed out the door, because it has no material affect on how I manage my finances.

Not sure if OP meant literally sell, or just rebalance out of stocks. TBH I've been considering sliding over to all bonds for a time, since there is no tax event if funds stay in the account. But the numbers don't seem that high at the end of the day.

If you try to time the market and you sell at the exact peak you still have to time the market again and buy back at the correct bottom. If you miss either of these you're likely leaving long term performance on the table.

"Be fearful when others are greedy". Greed is at an all-time high, so be careful. Whether that means buying or selling or staying put is for you to decide.

Any advice that confidently ends with "but whether you do A, B, or C, is for you to decide" can generally be safely avoided. This is providing 0 bits of guidance.

True, but so is financial advice on the Internet. There is no answer to 'what should I do with my money today', and anyone that claims to have one either is stupid, lying or trying to scam you.

The only valid advice here is to be careful because the economic climate is unstable, and it's not the time to make rash decisions.

> There is no answer to 'what should I do with my money today'

Actually I would argue there are valid answers to that.

There are varied schools of thought on it, but the most useful and practical ones each have their specific hierarchy of "what to do now".

Here's an example of a single blog post that was the lightbulb moment for me, ten years ago:

https://mrmoneymustache.com/2013/02/22/getting-rich-from-zer...

I was not scammed (and never gave any money to this individual or his blog sponsors/advertisers), the advice here is not stupid or mendacious, and it is genuinely helpful if your goals align with the stated intent of their admittedly very simple strategy.

The nihilism of "nobody knows what to do or can give you actual advice" is an self-defeating choice. There's plenty of help available out there. At least until some of the internet survives LLMs.

401ks probably have limited control, but in proportion to their share of your index funds, you could short these stocks or use options or buy an inverse ETF (if one will exist).

This should trigger all of us to be spinning up lawsuits. This whole thing is an absurd grift.

> This should trigger all of us to be spinning up lawsuits

On what grounds? What tort have you suffered?

If you want change (and who wouldn't?) you need to talk to your representatives, not the courts.

class action is the average person's best bet here. You should expect to get $.75 while the lawyers make big money.

Hopefully you didn't accidentally waive your right to class action by signing something at some point in the last 15 years that survived multiple buy-outs to land in the hands of some company tertiary to the lawsuit.

Essentially, yes, as I understand it. Elon's "investment" of millions in the current administration is paying dollars on the penny.

i read it as most likely people will lose their retirements if the companies goes bust. is that correct? in my country now they move to new pension model which will allow more aggressive investments with them. i am worried it will just get sent to these bros and i'll work until i die.

No, it's wrong.

Amazon is worth $2.81T right now and only represents 4.03% of the S&P500.

So a $1T share would represent less than 2% of the S&P500. This is significant for a single company, and 6% for 3 shit-tier companies (SpaceX, OpenAI and Anthropic) is even more significant, but we're far from "losing retirement if they go bust"-levels.

I wish we would start paying proportional attention to business news, instead of treating AI (or any other "cutting edge") companies as economy-defining and giving these 50+% of the attention.

It is especially telling if we try to list out all the psychological biases at play:

  - Availability & salience bias - vivid, memorable things feel more important than they are
  - Narrative bias - humans tend to think in stories, and AI tells plenty
  - Recency and novelty bias — new things feel more consequential than established ones (this one already drives like 80% of all HN content btw)
  - Proportionality neglect - people are bad at intuitively grasping what percentages mean, even if they see the stats
  - Social proof and reflexivity - coverage signals importance, and drives more coverage
  - Status quo invisibility - things that work reliably become invisible (surprisingly, HN is really good in terms of working against this bias, I feel like at least 5% of all posts are some niche "inner daily workings" topics)
  - Speculation premium in attention - uncertainty generates more discussion than certainty
  - In-group signaling - cutting-edge things are status markers among influencers

Yes, that's mostly correct. Many indices are weighted by something like free float.

One of the places you could have learned this would be the article itself:

> most share indices weight firms in proportion to the value only of shares they have released for public trading (the “free float”). For SpaceX, this means just the $75bn or so of stock it intends to issue in June—so its initial weight in the S&P 500 will be around 0.1%. The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk. Even so, SpaceX’s probable initial weight in this $40trn index will still only be around 0.5%.

You're not modelling the contagion here. The problem is that while any single one isn't that big a share of the S&P 500, similar companies do make up a lot collectively. Excl some non-tech/AI firms:

NVIDIA Corp NVDA 8.02%

Apple Inc AAPL 6.53%

Microsoft Corp MSFT 4.84%

Amazon.com Inc AMZN 4.01%

Broadcom Inc AVGO 3.36%

Alphabet Inc GOOGL 3.32%

Alphabet Inc GOOG 3.09%

Meta Platforms Inc META 2.23%

Micron Technology Inc MU 1.71%

Advanced Micro Devices Inc AMD 1.19%

Oracle Corp ORCL 0.99%

That's 40% of the S&P 500.

And if anything happens to the AI bubble all of these go down together. While they won't all go to zero and cause a "-40%" overnight, Nvidia's rise is so meteoric that they will trigger a -8% and the rest's valuation has more than doubled since 2023. Even Apple, which isn't much of an "AI company", is still following the AI-tech hype.

If Nvidia eats shit, and the others go -50%, that translates to an overall ~-24% on the stock market.

Before any contagion outside the tech industry is considered. Look at the Dotcom Bubble and a -40% to -50% crash is quite plausible.

Unlike OpenAI or SpaceX, a lot of those tech companies are raking in the money. meta, google, amazon, apple all have huge cash flows. They will be buffered by this money - in dot com time, the money wasn’t already there, just the eyeballs. And while Cisco, which like Nvidia sold actual things, took a long time to regain their stock price, they made money selling actual things all along. On the other hand, there is more debt now than in dot com. I wouldn’t be surprised by a fifty percent decline, but it will be different than dot com for sure.

> And while Cisco, which like Nvidia sold actual things, took a long time to regain their stock price, they made money selling actual things all along.

This is the key comparison. It's not the "Pets dot com" side of the DotCom bubble, but the Telecom Bubble that followed. (All the AI startups that just repackage someone else's inference will go the way of Pets dot com, but their economic impact is minimal)

Certainly, Big Tech has massive cashflows. But those cashflows were priced into the 2023 valuations.

That is what makes the current valuations so ominous. Just a correction back to 2023 would be enormous. And as you note, a lot of these companies are taking on debt, dumping huge investments into AI. They're worse off than they were in 2023. Oracle may straight up go bankrupt.

The issue with nvidia is that they're "selling" most of their product to companies taking out debt to fund the purchases. The company explodes, nvidia's booked but not-yet-existing profits go poof. They're also giving most of these companies the money to buy their own products. Looks sweet on a balance sheet, doesn't represent reality in any sense.

> Oracle may straight up go bankrupt.

And nothing of value would be lost.

I wish I could upvote this more. This is the point. Everything is so incestuous now that the problem isn't 2% here or 3% there, it'll be a catastrophe of epic proportions.

I do not want things to go kaboom, the CAPE index seems to indicate that what I want isn't relevant.

> Everything is so incestuous now that the problem isn't 2% here or 3% there, it'll be a catastrophe of epic proportions

Google and Amazon fund Anthropic which returns the favor with cloud purchases at these hyperscalers. So, google and amazon show increased earnings (via anthropic share markup) and increased cloud revenues via anthropic purchase. SpaceX didnt want to be left behind, so, it signed a deal with Anthropic.

Meanwhile capex at hyperscalers, VCs, PE etc is funding the party. Capex is not a concern to anybody as it doesnt appear on either revenues or earnings at the hyperscalers.

Downstream is partying from all the spending (server makers, chips, disk etc).

Whats not to like ! this is a perpetual money machine. Lets partay !

That's if everyone were acting perfectly rationally, but a world in which those three companies go bankrupt would have everyone panic selling every equity possible like it's the endtimes.

Anthropic and OpenAI maybe, but I don't think anyone gives a flying fuck about SpaceX, and everyone knows its value is nowhere near a trillion.

If they go bust won't it likely trigger a massive market crash? Afterall index funds will be forced to sell other US stocks to buy them, bringing their values down. Non-passive investors will predict that and divest even more and so on...

And that is on top of the IPO companies losing value themselves, this seems likely to trigger a doom-loop until the market reaches a low enough value. This will likely trigger layoffs and companies reducing spending and investments further depressing the economy. Added inflation from oil prices and war.

This doesn't seem like one big balloon ready to burst, but more like a house suspended by hundreds of balloons and they are about to be ran over by an airplane.

Yeah, think dot-com crash all over again, but probably worse IMO. Problem is, there really isn't a safe place to hide when this all happens. Some are less unsafe, like funds which track dividend-yielding stocks, or gold I guess (but that's just a speculative value store like bitcoin).

I don't know about your country, but in Sweden you can choose where part of your investment money (I think 40%) gets allocated. On top of that you can choose where 100% of your private pensions are allocated.

Also some EU pension funds are already in the process of divesting from US markets...

> Also some EU pension funds are already in the process of divesting from US markets...

And where will they go to?

The reason they're doing that is because traditional European ponzi scheme pension systems don't work with shrinking populations, so actually we're working till we die in either case unless automation taxes pay for it.

You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits. If we had a reasonable tax system that captured more of that surplus value (which mostly goes offshore and does not in fact "generate more jobs"), then we'd have no problem at all funding the pension systems, and much more.

> You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits.

You mean our pension funds?

I was going to be glib and say "a thimbleful" but let's really look at it.

Firstly, pension funds hold some share of stocks, but far from all. Second, pension funds hold a share of a pie that's not all that came out of the bakery. The bakery made a lot more dough, but much pie was spent (horribly mixing metaphors) to buy assets like property and private investments. So in reality pension funds hold a fraction of a fraction. Third, pension funds invested in equity is a replacement for the old pension systems of yore where companies were forced to set aside money and invest smartly to fund guaranteed income pension plans. They don't have to do that anymore. Instead they contribute to a 401(K) or similar in other countries, which lowered their costs and reduced company risk. For listed companies, those savings went to the shareholders, of which pension funds were just a fraction of a fraction.

I hope this illustrates that we, the salaried workers, see only a small fraction of the value created by increased productivity.

No, it really doesn't. I think you're quite mistaken. Ultimately, most shares are held in funds which are pension or other personal wealth funds, and those are held by billions of ordinary people.

In the US, public and private pension funds directly hold about US$9.9trn of corporate equities, out of US$83trn of the publicly traded market (ignoring non-public wealth extraction which I also mentioned). That is about 12%. After allowing for pension exposure through mutual funds, we might be nearer to 20%. The Fed’s corporate-equity category also already includes ETF shares, so you can’t simply add “ETFs” on top without double-counting.

You've ignored the broader point about distribution. The Fed show that the top 1% own about half of corporate equities and mutual fund shares. So saying that shares are held by “billions of ordinary people” is quite wildly misleading.

My point wasn’t that ordinary workers own no shares through pensions or retirement accounts. But it is a limited and very unequally distributed channel for returning productivity gains to labor. It doesn’t make “shareholder profits” equivalent to “workers’ pensions.”

The key is that the wealth generated by workers makes its way into private pockets at many stages along the chain. Much of it never even makes its way to shareholders, neither through stock value increases nor dividends.

That is only pension funds. By far the largest indirect holds of US stock are households, via retirement accounts, mutual finds, ETFs, etc.

Yes, I agree, wealth inequality is massively skewed. But that is a different argument. In the end, if productivity increases and share prices go up, you and I are share holders (I presume you're saving for retirement), and we benefit. As does virtually every other person saving for retirement in the market.

Again, inequality is real, and is going to have to be addressed, but it is not the argument here.

Surplus value is a propaganda myth from Marx along with other trivially disproven delusions like LVT. Tell me what work is being done by whom in a wine cellar as the vintage matures after harvest?

"Reasonable" is doing herculean amounts of work as usual, as it is implicitly operating under a thief's logic that the target didn't really deserve it anyway therefore if I steal all of it I will be justified.

We see the same shit when regiemes 'nationalize' segments of the economy and then wonder why instead of miraculously getting better without the 'exploiters' things turn to shit and absolutely nobody wants to trade with them. Empathy such a foreign concept to them that they don’t understand why merchants refuse to trade with those who steal businesses wholesale. Whose only response when confronted about their crimes is lame whataboutisms and victim blaming.

fine, strip out the words "surplus value" and "reasonable" if they truly blind you to the point.

Let's say, "If we had a tax system that captured a greater share of the increase in profits resulting from higher productivity (which mostly goes offshore and does not in fact "generate more jobs"), then we'd have no problem at all funding the pension systems, and much more."

each few years the pension age rises 69 for me now, but it will likely go up further. much further up is beyond the average life expectancy...

Yep, I'm sure in 25 years time, when I "should" retire, the retirement age will be 75, meaning another 10 years of work, so I have 35 left :) At least!

Which is why I have several different sets of savings for retirement. I have no choice about working now, but I hope to retire early in a few years, and my other savings just need to get me through until the official retirement income starts.

> unless automation taxes pay for it

But this doesn't solve the problem in any way; it simply leads to production drop.

I mean, this is literally the logic of every communist government in the 20th century. They had the same logic that "given the mechanization of agriculture, food practically produces itself; you just need to throw a seed in the ground and give it a couple of tractor rides, and the earth will do the rest. Therefore, we need a tax on such activity, because we have enough resources to feed everyone".

In other words, it's literally a pure tax on automation. The results were mass deaths from starvation every single time.

There were so many contributing factors to those famines but my understanding is that it was far and away the broken incentives for reporting failures as successes to avoid immediate head chopping.

There has yet to be an attempt at a centrally planned economy that actually had accurate data to plan with.

Not advocating for central planning but the important point is that these failure modes are possible under any tyrannical regime. For an example of where capitalist competition fell down in a similar way, look no further than the Irish potato famines.

> it was far and away the broken incentives for reporting failures as successes to avoid immediate head chopping

Actually, no. What you're describing is more of a part of the next stage, designed to solve the already existing problem of famine, rather than its cause.

When communists come to power, they don't try in the first place to reorganize food production under strict centralization; this directly contradicts Marxism, according to which the state gradually withers away as a communist society is built. They simply try to redistribute what is already being produced in a more fair manner, to force peasants to contribute their "fair share" to society.

This causes production to plummet, people are dying of hunger, and only then the government takes control of organization of food production, and only after that do the factors you mentioned become relevant.

But the famine itself under communism, at least in its initial, most massive iteration, is not a consequence of a tyrannical regime, but is a consequence of the "taxation policy" being pursued.

Not sure that is the historical timeline for Collectivisation in USSR and definitely no China. Collectivisation and Land Reform was a primary goal in itself in China from the 1950s. Communist Liberation was 1949 so right from the onset.

"state gradually withers away as a communist society is built" is 19th century Marx. I think 20thc Leninism, in practice, had a less sanguine view of the evolution of the state. The NEP was a tactical move. You could argue that Mao was always suspicious of state and party machinery which inherently had reactionary and counter revolutionary tendencies. However even when he was Mobilising the Masses, it was not restore to "autonomy" to the people but to clear the deck for further revolution. In Mao Zedong thought, "autonomy" is a very bourgeoisie.

Surely redistributing food (still effectively central planning) produced by a large number of peasant farmers is exactly equivalent to redistributive taxes on a very small number of very wealthy people who have captured the productivity gains of automation. Let's just dispense with the entire field of economics, all that fussy declining marginal utility and indifference curves, and just make a real zinger of an analogy.

Yes, it's EXACTLY equivalent. If you read the works of the communists who implemented all of this, you'll find literally the same arguments about unjust wealth created by productivity gains of automation (mechanization).

Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?

It's absolutely correct that we can easily feed, clothe, house everyone. We can even give everyone comforts. It's mostly greed that prevents it. Greed that capitalism spends $trillions cultivating by brain-washing us all to want more and never be satisfied.

You are correct but

> It's mostly greed that prevents it

Greed is a human axiom. Anything that depends on humans not being greedy isn't worth the paper it's printed on. That's why capitalism won, despite its many faults: it requires human greed to function.

Because its the only way the people who would like to be in power and can't manage to produce anything anyone else wants can see to get themselves put in charge: convince enough other people that despite their freedom, high standard of living, etc. they are somehow oppressed.

Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?

No, I don't think so. From a historical point of view, everything is quite clear: after communists came to power, the most severe famines occurred even before this totalitarian dictatorship is build, as a consequence of these very tax policies, the purpose of which is "easily feed, clothe, house everyone".

Totalitarian dictatorship comes later, as the problem transform to "we can easily feed, clothe, house everyone, but they don't want to, so we should force them"

Pretty sure the Bolsheviks developed their bloodthirsty authoritarian tendencies well before the revolution was even won.

Could you expand on your second paragraph - I'm not sure I understand your position. Are you saying you think we're not able to provide for basic necessities with our current level of technical ability and available workforce?

Our ability to do this is more of a fact. But the socialist distribution system completely destroys this ability.

> Do you think perhaps the totalitarian dictatorships perverted the communist aims of the proles perhaps just a little bit?

Do you think perhaps there is a reason why any communist regime quickly devolves into a totalitarian dictatorship?

Originally pensions were created so people who could not work would not be destitute.

The fact it became an all-inclusive all-year-round vacation reward is an anomaly which is getting corrected. Too bad for us we're the generations holding the bag.

At 60/65 (women/men) years old pensioners could contribute a lot to society in their last decade or more of active life.

Caring for grandchildren, running clubs and societies, giving their experience to local politics.

At 60, women who had daughters at 30, whose daughters just had children would be well placed to help with childrearing.

These sorts of things got lost in UK with equality and the pensions crisis.

There was a response about starting businesses. I consider those in their 60s to be capable of contributing to financial systems (eg businesses), I was just focusing on social aspects that have seemingly been lost with societal/political changes. So it was contribution in the non-financial sense I was particularly thinking of.

I suppose when we look at things like the 4-day week, we imagine more time and energy available for social cohesion. Or I do at least.

The gamble is that you either succeed or fail. If you try nothing you'll work until you die regardless.

Current system: Work until you die.

New system collapses: Work until you die.

New system lucks out: Probably get returns (pension).

I doubt that a FAANG programmer from hacker news has to work till they die. You are doing something wrong.

Current system isnt great but works. Just fear uncertainity doubt here.

I'd go so far as to say the VAST majority are not.

"back of the napkin" logic:

~2M FAANG employees (source: Gemini & this includes all types of employees...is your avg Amazon delivery driver regularly reading HN?)

~10M HN users (source: Gemini (via HN post :)) )

You mean 22k unique visitors per day making 13k comments and tons of web scraping bots?

Data from 2022, so if we multiply it by 2 I would say 26k real hacker news users.

Wasnt the stat that for 1 creator there are 10 commenters and 1000 viewers?

>This should be a 5 alarm fire.

Only for people that get their news from reddit.

Initial public offerings whose market capitalizations rank within the Nasdaq 100’s top members will normally be eligible to be included after 15 days of trading, Nasdaq said in a statement. The timeline is shortened from at least three months currently.

“Industry professionals, including asset managers and institutional passive portfolio managers, were mostly supportive of the Fast Entry proposal and proposed timing,” Nasdaq said in the statement.[0]

15 days vs 90 days isn't some huge shift nor is it inherently some "flaw." These changes have been asked for long before Elon entered the White House.

[0] https://www.bloomberg.com/news/articles/2026-03-30/nasdaq-cl...

The question is whether or not those industry professionals are speaking in their own interest, in the interest of all stockholders, in the interest of the economy as a whole, or any mix of the above.

This is why non partisan financial institutes like the FED and consumer protection groups like the CPB are important and we should have them as non corrupt and robust as possible.

Because it just doesn’t seem wise to trust asset managers with these kinds of things without a lot of evidence and transparency. The 2008 crisis should have taught all of us that much.

Why? An index fund represents the market (usually top 100 or 500 companies), and SpaceX will certainly be in the top few companies. I would argue it's a lot riskier to buy it after the IPO price (if you're buying it secondary it would be easier to spike prices by accident), plus then it's not representative of the actual market until you've purchased the stock.

Unless I'm misunderstanding this, buying at the sale price is the least risky way of purchasing the stock, which is what index funds should do. They should pursue the least risky way of indexing the market

Because nothing about the IPO price has any resemblance to a fair market valuation, and if it's being propped up by this forced inclusion, even less so? The rules existed to fundamentally protect against a Potemkin village situation where an underwriter and some early round investors whip the valuation into a froth and raise against a rabid corps of retail investors who don't necessarily care about a PE ratio of 1,000+ because they're buying the hype.

More importantly, it allowed organic price discovery to occur. This eschews that process because the indexes are _forced_ to participate essentially at _any_ price, so rather than the market writ large having the opportunity to reward or punish the underwriter pricing of the IPO and determine any true idea of price, they're forced to buy the banker's narrative, which will intrinsically prop up the stock to some degree, but at what cost, and based on what underlying?

You know that short selling is possible? And index funds are traditionally some of the keenest participants to lend their shares out to short sellers in return for a bit of extra return (over the raw index).

Can you short a company that quickly after it's IPO? I thought there was a period when that was impossible.

Sorry, that's not what I was saying.

As far as I can tell, there's no minimum period you have to wait after an IPO to be able to short shares. Legally, you can do it from day one.

And instead of a classic short where you have to borrow the stock, you can also write single stock futures. Futures don't require you to borrow the underlying. You just need enough collateral, but that can be anything, like T-bills or whatever.

Or you can write call options, or buy put options, to bet on a falling stock price.

People can dream with lottery tickets, that doesn't make them wise pension plans.

While I like the dreams Musk sells of self-driving cars so good they don't need steering wheels, of space colonisation and useful robot workers cheap enough that I could personally afford them, at this point I don't trust him in particular to actually deliver any of those things.

(And no, you can't convince me with some variant of "look at ${current version} of FSD" or "look at progress with Starship", etc., that's like responding to someone who doubts you can build a house by pointing to a pile of bricks: they're a necessary step, but aren't sufficient).

Index funds are largely synonymous with passive, long term, buy-and-hold investors. That kind of investors are best served by slower changes to the index, especially since index funds are intended to piggy back on the price discovery that happens in public trading. An IPO price, which is the result of a private negotiation, is exactly what you don't want to buy stocks at if you're a passive, long term investor.

There's lots of different indices with different rules, and lots of different funds to implement these. Pick one that works with your preferences.

If it is actually growing company with growing valuation being a year late is not big deal over say 10 or 20 years. It is actually the smart move.

How is that the smart move? It's exactly what OP stated as undesirable for index fund investors. The price discovery of the public markets hasn't taken place yet.

SpaceX financials are a mess outside of the actual SpaceX part. xAI is losing money hand over fist, other random bits in there are doing the same. The valuation makes no sense.

It's basically a money transfer from the average person to the poor richest person on the planet.

The true Great Filter is mental illness, apparently.

Moreover their filings on the matter basically correctly weight their space launch business and then go "and xAI will obviously be worth a bajilion dollars more".

They're still deep in the hole because the DCs were built on debt.

The IPO will hand those heavy debt bags to the public.

A lot of people are "printing revenue" in the current LLM economy, including, Nvidia, Azure, AWS, etc, the people selling shovels.

We have 0 proof that selling shovels is a sustainable business strategy since none of the gold prospectors are bold enough to publish GAAP + audited financial numbers.

Right now we have lots of people spending lots of money at the lower layers and none of the end-game companies, the ones selling to actual customers, private or companies, publishing any quarterly or yearly numbers that show that the end-state of current LLMs is profitability.

Keep in mind that Nvidia, Azure, AWS can't really pivot to something else once they can't stop selling shovels. Nvidia goes back to being a $10bn company selling GPUs to gamers and Azure/AWS probably see their earnings drop by a quarter or more if the AI bubble pops. At least shovel sellers during the gold rushes could cash in and invest in land or cattle or something and have long term sustainability.

Well, apparently Anthropic became "profitable" last month, because of some 1-time deal with xAI.

I wouldn't bet on either Anthropic or OpenAI being profitable, we'll find out soon enough what this house of cards has inside, as they both want to IPO.

Though with the current US administration, as proven by the SpaceX IPO, laws are mere recommendations.

> That’s $15 billion a year in compute costs, but reduced to an indeterminately-discounted level for the precise months that Anthropic is using to tell investors and the media that it has an operating profit. That operating profit is a result of accountancy rather than any improvements to its business model.

> While I wouldn’t say this is cooking the books, it’s definitely a shiatsu-grade massaging of the numbers. Anthropic has deliberately leaked a quarterly “profit” where it knows it can suppress its costs

https://www.wheresyoured.at/anthropics-profitability-swindle...

It turns out, there are many ways to skin a financial cat.

> Though with the current US administration, as proven by the SpaceX IPO, laws are mere recommendations.

Are they breaking laws?

If you can write the laws, nothing is illegal. This argument isn't as strong as you think it is.

> I'm asking a question, not making an argument.

Is it a loaded question? If you ask and I reply with a curt "no" and you vanish back into the ether without replying, what does that gain both of us as well as anyone that reads these comments later?

To your point, I'm both not a lawyer and based on what I've read/seen, no, they aren't breaking any laws. But what they're doing is overall very shady.

Fairly sure most of what banks did during the 2008 GFC wasn't illegal either, until we made it illegal. Robbing banks in Minnesota wasn't illegal in Illinois, either, until we made it illegal. Allowing the Titanic to leave with life-rafts for only 50% of its maximum capacity wasn't illegal either, until we made it illegal.

I don't find this reassuring, because Elon's playbook is to force the public to purchase anything of his which doesn't do well on its own. Maybe a nice $1.776 trillion dollar tax funded investment into "unwoke" AI. :D

Yeah, his current playbook is to get the public to fund his Nazi propaganda machine of X + Grok. Letting a billionaire tie that heinous stuff to critical space infrastructure and use 401k money from all Americans to fund it is a criminal indictment of our entire system!

Because it's a scam by the richest people in the world to steal from the retirement accounts of everyone else.

And when it happens, I suspect we'll end up having to eat austerity to avoid inflation again. Under new leadership from the Responsible Party, whoever that is where we live.

> >Why does SpaceX warrant a change of existing trading rules? They don't, while timing certainly benefits, and potentially was triggered by them

So the question remains, why do they warrant a rule change?

The answer remains, these rules do not specifically apply to only SpaceX, they apply to a range of companies that fit specific profiles. Timing happens to favor SpaceX, but will equally favor OpenAI, Anthropic and others within the same qualifiers.

The links above provide specifics as to the what's and the why.

And prior to that Elon did float the idea of IPOing on a non-NYC exchange, some Texas exchange. So a bit of a stick and some honey in the IPO fees and early access.

What exactly do people think they are entitled to here? Free money guranteed with no risk? "gimmi gimmi gimmi" is not a social contract.

Yeah ultimately who wouldnt want that? (Strawman btw) The other extreme is, what exactly do the power hungry cretins want? Godlike worship form all other humans.

Reality will be whatever happens (capital and corportism wins through the monopoly of violence and the oligarchic capture)

One example of legible demands: Americademands.com

There are many people with many unmet needs. Everyone has played a part and continues to do so every day with their choices.

"Bought" is probably more correct, but honestly discussing semantics is just distracting from the main issue.

We all know they get paid by musk to load up on overvalued stocks so musk can get some cash from pension funds, the pay off a bit Russell’s for bending the rules. No one in their right mind would change rules to buy space x. What profit must have to compensate the valuation?

> Why does SpaceX warrant a change of existing trading rules?

It does not, of course, but when oligarch corruption runs supreme, it is whatever they want.

Stop downvoting the only person that talks reason. We have reached a point where Musk and its tech pals must be stopped with all means possible, because government oversight, democratic processes, and the judicial process clearly do not apply to them anymore.

Sadly that's what happens when people have a "high" technological culture with absolutely zero political nor ethical education. They see all the cool gadgets while being completely blind to the political and social side effects

It's not only a question of _ethical_ education; the magical claims should also be refuted on rational grounds. Seems that's difficult, too.

This is a good point. It's like a strange form of selective magical thinking, or maybe it's really just a global psychosis. Tech people without a background in humanities (not academic, even just because of personal interest) are the most prone to this in my experience.

Because 5 days is not enough for the market to discover the price of SpaceX. And the rules were changed so the float is weighted as if it was much much larger than it is.

Are you sure? It discovers it within seconds following a bad earnings report. It seems hard to know right now whether five days might actually be sufficient or not, seeing as the cat is out of the bag about how unprofitable and debt laden this trillion dollar enterprise is.

No, it's not long enough. You need long enough for the initial investors to get past their lock-up period and either sell their shares, or not, which is typically 90-180 days. Otherwise, index fund investors will pick this up at basically peak overvalued initial pricing, only to potentially take a bath on it three months later.

Additionally with SpaceX they are issuing only a very small percentage of stock compared to a usual IPO, with an unprecedented valuation. Couple that with a much larger than usual amount of the IPO being issued through retail investment platforms rather than to professional institutions (30% rather than a more typical 5%) and it looks pretty unsettling.

If price is fully discovered right after ER then you will see price stabilized right after ER. But in fact post ER prices can wildly differ from the next minute, next day and next week price. It’s speculation and anticipation.

Ask yourself this question: Why were the rules there in the first place? SpaceX being big doesn't make this okay, it actually makes it more dangerous since more and significant money could be funneled.

they should wait for the major lockups to pass, there by skipping some of the inevitable volatility they will likely cause.

You shouldn't be downvoted because your point is completely valid. Matt Levine made the same point in the last Money Stuff podcast. These indexes are supposed to contain the largest, most significant, and in some cases all companies so people shouldn't be mad at the indexes for pulling in a company that's going to have a 1.5T market cap at IPO. Given the market cap, it would actually be weird to not have it in an index like the S&P500 or QQQ.

Instead blame the bankers and market who are putting buying in at 1.5T valuation.

If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.

The whole point of original rule was to have market discover price over time before adding a company.

It is absurd to blame "market" that did not had enough time to settle. "Bankers" are to blame for making this rules change happen.

It is entirely valit to blame people who changed the rules to allow this to happen.

> The whole point of original rule was to have market discover price over time before adding a company.

IPOs and indexes were not really built to handle companies that stay private as long as we are now seeing. SpaceX is trading at crazy levels in the private market right now. Even if it prices down to something ~1T, it would be silly for an index that is a total market or the biggest 500 companies to ignore it. With that said, it'll be float weighted and have about as much impact on the s&p 500 as something like DoorDash.

>>If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.

"People" don't know much about finance to put it mildly. ETFs are created by market demand. Even "factors" ETFs are often based on completely irrational things like dividends, P/E ratios and other meaningless metrics. This happens because people are easily seduced by narratives ("solid dividend paying stocks", "low P/E ratio - good returns") which are plainly wrong but tempting to an average person.

Most people realized they don't know anything about finance and would like to pay someone (their fund manager) to make responsible decisions and expose them to wide market while avoiding blatant manipulations. Unfortunately the incentives are misaligned here. The managers' incentives are somewhere else. They are not paid by long term performance of their fund and they are disproportionally penalized for taking contrarian decisions.

People being force feed those mega IPOs losing money on them is bad for others as well - there will be less wealth for productive investments and more in hands of "players" (or scammers if you want to call it out). There might be a crash. Trust in financial market will plummet and hostile regulation might arise which other market participants will pay for even though they are not to blame.

I will not have exposure to those mega IPOs but I am in privileged position because:

-My understanding of financial markets is much better than that of an average person.

-I have quite a bit of time to follow all of it and react in time

-I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)

-I know where and how to move my money so I don't lose advantages of wide market exposure

It took me a lot of effort to set it all up like that. An average person falls short on all of the above and is not in position to avoid donating part of their pension fund to Musk and Altman though. It is still bad for me for reasons mentioned above.

> I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)

How so?

What's really clever is that Musk could pull his Nazi salute at the inauguration of the president he bought, and the ensuing 'voting with your dollars' against him doesn't matter because he was able to orchestrate forcing people to pay him by cutting them out of the loop. I mean it's absolutely evil, but it's pretty clever - his team proved they can't run a country (they probably could, but don't want to), but they're incredibly adept at stealing.

I wonder if Musk chose rocketry solely because of the ability to use it to drain money from government?

Also worth asking what SpaceXLAI's plan is to make money. $22.7T of their $28.5T Total Addressable Market is... Drumroll... Enterprise AI! That's the plan, that's what we are investing in: spacex and Tesla and Twitter are all side shows, to sell AI. That's what everyone's absurdly overpriced forced passive investment is going to. https://bsky.app/profile/segyges.bsky.social/post/3mnan7hr2j...

There is nowhere near enough burning rage for this absurd fleecing of the public.

Tesla’s market cap is entirely about Optimus vaporware hopium.

Similarly Space-X’s IPO valuation is about “data centers in space” vaporware hopium and “timeshare all the GPU time that Grok isn’t using”.

There’s a trend with Musk’s companies.

The problem is the stock market is more divorced from reality than we have ever seen. For instance, why does Tesla stock still sit where it is? How could it possibly not be going down at this point? So many undelivered promises, major setbacks in sales, massive decreases to their sales forecasts… literally nothing has gone well for them in years and yet the price is still outrageous. It really feels like I’m just out of the loop on something.

Jack Barker’s rather blunt monologue in SV about how the stock is the product is more true than ever. It felt very heavy handed at the time but it’s only proven to be more the case than I thought.

This probably illustrates my disconnect from reality, but I’ve never understood why a company would care about share price once they’ve left the door. I get that the co still owns its own shares and can conjure new ones for sale, but why would those very infrequent events interfere with the day-to-day operations. In my (wrong) eyes, it’s like pro-baseball players trying to increase the value of their trading cards via their participation in the game. The team doesn’t matter any more, it’s al about what the card owner wants.

Company itself really shouldn't. Everyone involved in management from board to executives do. Board operates behest of stock owners, executives operate behest of board. Such to keep their job they have to do what stock owners want. And stock owners either want dividends or growth in some term.

> Board operates behest of stock owners, executives operate behest of board

These are often both weak signals, though. They'll govern very high level decisions, but all the day to day is inside the company. Just as I want a return on the money in my bank account (as I was promised) investors want a return on their money too, and as you say, the executives and board should care about making sure the people who put money into the company are getting a decent deal out of the arrangement.

People have always way overstated the power and scope of “fiduciary duty.” It doesn’t mean you have to redline your company at all times to maximize every single penny in the short term at the expense of all other considerations. That’s just a cultural thing we do in the US by choice

Selling more stock is usually a lever a company can pull when they want. So even if a normal company in normal times doesn't have a reason to do so often, they can if circumstances change. Tesla and some other meme stocks have been extremely aggressive about selling more shares into crazy valuations, and have raised immense amounts of money doing so.

Plus as others have said, usually all of the decision makers have a bunch of stock exposure and will prioritize their own financial gains over pretty much anything else.

I used it. It doesn’t work as FSD. A driver has to pay attention and intervene. Can’t sleep. Can’t read a book. Can’t look at the scenery going by. It’s still super neat and I like it. But it’s not FSD, and I suspect why fewer than 10% of tesla owners pay $100/month or bought it.

Waymo is actual FSD.

More like for all that sweet sweet cooling capacity.

EDIT: guys, it's sarcastic... since the parent was talking about latency, cooling is something that is even worse in space than latency

It is not easy to radiate heat in space. You need a significant extra mass budget to radiate heat from hardware that is easily cooled in less volume on the surface. These will also be too large of a capital investment to operate as disposable satellites at the bottom of LEO. They will necessarily be higher up.

Well, unfortunately, it's not such common knowledge that it would be considered sarcastic by default. I have learned to be explicit by appending "/s" or "/j" so it's clearer.

If putting data centers in a vacuum is a good idea why not just put them in a thermos bottle here on earth?

Or a bit of everyone else's.

To quote a message I wrote on a finance channel on telegram:

  The TAM for "enterprise applications" at 28 T sounds both too much and too little: by the time the tech (and/or overall economy) allows it to reach that number, that number itself will look unimpressive, and this kind of scale seems to be reachable with ground-based more easily than with space based (at current energy prices, even that TAM is only about 2% of being Kardeshev 1).

  Feels like Musk did vibe-economics for "how big is the global digital economy?", much like the claims about factories on the moon making data center satellites looks like he prompted grok with "if I tile the moon with solar powered factories and mass drivers to launch them, how many TW can it launch per year?"

> Or a bit of everyone else's

The world's GDP is about 100T. That would mean more than 1/4 of every expenditure in the entire world would go into buying AI or by AI providers into their consumables.

That number is just bullshit.

While I essentially agree Musk is BSing, TAM doesn't imply "we can actually get this entire market". The TAM for the food sector is *all food*, not what one particular alcopop manufacturer can sell: https://en.wikipedia.org/wiki/Total_addressable_market

AI today can't do all desk jobs, I don't know how far we even are from that given the spiky nature of ML, but it smells like this IPO is using that as the justification for the claim.

The TAM of a particular alcopop manufacturer is "all beverages sold on the area it distributes". Misrepresenting it as "all food" would be borderline fraud.

The TAM for AI right now is the sum of all revenue from all AI companies. That seems to be something around $100B, or about 0.3% of the number on that document.

If they plan to grow that market, that's a different indicator.

He personally and his companies have been sued for fraud, so I wouldn't put it past him to be doing so here. That said:

> The TAM of a particular alcopop manufacturer is "all beverages sold on the area it distributes". Misrepresenting it as "all food" would be borderline fraud.

If you're confident of this, you may wish to edit the wikipedia page I linked to, which I was paraphrasing, that distinguishes between total available market (TAM), served (or serviceable) available market (SAM), and target market (TM). To quote it instead:

  For example, the total UK consumer expenditure on food in 2014, which is the total addressable market of food, was £198 billion (including catering, alcoholic drinks, non-alcoholic drinks and other foods).[3] The serviceable available market for alcoholic drinks, which producers of alcoholic beverages target and serve, is £49 billion.[3] Since the market for alcoholic drinks is not a monopoly, the market share for a company producing alcoholic beverages can never reach 100% of SAM.[4]

Do you think it’s more or less likely that they will make the same change as the other benchmarks?

> Do you think it’s more or less likely that they will make the same change as the other benchmarks?

S&P has historically been more conservative. My personal guess is they won't adopt all of the proposals.

But you think they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?

    > at the expense of large funds

I don't understand what you wrote. It sounds like you are saying this is a zero-sum game of winners and losers -- SpaceX "wins" and the tracking funds "lose". The ETFs and mutual funds that track these indices don't care what stocks are added or removed. They have one job: To track the index as closely as possible with the lowest cost.

SpaceX’s IPO is believed to be set at wildly inflated prices. The company just isn’t that profitable, it lacks significant opportunities for growth, worse its facing significant competition in the near future. Trying to short it when index funds are forced to buy vast quantities of stock is a losing proposition, but those indexes are definitely getting hosed over the next decade.

At least that’s the general consensus, nobody would be worried about index funds buying stock if it looked like a good long term investment. Really the expectation that the stock price would tank is why there’s been a push to change the rules.

SpaceX will not "win". Its current investors will win by selling at IPO and in following months at inflated prices to unwilling buyers.

And historically indices had a waiting period for IPOs to allow for true market price discovery, and the fast tracking as well as allowing small float stocks into the index generates a ton of upward pressure on something that we already don't know the true value of.

Not true, they collectively lose investors if they become less attractive. Probably not an overnight thing, but if people are told that index funds are not attractive anymore then increasingly fewer people will put their money in them vs a hand-picked portfolio.

If the S&P adopt those rules would there be any index fund that is S&P without the new rules?

An index fund like the S&P500 is not the S&P500. It is stuck competing in a world of low margin pain.

I sincerely hope S&P and Nasdaq rollback the SpaceX-targeted changes, but unfortunately I seriously doubt it.

Dimensional funds have a type of index factor funds that roughly track these indices without strict adherence to S&Ps inclusion rules. That's the only one I'm aware of.

Vanguard doesn’t use S&P, because they wanted low fees and the license was expensive. They use CRSP’s index rules.

I checked and it looks like new stocks get added to the CRSP index at the next rebalancing, which is September. So, even the knockoff S&P adds it quickly.

BTW, CRSP was run by University of Chicago, but got sold recently to Morningstar, a mutual fund company.

> they’ll adopt some of these proposals that are in the benefit of these companies IPOing at the expense of large funds?

Yes. And I see the argument for it. It’s hard to claim you represent the market if trillions of dollars are outside it for no reason other than newness or capital-structure weirdness. (I agree with excluding unprofitable companies.)

Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear.

> Moving the goalposts of an index fund for one or 3 IPOs puts the reputation of S&P and Nasdaq in question. The comments in this thread make that clear

These indices have lots of competition. NASDAQ 100 lost basically zero money when they made these changes. If S&P makes them, I'm doubtful anyone will react either.

When S&P was still taking public comment, I put the link on HN. It got like two upvotes. This isn't something materially care about as much as like to get angry about on the internet.

Why do you consider HN upvotes to be more indicative of "materially caring" than HN comments?

Perhaps you got unlucky with the timing of your post, or title didn't grab attention in the /new feed compared to this post's. For all we know, whether or not they saw your HN submission, every critical commenter here may have also submitted a public comment to S&P.

There's quite a bit of money in, say, the cannabis business; do they have any representation in indices of note?

You clearly have no clue of the marketcap of these cannibas companies.

The minimum marketcap for S&P 500 is ~23 Billion

The highest current marketcap of cannibas companiy is $3 Billion

What was the point of your comment saying

> S&P has not finalized a rule change yet.

If you were responding to someone saying the benchmark indexes were changing their own rules?

Like the actual intent of the comment and not just observing reality like someone saying the sky is blue.

> Are you actually optimistic?

Not particularly. When I posted the request for comment to HN it got crickets [1].

Not enough people care about this. And the "safe" option has kind of shifted with the other index providers having moved first. That said, there were a lot of proposals and I'm not expecting all of them to be adopted.

[1] https://news.ycombinator.com/item?id=48054324

It is not obvious that excluding SpaceX is (1) better for index investors or (2) what index investors/buyers want. Passive index investors buy the whole market. For better or worse, SpaceX is (will be) part of the whole market.

Most indices will be buying proportionate to float, which is probably the correct thing to do. Only the Nasdaq 100 isn't float-weighted, and there's just less money in that index than the S&P500 (even with outsized weighting, Nasdaq 100 indexers will buy about 0.5% as much SpaceX as S&P500 indexers).

It is not obvious that SpaceX's price will fall (and not instead rise) between the IPO and whatever date you have in mind.

A: posted a fact

B: but what about your emotions

Very glad to see HN stereotype being upended :)

A: This has not happened yet. B: Are you actually optimistic that it won't?

That's a request for an opinion, not an emotion.

The money still comes from somewhere. In this case, those index funds will be forced to trim holdings of other companies. So it's cannibalizing other parts of the stock market.

which, if true, would make an arbitrage opportunity for a fund that explicitly excludes these high valuation targets but buys those trimmed companies (because for trimming to have happened, they must've been sold unwillingly and thus must be under-priced).

Which, again, benefits the wealthy and well-informed and well-connected.

The suckers who have their retirement savings in some kind of index fund because all the experts have been saying, "Buy index ETFs and forget about it" for decades are gonna get fleeced, and the wealthiest get wealthier.

Bogleheads aren't wrong, historically. At least, not in the general sense that buying index funds and mostly forgetting about it is smarter than trying to beat the market with individual stock picks and timing the market.

But, that philosophy came about in an era when there were protections for small investors that prevented the richest man on earth from dipping into your retirement fund to make himself even richer. I don't know how to be a smart investor when the game is so thoroughly rigged for a handful of billionaires.

Perhaps a return to first principles: a smart investment is an asset that generates value. For example I have a powerful PC - that is a smart investment, and not only because I bought lots of RAM before the RAM shortage. Others might have a farm tractor and land, or a restaurant building and tables and chairs and fridges. A house is a smart investment for almost anyone (problem is they're too expensive to be worth it). A car, if your city isn't walkable or your job involves carrying equipment around. A sound system if you own a nightclub.

I think the way to adjust the boglehead philosophy for this scenario is to construct a shadow index which would be the same as the normal index except with the grifts removed or at least underweighted. And then buy stock to track the shadow index.

I assume not all indexes will make this deal with the devil, as Nasdaq is doing. At least, not immediately. But, given how lax regulation has become and how corruption and lies from the biggest companies has become commonplace, I have to assume it will be harder to not let Elon Musk have a taste of everything just because he's too rich for anyone to ever say no to him.

I suppose everyone reading this thread counts as "well-informed" then, right? All I have to do is move my 401k into the bond-heavy fund right now and then back into the stock-heavy one when everything craters is what I'm hearing. It's what you're doing, right?

You are giving up equity premium for the time till everything settles. You will also not know when that is. It's going to be more like a long term ticking bomb that may take years to detonate.

Years? The way people are talking in this thread it's all an AI exit scam, which shouldn't take years to play out. It's a popping bubble, remember?

Yeah it's years because they will slowly unload it to entities that are forced to buy (and as they do those entities will be forced to buy more). If you have money invested in those ETFs I think you may want to pay a bit more attention rather than making sarcastic comments unless you want to end up with 5%+ of your portfolio being invested in hopium by the end of 2028.

The threat is to end up with the bag, not that the bag explodes this month or the next.

> Yeah it's years because they will slowly unload it to entities that are forced to buy

I get your logic, but why all the handwringing over the short time frame for inclusion in these funds (days instead of a year)? None of that should be relevant if it's going to take so long to play out.

> unless you want to end up with 5%+ of your portfolio being invested in hopium by the end of 2028.

OK so, going back to the original question: the play is what? Move into bonds around IPO time and move back in when everything craters?

>>I get your logic, but why all the handwringing over the short time frame for inclusion in these funds (days instead of a year)? None of that should be relevant if it's going to take so long to play out.

It matters at what price the forced buying starts.

>>OK so, going back to the original question: the play is what? Move into bonds around IPO time and move back in when everything craters?

It's hard to say what's the play is because:

1)For many people making any kind of "play" triggers a tax event

2)It's not clear what ETFs to choose as currently there aren't many good options.

Imo one decent choice out of available ones are ETFs based on MSCI World Quality Factor index. It's not ideal because it still excludes companies like Berkshire Hathaway (because of accounting rules) but it avoids many suspicious companies (like MSTR) as well as mega IPOs. Unfortunately those are more costly (0.3% instead of like 0.05%). If you are in EU you and want world wide exposure you still need something for emerging markets (EU based ETFs based on that methodology exclude emerging markets).

You can also become an active investor but that's a job and I don't think many people want to take on it.

The main problem with going with bonds is that you are giving up equity premium and you still need to time the market for a comeback and that's very difficult.

It is a liquidity event for Elon Musk, and people like Elon Musk. What they do with it, hard to say. But, the forced buying by institutional investors will push the price of SpaceX upward based on nothing. SpaceX revenue was $15.8 billion last year, and its profit was negative $2.4 billion, its AI business is an also-ran, Twitter has declined to a fraction of its value before the acquisition.

There's no there there, so anything that props up the valuation of SpaceX puts money in scammers pockets at the expense of everyone else exposed to the stock.

I'm informed enough to see what they're doing and why, but I'm not informed enough to know how to prevent them from wrecking the economy for normal folks while enriching themselves. I don't think information alone can solve the problem for the majority of people. Retirement accounts aren't often easy to change, non-retirement accounts have tax consequences, timing the market as a normal retail investor is risky.

I don't really have advice. If I were directly holding an index that tracks the Nasdaq 100, I would get out of it, and take the tax hit. But, I suspect the impact and risk will cascade outward. Nvidia has exploded in price based on actual revenue (though I suspect it will be temporary, and have to come back to earth in time). SpaceX is entirely fantasy land. It doesn't have revenue to justify anything like the price they're launching the IPO, and when indexes are forced to buy it, everyone holding those indexes provides exit liquidity for the same scammers who've been hyping it.

If you are subject to capital gains taxes, this would likely be a bad idea? (Though I have no clue how American 401k work in this regard.)

Wouldn't it make more sense to move it after the IPO? The supposed scam here is that Elon et al will dump their shares and crash the value, but that cannot happen for 90(?) days after IPO. So I think you should let your index buy the inflated IPO, then sell it before the crash, not sit it out entirely.

No.

The insiders don't need it to go up from the IPO price. It can fall quite a bit, and they still win. Your ETF will likely be catching a falling knife. All the funds that track the Nasdaq 100 will prop up the price so it doesn't completely collapse.

This stock is a terrible deal for investors, whether as part of an ETF or as a buyer in the public offering. It's possible people will fall for it... they're still falling for TSLA despite everything.

Regardless, I want nothing to do with it.

How would the knife be falling before any insiders can sell one share? You're assuming outsiders are going to pump and dump before you can sell anything yourself?

The whole concept of passive investing depends upon some large number of people timing the market. Just not you. It is predicated upon the concept that you are not good enough to make your own decisions. Usually that's true, but sometimes it isn't.

There is an entire segment of mutual funds and ETFs that avoid stocks with high valuations, called value funds. About half my equities are in value funds.

The downside is that it's not an arbitrage. Sometimes they perform worse than the broad market. A lot of times, in fact.

>The money still comes from somewhere.

Can't they just be printed and massive funds borrowing money to buy shares?

>and cut the seasoning window from 90 days to 5.

90 days or 5 days, it doesn't really matter because the float will be tiny due to the 6 month lockup. What kind of price discovery are we expecting that would happen in the other 85 days?

The indexes are weighted based on the float (at least most of them)... so a small float means they will buy a much smaller number of shares.

Well, they changed that rule as well. If the float is less than a set percentage, then it is weighted as a much higher percentage. Something like the minimum for weighting is 12% where SpaceX's float will be below 5% (those are the numbers I recall, but I don't have a lot of confidence in them.) That means they will be weighted as if the float was 12%.

How many funds track NASDAQ vs S&P 500? Feels like the former is way more niche/sector specific than the latter.

No, the parent was saying the other rule change is arbitrary.

The tiny float and just a few days before the index funds buy means they have to buy without any more revenue / earnings info than was already published pre-IPO. 90 days is a quarter, so there WILL be more price discovery before a 0 day index fund seasoning period.

There is a world of difference between 5 and 90 days, even if you aggressively stick to the “time in the market over timing the market” strategy. If it wasn’t of consequence, then they wouldn’t be attempting to change the rules. And if SpaceX is such a great long-term investment, then they shouldn’t need the advantages this provide. Join the index funds like any other company. Let the market sort itself out.

SpaceX is slowly and steadily increasing the float over the first 6 months by having a rolling end to the lockup. The only major cliff will be Elons shares

> The only major cliff will be Elons shares

You can’t imagine a scenario where he goes lunatic and does something wild (again)?

    > The only major cliff will be Elons shares

Do you really think he would see a large portion of his shares on his unlock date? If so, why? What would he do with the capital?

Off-load some of them when the valuation is _to the moon_ from AI and then later he'll force shareholders and the board to gift him even more shares then he sold.

I don't think he'll sell a large portion of his shares. My point was that when his shares become sellable will be the only time there is a giant leap in available shares. Because everyone else will be able to sell some of their shares in regular intervals.

    > My point was that when his shares become sellable will be the only time there is a giant leap in available shares.

Fair point and well-stated.

Another thing that is special about Musk's "vesting cliff": He has the longest in modern history: one full year. I cannot think of any other IPO in the last 10 years where the founder had such a strict/long vesting cliff. While I think the "super shares" (with 10x voting rights) are bullshit, I do think the very long vesting cliff is a good sign.

> This forces over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.

And more importantly forces them to sell the rest of the market.

Who will be on the other side of these trades? I suspect the stock market is not sufficiently liquid for all of that to happen in a single day without the rest of the market seeing a significantly depressed price, and index holders effectively gifting value to everyone else by effectively pre-announcing their large trades.

You're misrepresenting things a bit. S&P 500 has not approved those changes yet and they have some other protections as well. Nasdaq and FTSE Russell definitely sold out and should not be trusted as good indexes going forward.

Most popular passive indexes are S&P 500 and some total markets. Total index, like the one used by VTI, is likely the best spot in this case. They have not changed any rules, as far as I know.

Vanguard’s VTI uses an index designed by CRSP. I read the rules and, best I can tell, CRSP indices will add the stocks at the next rebalancing in September.

(FWIW, CRSP was run by U of Chicago, but they recently sold it to Morningstar.)

You protect yourself by understanding that this is one infinitesimally small cost (expressed as a fraction of your portfolio returns) that doesn't overcome the benefits of maximum diversification and the ultra-low fees of broad-based ETFs.

Buy MSCI World, enjoy the 0.04% p.a. fees and minimal idiosyncratic risk, and relax.

Index rebalance traders will reduce your annual returns by less (probably much less) than 0.1%, but there is no better alternative for you at this moment in time.

I broadly agree. Though I'm less pessimistic: lots of people will pay lots of attention to SpaceX and friends, and with short selling in public markets being possible, an accurate price will be established very quickly.

Remember also: index funds are some of the participants most keen to lend out their shares to short sellers. It's one of the rare ways they can boost returns above the raw index they follow.

> and with short selling in public markets being possible, an accurate price will be established very quickly.

I know very little about markets, but: aren't the short-sellers just going to provide liquidity for the big index funds? Like, if the funds HAVE to buy SpaceX, and the funds are enormous, wont every single stock sold short be immediately gobbled up, as well as pretty much anyone else wanting to sell? Even if everyone else is selling like mad, it wont affect price much at all?

Maybe this is naive, but if these enormous funds are more or less forced to buy SpaceX, it seems impossible that "actual price discovery" is going to happen in any reasonable amount of time, and the short-sellers will be screwed.

Most index funds, and essentially all that matter economically, hold stock in proportion to the free float, and not the total market capitalisation. See https://en.wikipedia.org/wiki/Public_float

So if SpaceX only sells 1% of shares in the IPO, and the rest are locked up, then these index funds will only try to buy some fraction of this 1%.

For simplicity, let's assume about 25% of stocks by value are held by index funds. In our case, that would mean that index funds would buy 25% of 1% of SpaceX, or about 0.25% of SpaceX's market capitalisation. For simplicity, assume a SpaceX market capitalisation of 2 trillion USD, so that would be 5 billion USD. A big sum for you and me, but not all that much too worry about for the index fund industry and the stock market.

Later on, the lock ups will be lifted. That will increase SpaceX's weight in the relevant indices, but will also make sure that more stock is available to buy for them.

About the impact of short sellers: let me construct an exaggerated cartoon example. Suppose our index fund already has a 100 shares of SpaceX and wants to hold 300 more, but no else who holds SpaceX is currently allowed to sell for another three months.

Well, index funds are really, really keen on lending out shares to get a bit of extra revenue. So the index funds lends out 100 shares. They go to a short seller, who immediately sells them back on the exchange, where the index fund buys them. Now the index fund has exposure to 200 shares. 100 'real' shares it just bought, and 100 shares that the short sellers owes them. Well, the index fund can lend out the 100 real shares again, and repeat the cycle 2 more times, so that at the end they have 300 lend out shares and 100 real shares on their books.

In three months the lockups expire, and the short seller closes out their short position.

The above is an exaggerated stylised cartoon description, but it's not too far off what can happen in principle.

Well, the index fund would lend out the 100 'real' shares they have at the end, too, just to collect a bit of extra borrow fee on another 100 shares. So the index fund has an economic claim to 400 lend out shares, and doesn't currently hold any physical shares.

Other market participants can trade these 100 physical shares back and forth amongst each other (or loan them to each other, too) to help with price discovery.

There's also stock futures, where you trade the right/obligation to transact some shares at specific prices in the future. Economically, entering into a contract today to be obliged to sell shares in the future is equivalent to becoming a short-seller, but for regulatory reason you don't need to borrow the shares when selling futures.

So stock futures are another way to help with price discovery, even when there's scarcely any underlying shares available right now.

That’s a really great explanation, I think I more or less followed all of it. Thanks for taking the time to write it out!

> with short selling in public markets being possible, an accurate price will be established very quickly

It'll be virtually impossible to short sell the stock within the first month due to lockups, and it'll take 180 days for all the pools to be available: then, we'll have a more-or-less "accurate" price, as you put it.

Whatever float is available on the market can be made available for short sellers to borrow. That can even happen multiple times: ie short interest can exceed 100% of the float. Or even 100% of the market capitalisation.

With stock futures, you don't even need to borrow the stock to (effectively) short it: anyone with enough collateral can write stock futures, whether they own the underlying stock or not.

> understanding that this is one infinitesimally small cost

They are stealing your money with make believe numbers, but just suck it up.

Seems this advice was wrong as VGT uses an MSCI index which does have fast track entry. Do your own research.

Not buy these index funds. If you don’t want to own the entire market, don’t buy funds that seek to own the entire market. Funds like ESGV which exclude companies with poor governance have existed for a very long time - I can’t find a clear answer as to whether or not it will buy SpaceX, but I’m sure you can find funds that cater to your desires.

That ignores the actual issue here, which is the change in rules. Index funds already seek to own the entire market, and when most people chose these index funds there were rules about when newly listed stocks get purchased by the funds. And now those rules are being changed.

Index funds generally try to match the performance of the index, but most are not required to hold the same companies as the index itself does. They typically do, but managers often have choices.

> Index funds already seek to own the entire market, [...]

No, it depends on the index in question.

Yes, most index funds don't literally intend to own the entire market for any sufficiently broad interpretation of the word "entire."

But the point is that we have notable index funds which are marketed to customers as having the intention to own segments of the market according to certain rules, and they are changing those rules with relatively short notice and for reasons that seem suspicious to many customers.

> Yes, most index funds don't literally intend to own the entire market for any sufficiently broad interpretation of the word "entire."

I mean that your index doesn't even have to own a segment of the market. Just look at eg how the Dow Jones Industrial Average is constructed. When a company has a stock split, it changes its weight in that index. That has nothing to do with 'the market'. (Stock splits have approximately no influence on your weight in the S&P500.)

Or you could have an index that captures all the stocks whose ticker starts with X minus those that start with Y plus the current temperature in Frankfort, Kentucky, in Rankine degrees.

The problem is I'm already in a S&P500-tracking ETF, for a decently large amount of money. Selling it off would be a big taxable event for me, something I don't want to do.

Could you use a prediction market (or Spread Betting in the UK) to hedge against your ETF loosing money during the period? If the ETF lost value, the hedge would gain it back and vice versa. You wouldn't need to sell the ETF and you'd only be liable for tax on gains from the prediction.

Yes, because when you sell it, you get cash and profit. Profit is taxable, in Germany they tax it with 25% + Solidarity Tax + Church Tax (if you are a member of a church). After, you can go ahead and buy another fund, but in between you "shed" a significant amount of money.

Details depends on jurisdiction, of course.

In the US, you would likely also have to pay capital gains taxes for such a trade. (I think.)

In Singapore, in contrast, swapping between funds like this would not have any tax implications.

However they are literally changing the rules of what "the entire market" means to include those companies sooner that they would have been when people bought those indices.

I want to own the whole market AFTER the due process of price discovery. This was always understood as new stocks will have a couple quarters to prove themselves before being included.

There is a ton of research that almost every IPO on average goes down in the first 6 month. That's why they are not included by default.

Index funds don't represent "the entire market" anyway. They are a diversified selection of stocks choosen according to some rules.

If you intend to remain a passive investor, keep doing what you’re doing. If you have conviction that AI boom will bust and you want to become an active investor, follow the advice from other comments on how to prevent these companies from being part of your portfolio. If you're going to become an active trader, I suggest thinking about both upside and downside risks and look beyond the local echo chamber.

> If you're going to become an active trader

and remember the best way to make a small fortune is to start with a large fortune.

Here are some options for pre-tax retirement funds (ex. 401k):

1. Exchange your market-cap funds for S&P 500. Afaict, even with their own rules changing, they will wait up to 6 months (as opposed to 12) to let SpaceX in. This is the simplest solution that buys you time without losing other gains in the market, assuming your existing funds were broad market-cap funds. The idea here is to wait for ~5 months and see if you still want/need to exit S&P before they let SpaceX in, or pick another option.

2. Exchange your market-cap funds for RSP, an equal-weight fund. This is also simple and reduces your risk, as SpaceX's allocation of the fund would only be 0.2%.

3. Exchange your market-cap funds for a selection of different funds in order to replicate the previous allocation. Buy small-cap and mid-cap funds, and buy ETFs that cover the market without including tech. This is more complicated, but not really that complicated once you learn how to exchange funds. Still mostly passive, you're just actively managing your allocation into different indexes. Downside is you lose the gains from tech.

4. Exchange all your index funds - temporarily - for a money market fund or other low-risk, low-return investment vehicle, until SpaceX price settles down. This is the absolute simplest option, least risk, least reward. You lose all the gains from the market during this time, but a percentage of your fund doesn't disappear overnight. If you're nervous, it's safe to do this by June 11th and sit on it until July 5th and see what you'd like to do then.

You probably DO NOT want to do this for non-retirement funds, as you will get hit with capital gains taxes. You would have to estimate how much you think your portfolio would drop due to SpaceX's overinflated price falling, and compare that to your potential tax bill from rebalancing. It's almost certain that your tax hit would be higher.

1) You didn't ask 2) The guy who asked didn't say "make sure you don't use any tools to research answers to my questions, I only want unverified human ignorance", in which case I wouldn't have replied 3) The advice is free, you're free to ignore it

You could move your passive investment to an index that includes a great proportion of bonds or move to an entirely bond based index. You reduce the upside potential and downside potential.

I personally have moved my retirement accounts to bonds while being more aggressive with my personal investments.

There are many large cap ETFs out there:

https://etfdb.com/etfs/size/large-cap/

You could switch to one that focuses on stocks which pay dividends, for example. That should provide a bit of protection against an AI market crash:

https://etfdb.com/etf/VIG/#etf-ticker-profile

So-called "smart beta" ETFs are also interesting. https://etfdb.com/themes/smart-beta-etfs/

Here are some factors I would expect to rule out the frothiest stocks:

"Quality Factor ETFs are made up of securities deemed to exhibit strong fundamental characteristics. These ETFs screen for stocks that have healthy balance sheets, encouraging growth prospects, and consistent improvements in their earnings."

https://etfdb.com/themes/quality-factor-etfs/

"Value-centric ETFs invest in securities deemed to possess value characteristics, including those operating in stable industries with relatively low price-to-earnings ratios."

https://etfdb.com/etfs/style/value/

"Low Volatility ETFs invest in securities with low volatility characteristics. These funds tend to have relatively stable share prices, and higher than average yields."

https://etfdb.com/etfs/investment-style/low-volatility/

Be sure to check the expense ratios on smart beta ETFs. Generally, the more sophisticated the stock screening, the more they will charge you in management fees.

As long as you're thinking about your portfolio, you may wish to consider international diversification in case the US economy implodes somehow: https://etfdb.com/themes/international-equity-etfs/

Personally, I keep my portfolio extremely conservative. My bet is that if the singularity arrives, we will all either die, or get UBI. I don't particularly care about having more moons than the other guy: https://www.astralcodexten.com/p/you-have-only-x-years-to-es...

That’ll do precisely zero to protect against the effect described. In fact the opposite - the dividend paying stocks will by mathematically necessity be among those ETFs sell down to buy these IPOs

I believe you may have gotten discussion threads mixed up, but in any case: I expect that as SpaceX investors sell their SpaceX stock, they will buy ordinary equities to diversify.

I don't like this either, but from the article:

> Although Nasdaq has already shortened the “seasoning” period before index inclusion to 15 trading days and FTSE Russell has slashed its waiting time to five days (and S&P Dow Jones is reportedly considering something similar), most share indices weight firms in proportion to the value only of shares they have released for public trading (the “free float”). For SpaceX, this means just the $75bn or so of stock it intends to issue in June—so its initial weight in the S&P 500 will be around 0.1%. The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk. Even so, SpaceX’s probable initial weight in this $40trn index will still only be around 0.5%.

So people who hold ETFs that track the S&P 500 probably don't have too much to worry about. People invested in the NASDAQ 100 probably have more to be outraged about - but then again I suppose if you're invested in the NASDAQ 100, you may be consider more exposure to SpaceX to be a good thing.

This needs to be higher for more visibility, because the weighting and the float's proportions are an important aspect that most news sources or comments fail to mention.

Correct me if I'm wrong, but 0.1% of S&P 500 seems exceedingly huge when you consider how much of the economy is represented in the S&P 500.

To be pedantic, the S&P 500 is a large portion of the stock market, not the economy. Its value is about 75% of the value in stocks. But stocks are only 25% of all stores value. Real estate is twice the size of the stock market. The rest is mostly corporate and govt bonds.

This is why the real estate crash of 2008 caused the Great Recession, while the Internet Bubble bursting was a small recession.

>The NASDAQ 100 is an exception, and has changed its rules to weight companies at up to three times their free float, in an apparent effort to woo Mr Musk.

im not a finance guy, can someone explain to me why the nasdaq would want to "woo" someone specifically? what benefit would nasdaq get? or, alternatively, what harm would befall nasdaq for not woo-ing musk?

Nasdaq earns money every time a stock is traded on their exchange (a very small amount per trade, but it adds up) in addition to other listing fees that the company pays. So it's definitely in their interest if Musk chooses to list SpaceX on Nasdaq instead of, say, NYSE.

It's still extremely corrupt, and done to benefit a very small group of people. Dismissing the criticism like this is directly against the rules and spirit of hackernews to assume good faith

You're using the word corruption without any solid evidence. The decision for the rule change has been clearly explained.

So the obvious thing to do, for someone that's got ~$3mm to play with, is to setup an ETF that is SP500 but with the old rules. If you can convince $40mm of other people's money to go into your not-specifically-Musk-less-but-just-happens-to-be ETF, they'd come out ahead.

Seems bizarre to have a Shariah-compliant index fund comprising companies that are all levered with huge amounts of debt financing.

One presumes it's because a huge amount of its revenue comes from defense contracts, which are haram. Here is n excerpt from the fund's exclusion criteria:

> S&P 500 Shariah Industry Exclusions. The index universe consists of all the constituents in the S&P 500 Shariah, excluding companies classified as part of GICS sub-industries 20101010 (Aerospace & Defense), 40203040 (Financial Exchanges & Data), 40201060 (Transaction & Payment Processing Services).

That is wild. Saudi Arabia which is governed by sharia law spends about 7% of its GDP per year on its military. I had no idea that ownership of defense contractors is considered haraam.

There's probably a difference between investing in your own vs in another entity's. In Islamic finance, you aren't allowed to just invest money. You're supposed to have some kind of leadership/skin in the game. like shared ownership. I vaguely recall this from a course I took in law school and I thought it was nice, but a double edge sword.

There's some academic consensus that one reason Europe was able to leapfrog the Islamic world after being behind technologically and scientifically was that Islamic law around inheritance and finance had specific ways property was to be split up, preventing the growth of large corporations.

Contrast with Europe, where the modern corporation was developed, allowing a business entity to be immortal and be controlled by one person at a time via inheritance in perpetuity (if desired).

The modern corporation could grow significantly larger as a result, leading Europe to greater economic power while inheritance law (uncle gets a share, brother gets some shares, sons get some shares, etc.) led to companies closing up or losing power because of the fracturing of control.

ANYWAY, I know that was a semi-tangent, but after a lifetime of learning to master "finance," to learn there's a whole parallel system out there, and different approaches lead to different social outcomes, was eye-opening.

In Jewish dietary laws, they're allowed to have grape products prepared by Jews, but not by gentiles (hence Manischewitz wine, which is kosher because it's made by Jews, versus most wine made by gentiles).

I wonder if this is the same thing: investing in your own military is fine, but investing in defense that is not specifically yours is not.

opinions vary, but this was the opinion adopted when formulating this index

it probably makes it easier to ship in europe where some private banks and pensions (eg denmark gov) ban defence investment

    > the opinion adopted when formulating this index

You raise an excellent point. I did a little bit of Googling and discovered:

    > S&P Shariah indices ... are overseen by an independent Shariah Supervisory Board consisting of a panel of internationally renowned Islamic scholars. This board is facilitated by Ratings Intelligence Partners, a London and Kuwait-based Islamic finance advisory firm.

Ref: https://www.ratingsintelligence.com/

I wonder if these Islamic scholars are scholars or "scholars"

Like how major churches in the US are overseen by "Bible college" graduates whose qualifications are basically "charismatic enough to get VC funding and attract loads of the most superficial of Christians searching for Biblical justification for their bad behavior"

(Not to suggest that there's a religion that is perfect, but when I sit in on a megachurch service that is transparently justifying child rape by Trump, and advocating that the Bible requires us to support Palestinian genocide, and the pastor went to a two-year Bible school but looks fucking cool like right out of a rock n roll photo spread, it's hard to equate that morally with, say, dorky-ass 70yo episcopalians and the occasional sins of leadership)

Dogs went into space. Dogs are haram. Therefore, space is haram.

Probably not this reasoning.

Wouldn't the other index stocks need to tank as funds must be shifted by large scale investors into the these new gigalistings?

That’s the new paradigm of US leadership. Not laws or principles but just „who’s going to stop me“

Ah yes, market manipulation, a key trait of fascism right next to authoritarian military regimes and ulta-nationalism.

Words have lost all meanings.

Do you have a source for the $30 million claim? It'd be nice to work out the math. Not _all_ of 401k funds / index funds are going to go to SpaceX.

I’m actually neutral on this so far but my main question is are they changing the rules permanently or just one time?

This fundamentally misunderstand the point of an index. The fundamental reason S&P 500 exists is to let people buy the entire market ( the top 500 companies make up most of the entire market ). That is it. Period.

They are not saying these 500 companies are going to be the most successful in 6 months or 10 years. At one point Enron was 0.6% of S&P500 because it was a large company, not because the directors at S&P500 thought the management were honest people.

If you don't like that, fine, don't buy S&P500 and buy stocks or other funds that do have companies you like.

This disregards the fundamental reason why people buy index funds in the first place. Rules for consistent GAAP profitability and cooldown periods specifically prevent retail investors from being exposed to particular malicious stock market tactics and overall risks that otherwise could significantly hurt them in the short term. So it's more like saying "you don't like extra risk? too bad."

Yes, if someone thinks that the top 500 companies include too much risk then yes too bad, you need to move out of SPY.

It isn't called the S&P495 because they kick out 5 of the biggest companies that some people consider to be risky.

I personally think its super risky to want to be Diversified and NOT include any exposure to SpaceX. Yes, Elon is unique but that doesn't mean his companies are going to fail especially given the potential risk of AI changing the world. Is IBM going to keep selling overpriced IT outsourcing in 5 years?

It's not about the overall long term risk of the company, it's the inherent short term risk of the IPO that will potentially hurt retail investors. Why not have them trade for a while and go to business as usual so things settle down and the index can prevent wild fluctuations? The only ones who might benefit from this rule change are pump-and-dump types.

The goal of SP500 is to provide exposure to the 500 biggest companies, not protect shareholders. I think IBM might do poorly when AI destroys their overpriced IT outsourcing business, but that doesn't mean SP500 should kick them out.

Again, that's not the issue here. Long-term, these things should absolutely go into the index if they fulfill the size requirement. It's the IPO process that has people worried (and rightly so).

You are talking nonsense.

The reason why I liked the SP500 is especially BECAUSE they had guardrails against unprofitable speculative companies that just got added on the stock market. On average those stocks are going down on their first public year. The SP500 made sure to have a cooldown period before adding them.

Now you are trying to justify why we should have them anyways, even though I never chose that to start with.

The issue everyone is having is the rule changes to add them in a couple trading days. How can you defend that?

You misunderstood what you were buying if you thought that S&P500 could never change their processes.

This is simply not true and a misrepresentation of the issue. There is no issue with SP500 buying into all these companies. The issue is that “valuation” should be determined by the market before the index funds buy into it hence the original rules and policy in place. Else wise we run into the issue now where our 401K is pumping the IPO, regardless of fundamentals.

> The fundamental reason S&P 500 exists is to let people buy the entire market

And why do people want to buy the entire market in the first place? They want to diversify and insulate themselves from a single company crashing their portfolio value.

What are people afraid of right now? They're afraid of a single company crashing their portfolio value.

Why are people afraid of their portfolio value crashing? Because these 3 companies will fundamentally increase the overall risk and volatility of the index.

Do you see the problem?

The problem is people equating S&P 500 with "set and forget" investment when that's never what it was. It's an index. You're not paying anyone to balance it with a particular risk profile.

There are indexes that invest equal amounts of money into all companies, so Nvidia doesn't dominate. Or you can pick low growth high dividend indexes to insulate against AI. Or just grab Vanguard LifeStrategy if you don't want to think.

The current situation is unusual. No index can handle all situations. Either adapt or use a fund that does the thinking for you, right?

The current situation is unusual and the standard rules handled it fine. For some reason they're changing the rules. That's not "no index can handle all situations." It's a deliberate, harmful change.

People use the dollar in business becaUse its a stable currency.

If the US does something to destabilize the dollar, will economists be running around saying “the dollar was never intended to be used for that purpose!”? No.

It doesn’t really matter if the index “wasn’t supposed” to be something it became. The problem is the same. The only difference is who you blame.

well, i had that, and now they're making me think, when they could instead keep it the way it was

Why would you accept this? Who does this serve?

I want to believe the world is full of good people but I read stuff like this and realize otherwise.

Why do you assume SpaceX will be a failure? Do you have a track record of being correct on Elon companies? If SpaceX succeeds and its in the SPY from day one that serves everyone who owns index funds.

Because the economics are simply not there.

There is not enough money in space exploration, let's be real. SpaceX biggest customer is itself. Hence the vaporware about datacenters in space.

Why the special rules for SpaceX though? I still do not understand why the world’s richest man and one of the most valuable companies needs an exemption? Genuinely confused.

The only good news here is that the SP500 and wide market index funds like VTI are "float weighted", meaning they will only buy based on the dollar value of SpaceX stock sold to the public. The latest numbers are something like $75B for SpaceX, which is only something like 3% of the $2T valuation, so they will only buy a small amount of this (0.1% of the SP500 fund) because the total float for the SP500 is $45-50 trillion.

Still criminal, and also, anyone buying this individually is a fool.

It is not just the passive money. Many active managers are benchmarked against those indices, and you do not want to try to explain to your clients that you lagged in performance because you did not buy these stocks when your benchmark did. Sitting out would be taking a huge risk (of losing your job, which is important to you, as opposed to losing your clients' money, which is less important if your benchmark also lost money).

Those changes should be taken as a harbinger. Smells a lot like 1999 when a company producing cat turds could get a listing.

Cutting SNP500 from you etf portfolio seems the sensible choice now. On the other hand, things haven't been sensible for over a decade, and there's still no sign the insanity will stop. The market can stay irrational longer than you can stay solvent...

Now if you looked at it the other way around, you could say if they were trying to swallow the stock market they would probably want to start by taking some pretty much larger bites than most :|

Do we know what the situation looks like with other popular indices such as MSCI World, MSCI ACWI, MSCI ACWI IMI, FTSE All-World, …? Do they have any requirement of 12 months of trading or of profitability or similar?

Very silly question but cant someone just spin up an index cutting out spacex? Like even an etf that is nothing more than an sp500 sans non profitable companies?

Yes that's definitely possible and will probably happen. The big hurdle is traction though. How many people will know about it and be willing/able to shift into it? A lot of passive investments are effectively locked in by unrealized gains or limited 401k provider options.

This is why I have moved all my money out of the US market. I’d rather go for the picks and shovels in Asia and the boring rule of law in Europe.

The crypto market is 2.5T, essentially money parked in nonproductive assets. A simple public awakening and reallocation will suffice.

This kind of doesn't make sense. You don't park "money" "in" crypto. Crypto sits there, with its value set at the last sale price. There's nothing to stop the next sale price taking its value to zero without anything happening to real money other than some of it changing hands. It's not like crypto holders can sell $2.5T of crypto and plough it into equities, for a start some other investor will have to buy it from them for $2.5T and then we're in the same position we started in.

Explain to me how crashes work then, isn't it when there is an inconsistency on supply vs. demand?

It just takes a narrative shift to tumble it - ex: quantum to break crypto security.

Someone makes a trade at a lower price. That's all a crash is. It's a crash in price, nothings actually happening to the stock or the token or the money.

Changing the rules to appeal to SpaceX is really really bad... especially given the historical performance of IPOs

The rules built to protect passive investors: 1. S&P 500 has required 12 months of trading and 4 quarters of GAAP profitability since 2002. Both waived. 2. Nasdaq cut its inclusion window from 90 trading days to 15. 3. FTSE Russell cut its to 5. All three benchmarks are now structured to buy SpaceX at IPO pricing."

Which really really sucks. We all see Trump whoring out the whitehouse for his trailer park presidency. But I didn’t anticipate the markets kowtowing like this. lol bankers gonna be bankers tho nvm

It’s an index fund. It must follow the index. They’re forced to buy any company in the SP500.

They are buying it at IPO pricing

This is going to be very... "interesting". SpaceX will IPO with minimal float, while at the same time forcing every index fund to buy a fixed percentage. A long squeeze, so to speak.

I can't picture any scenario where this ends well.

It's honestly blown out of proportion. S&P 500 allocation is float adjusted, i.e. the allocation is based on the market cap of the floated shares, not the total market cap. SpaceX float is ~4% at IPO, and at a $1.75T valuation that's $70B in floated shares.

SpaceX will be ~0.125% of the index. The actual amount of buying is in the low tens of billions, and given these are $30 trillion+ markets, this is hardly anything to fret about.

nasdaq & russell, yes. but not s&p - that has a 6-month requirement for eligibility, which ensures stock is past the lock-up period.

Wow, didn’t know that.

If SpaceX tanks and 401ks are left holding the bag, this could result in the biggest class action lawsuit ever.

People can surely sue the index publishers for removing the safeguards, or the index funds to take more risks than they were mandated.

When money is lost in the order of billions, someone is getting sued.

> someone is getting sued.

but that doesnt mean any money gets recovered at all. Musk sure as hell aint giving anything back.

The fix is to simply not buy it - those 401k aren't completely passive, you can choose a different investment (instead of NASDAQ index).

> People can surely sue...

Would either published indexes or investment funds exist, if suing them for poor performance was anything resembling that easy?

I'm thinking "no".

Will take 6+ years and lots of fees lost to recover loss. Won't be anywhere close to made whole.

SpaceX would be the target of the lawsuits. Index funds/401ks are immaterial.

Check out previous flops like Enron (only $60b) for examples of lawsuits.

Sure, the problem is trust.

Regular people want to invest so they can make money and companies want people to invest so that they can raise money. So pretty much everybody wants the 401k money to be invested in the stock market.

But the issue is that investing in the stock market is very technical, so some smart asses invented the index funds to make it easy for daddy and mummy to put their retirement accounts to work.

The index has safeguards in place to try and reduce its volatilty. So people are happy, cause they are investing in stock without having to look closely at what it is they bought.

But if suddenly some people change the safeguard rule, so that their buddy can dump their overvalued stock over people who think they are investing relatively safely, then it can be argued that there is foul play.

People are not finance specialists and they are heavily incentivized to buy index funds, so they need to trust that the people who are telling them to invest are not hiding things from them. If that trust is broken, lawsuits will follow.

It’s like: imagine you own a Toyota and have a maintenance contract with Toyota, and one day you have your car serviced and they tell you they changed the brakes. They tell you the brand of the new brakes and they tell you it’s fine while in fact, they put some cheap garbage that fail after 100 km of driving.

When the brakes fail and your car falls off a cliff, you go and see them and they tell you: “yeah those brakes were bad, but we told you we put them in, you could have looked up that these were bad, it’s all over the internet, so that’s on you”.

> People are not finance specialists and they are heavily incentivized to buy index funds, so they need to trust that the people who are telling them to invest are not hiding things from them. If that trust is broken, lawsuits will follow.

A "lawsuit" isn't a concern for the likes of Musk.

He's got the money to pay lawyers, politicians, and influencers. He's spread this risk around to the right people; if he goes down, they're going down with him, too.

At a certain point you have to start jailing people for long periods of time. I don't mean the Milken, Belfort, or Skilling treatment. I mean being placed away for 30+ years in medium-security facilities at the least.

> At a certain point you have to start jailing people for long periods of time. I don't mean the Milken, Belfort, or Skilling treatment. I mean being placed away for 30+ years in medium-security facilities at the least.

Bernie Madoff was sentenced to 150 years in prison, if that counts. But then he had committed a crime, which is the usual "certain point" we wait for.

Indeed. Everyone should be moving their funds out of target date funds right now and into medium and small cap stock funds.

It's quite sad that the pillar of American life that is the 401k is given to shady fund managers. The law should be that if you manage a 401k you must be a fiduciary. If that were the case then no one would be bag holding these fake valuations because they'd be liable for negligence. Right now they're just in on the scam.

You can't sell these ETFs without incurring capital gains, potentially large. So it isn't really a choice.

If it's actually your 401k, sure you can. Just today I rebalanced my retirement funds away from large cap stocks to avoid this steaming turd that Elon is dumping on the public.

> Just today I rebalanced my retirement funds away from large cap stocks

Away from large cap stocks to what?

For what it's worth, I think anything selling energy or fertilizer which is not sourced from the Middle East is a pretty good bet right now. Depends on how the US/Iran conflict plays out, of course, but I'm not optimistic.

Small-cap, mid-cap and ex-US real estate? That's been floated in my circles - that and the 30 year.

If you're truly convinced there's nefarious reasons for including megacap IPOs in passive index, you can always short the stock (or use derivatives) by the same amount.

I'm not sure you'll come out ahead. (Personally I don't get the outcry, except for nasdaq which has fairly stupid rules, delaying the inclusion of megacaps won't make the problem go away, but probably increase since the float will be massively larger). It's inherent to being a passive index.

this is disgusting corruption, a direct wealth transfer from the many to the few. shame on everyone involved

The opposition you're talking of will hold no significant power in 2029. They currently hold a minuscule amount of power and this isn't going to skyrocket within 4 years. A meteor causing an extinction event is more likely and I don't think you're expecting that.

And significant part of those in opposition will jump the ship if they gain power. I think there is little hope for system to change unless there is total collapse and replacement.

They're just as on the take as anyone.

Think about it: you have hundreds of thousands of pages of evidence that the hyper-wealthy may have trafficked minors across state and international borders. Only one person is in prison over it, and her cell gets upgrades.

35 years ago this would have been a slam dunk for the opposition party of any republic. Instead of standing ten toes down on it, opposition leaders are doing... what exactly? Going on with business-as-usual, for the most part. They should be attempting to add language to every single bill that comes across the floor to see more done. They aren't.

I think stock trading shenanigans are far lower on the list of moral outrages, particularly given Congress' predilection for insider trading.

Not just the opposition. In other times this would have been the reason for a revolution.

I’m not sure this is the answer. As you say, the concept of keeping the masses occupied is a lot older than TikTok or Doordash…

Nowhere in history we had products as addictive as those. There are people making a career studying how to exploit people's weaknesses, to induce them to buy products.

Indeed, not enough people are asking why the Biden administration sat on the Epstein files for 4 years and did nothing with it.

> this is disgusting corruption

The guy called 401(k)s a Ponzi scheme. Now, he's coming after them to loot.

Not really. Social security is a defined benefit plan that requires new payors to fund todays expenses. 401ks are a defined contribution plan. Very different.

The argument is, as I understand it:

* Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings

* Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize

* OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble

I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.

> * Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings

That is a hell of a statement to make (their earnings are mostly negative, after all, except nvidia). Would require exceptional evidence, which doesn't seem to be there.

> * Build out of infrastructure is demand-driven, hyperscalers are not building just for future demand that would not materialize

This does not reconcile with the large amount of empty datacenters and GPUs which have not been installed: https://www.wheresyoured.at/ais-economics-dont-make-sense-ad...

> * OpenAI, anthropic & co can be overvalued but that does not mean there's a systemic bubble

OK? It could also mean there is.

> I think this underestimates contagion effects and the fact that demand appears to be subsidized and may disappear quickly, but it's just MHO.

Even with subsidized demand Microsoft still ended up cancelling over a gigawatt(!) of planned datacenters already back in 2024. But yeah, their arguments are missing a lot.

This doesn't even get into nVidia's circular financing deals that artificially inflate its market cap.

I think the earnings are suspect and exaggerated. Hardware manufacturers are making real money now, but there is a big question if any of these AI companies can deliver profitability to match their current valuation let alone future valuations when they go public.

Hyperscalers are in big trouble if the build out suddenly stalls. Even Nvidia and Micron are going to see their value significantly trimmed if it looks like growth is stalling. With such concentration at the top of the S&P among tech companies and with SpaceX, Anthropic, and Open AI, three companies that probably burn a combined 50+ billion a year. The whole stock market will be a tinderbox.

The whole thing is so private capital can get their exit. Default rates of private capital are already at 6%. Banks are exposed so they are on board with the fraud.

> Hyperscalers are in big trouble if the build out suddenly stalls.

How would you define stalled? Hardly anything has been built in the last 2 years (and most of those juicy new GPUs must be sitting in a warehouse somewhere waiting to be installed, together with all of our RAM and HDDs).

but google, meta, microsoft and amazon were making a ton of money even before the AI boom.

OpenAI and Anthropic's can go bust, but ads, windows and cloud hosting would still make a ton of money without them.

But the stock market is not priced for what is happening. It is priced for what investors think will happen. And investors think companies are going to make a lot of profit in the next 3-5 years from AI. If investors lose confidence it will happen those stocks could see a 20 - 40 percent pull back. The companies will obviously be fine, but the stock will take a beating.

* Valuation of the sp500, the hyperscalers and Nvidia is (mostly) reasonable based on earnings

Based on earnings that mainly include all the circular tricks to generate business with each other. How much is really left once you remove all of those?

You mean "Listen to [someone who started on Wall Street at Lehman Brothers, joined PayPal in its earliest days and worked alongside Peter Thiel and Elon Musk, and eventually became a venture capitalist in Silicon Valley] argue why AI probably isn't a bubble".

Funny how this different framing of the exact same person provides a completely opposite expectation of their incentives behind commenting on whether AI valuations are a bubble.

We don't let bubbles pop anymore. We print money and borrow from the future so that no one loses money on their homes and retirement accounts. The GFC changed the rules.

It looks less like capitalism and more like socialism for the rich, marketed as free markets.

Print money. Push most of it into cheap credit for giant corporations and asset owners. Let a little trickle into the real economy so ordinary people feel temporary relief. Then let inflation quietly do the dirty work.

The public pays through higher prices, weaker savings, and future debt.

The powerful collect the upside.

That is the game: privatize the profits, socialize the losses, and call it capitalism.

And all of this is legal under the disguise of "protecting the economy for regular folks", and they can keep doing it repeatedly.

It worked. The only people upset about it are young people who don't vote. If young people don't want a continual wealth transfer from them to the old, they need to start voting. That's been the case since 2008, and here we are a generation later.

You mean the young people who cannot (or could not) vote because they are under 18?

Also very bold of you to assume voting does much.

(coming from a 22 year old who votes at every federal, state and local election).

The way people voted in the last federal election did a whole lot. Granted, it’s effectively limited to people in swing states.

People under 40 have much lower voter turnout than people over 40. 75% of 65+ year olds vote. Less than 50% of 18-25 year olds vote. I wasn't referring to children.

Old people will be the majority for the foreseeable future, though. To be honest, the only strategy that I currently see for young people is waiting and growing old, unfortunately..

This is a well-known affliction of democracy.

Logically, it seems insane that people who live on other people's taxes have the right to vote. Officials, public sector employees, and anyone else who receives money from the government rather than contributes to it shouldn't vote.

It's hard to take the "just vote" seriously after the rash of gerrymandering happening in the south. Some elections were even downright cancelled.

It's possible that the gerrymandering will come back to bite them. It doesn't give them more votes, it just spreads them thinner over more seats. Which means if the blue wave is larger than expected a lot of their "safe" seats will suddenly be blue instead.

One thing I have come to realize, is that worrying about bubbles will keep you poor.

If everyone is in the bubble and it pops, everyone is in the same boat, so you’re not really going to be poorer than your peers by comparison.

If it’s not a bubble and you are wrong, you will fall way behind everyone else and just watch people get richer and richer doing the exact same thing you should have done.

Also, just because something is a bubble doesn’t mean it has to end in a devastating pop. Sometimes bubbles expand and then just get diffused. The exponential rise stops and prices plateau, but it just becomes a new normal and things stagnate for a while before resuming normal upward growth.

Ask Warren Buffet how concerned he was of "missing" on bubbles... He got richer than pretty much everybody else by just avoiding bubbles and then buying assets at fire sale prices when they inevitably popped.

https://x.com/Mr_Derivatives/status/2022796755621060695

Chamath says Warren Buffett outperformed the $SPX by 2 times pre-2000’s because he used "insider info".

Berkshire Hathaway completely exited its investment in Paytm (One97 Communications) in November 2023. This divestment occurred just two months prior to the Reserve Bank of India (RBI) initiating its strict regulatory and KYC-related crackdowns on Paytm Payments Bank in early 2024.

I think Warren has been doing insider trading.

No, Warren Buffet became so rich because he was making deals to pick up stock at favorable prices the public didn’t have access to. You will not be Warren Buffet just by buying after stocks crash.

> If everyone is in the bubble and it pops, everyone is in the same boat, so you’re not really going to be poorer than your peers by comparison.

> If it’s not a bubble and you are wrong, you will fall way behind everyone else and just watch people get richer and richer doing the exact same thing you should have done.

I don't get? First scenario, you get richer vs. the average and in the second you gt poorer. So in total you average out? I don't see how not participating makes you poorer in average.

> Sometimes bubbles expand and then just get diffused.

That's not what a bubble is. A financial bubble is defined by the "burst" at the end.

Normal people generally won't be able to beat professionals in the "market timing game". So when Joe Sixpack decides to sell off his index funds with intent to buy back in at a lower price, he's usually making a mistake. Staying invested in the market is a better choice for most investors because being in cash is about -2%/year EV whereas being in stocks is about +6%/year EV.

> If this is a bubble... The pop stage will be devastating...

Why? It could be sudden. It could be slow and gradual. I've seen no reason it needs to be one versus the other.

Irrational exuberance rarely transitions to a rational drawn down. The minute the first selfish-actor flood-liquidates, everyone else will too. That's now runs work.

but this isn't "irrational exuberance", literally everyone I know paying and kind of attention has "rational dread".

In my opinion the amount of money poured into these companies is the definition of irrational exuberance. And even if you want to call it dread, once they start to deflate people will panic and flee.

Hmm. With respect, I disagree. When the term was first coined, the broader context was "Main St" (ie, retail) investors acting with apparently excessive optimism. Whereas the unfathomable sums being poured into AI by "Wall St" arguably stem from profound but simple greed, a scheme in which the uber-rich are forcing AI and the concomitant bubble risk down the throats of the general public. "Exuberance" has a significantly positive connotation, which in this case I find completely absent.

That's not the problem, the problem is when they take it out of these companies, where it goes after that is irrelevant. Once the exodus starts prices will plummet and lots of people will lose a lot of value.

While this is factual, the world (and humans) haven't functioned this way since ... ever? It doesn't matter what you think logic is, if the people who are providing the services (teacher, worker, doctor, etc..) are illogical and you need these services from these people.

Because it is deliberately extracting cash from Mom and Pop into the robber baron's wallets?

Because traditionally the pop is delayed while those who realized most of the gains attempt to offload the risk to other parties. Whether this works or not at some point it becomes an inevitable and self reenforcing feedback loop.

Just investing less in risky things on the run up means you personally perform worse so even in known bubbles you don't see reasonable slow downs instead of disastrous pops.

> traditionally the pop is delayed while those who realized most of the gains attempt to offload the risk to other parties

What? Source? Plenty of investment bubbles pop before the bag is passed.

This thread involves a lot of people looking at something they don't like and presuming karmic forces will give them what they deserve. There is no reason these companies, even if massively overvalued, have to "pop."

That's fundamentally different from e.g. the financial crisis, or the 2023 bank collapses, or even the dot-com bubble. Those did not have the ability to self correct. There was no slow deflation other than through a bailout.

> There is no reason these companies, even if massively overvalued, have to "pop."

This is a wild thing say without any qualification.

> This is a wild thing say without any qualification

It’s really not. Bubbles are notable because most elevated asset prices slowly go down. And they have common characteristics that force the reckoning. Usually debt. Sometimes operational leverage.

I'm genuinely curious why you say this is different from the dot-com bubble?

As I see it, this is the exact same situation - wildly overvalued companies based on investor exuberance, the underlying business is not capable of supporting this kind of valuation. IPO tends to be the crunch point at which this overvaluation is exposed. Once exposed, the valuation correction spreads to other similar businesses quickly and the bubble pops.

What's the self-correction ability that AI companies have?

> genuinely curious why you say this is different from the dot-com bubble?

A lot more revenue. Dot coms were going public pre revenue. And Anthropic is profitable. Both it and SpaceX wouldn’t be dependent on further stock sales to stay alive—that lets them weather a downturn.

As I understand the situation, Anthropic is revenue-positive but not profitable. As usual, Ed Zitron covers this well [0].

As with the dot-com bubble, there is a lot of voodoo accountancy (and flat-out lies) about the actual situation here.

As I understand it, the basic problem is that the big three can't charge enough per token to cover costs because they're in competition with each other (and one of those is Google that can afford to buy market share using its other operating revenues), and the OSS/cheap Chinese models.

And this situation is unlikely to get better in the short term because building cheaper per-token capacity is very expensive and time-consuming.

[0] https://www.wheresyoured.at/anthropics-profitability-swindle...

> this situation is unlikely to get better in the short term because building cheaper per-token capacity is very expensive and time-consuming

They don’t need to fix it in the short term.

Look, this could be total nonsense. But what won’t happen is Anthropic or SpaceX disappearing inside a year. That was true in the 90s because the only cash flow going into those companies came from investors.

I notice you left out OpenAI from that ;)

Agree, some of these are valid businesses. But they are also massively overvalued on that underlying valid business, because of investor enthusiasm. When the bubble pops they are going to have real problems because of that overvaluation. Hopefully they survive, as a lot of the dotcom businesses did.

I think the real bloodbath will be the second-tier businesses that are mostly reselling cheap tokens to a market niche with custom prompts, and also massively overvalued as "AI businesses". And that kinda mirrors what happened in the dotcom bust - all the overvalued "webscale" businesses that hadn't really worked out a solid model yet went to the wall immediately

> notice you left out OpenAI from that

OpenAI seems to have made debt-like commitments to spending on infrastructure. If those are indeed binding, they may have less flexibility than the others. (If Anthropic’s revenue growth stalls and its valuation halves, it should still be a going concern.)

If what you say is true and it predicts the future, then everyone would be selling right now. The fact is, no one knows when or if the bubble will pop, and we will only be able to say in hindsight whether your comparison is correct.

There will come a point, probably in the next year or two, when investors realise this is true and it predicts the future. And then they will start selling. And that's how the bubble pops.

Bubbles always pop. The question is only ever about the timing.

I said attempt to offload see mortgage backed securities for one such attempt.

The point is that nobody wants to be the first out of a hot market nor the last so that bubbles everyone knows are bubbles first hang on despite it being broadly believed to be so and then crash as people head for the exits.

Broadly people are taking on debt to realize profits that may not exist. Retrospectively widely acknowledged bubbles like every crash in the last century all popped im not aware of any big enough to cause a recession that petered out slowly. Since we don't need to look up 100 years of crashes together can you name some similarly large issues that were resolved slowly over time?

Once the liquidity is transferred, that's it? There is nothing there (datacenter in space, that dude is really smoking some serious stuff), so the money will be spent/transferred and then there is no revenue/new sources of money.

It's the same scenario of a ponzi scheme. Everything looks fresh and fine until everyone realizes there is nothing in there.

Why would that pop the bubble?

Robber Barrons existed from like 1860 through 1915 and extracted the wealth of many people, including Native American tribe lands.

Like this shit can keep going until we decide enough is enough and actually change our society.

Not related - many robber barons went bankrupt in the severe economic crashes of the time, such as the Panics of 1873 and 1893. The Gilded Age continued despite bubbles popping.

I mean, isn't the definition of a bubble that it pops quickly? If it slowly loses value over time, its not really a bubble.

> isn't the definition of a bubble that it pops quickly?

There is no consistent definition of a bubble. We have no fundamental reason current valuations have to collapse suddenly.

Is there any definition of bubble that doesn't involve popping? That's literally the metaphor.

> We have no fundamental reason current valuations have to collapse suddenly.

I would agree, but i think that is just saying that the current situation is potentially not a bubble. Which may be true. We will only find out after the fact.

> Is there any definition of bubble that doesn't involve popping?

I’ve seen it commonly used to refer to any period of high multiples.

There is literally nothing creative about circumventing existing regulations. By definition of there already being rules in place to prevent them, the pump methods being used are already a known quantity. That those safeguards are being bypassed is just boring old corruption.

The wrong lessons were were learnt in 2008 after no individual suffered any negative consequences for their part in causing horrible losses for a lot of people.

This is such a scam.

SpaceX used its massive IPO and listing fees (and the prestige of being the largest IPO ever) as leverage. Index providers and exchanges saw financial incentives: listing fees, trading volume, data sales, and long-term revenue from asset managers. Reuters reported that SpaceX advisers contacted major index providers (including Nasdaq) to discuss early index entry, and that SpaceX was leaning toward listing on Nasdaq only if it got early inclusion in the Nasdaq 100.

The rules built to protect passive investors were waived:

- S&P 500’s 12-month seasoning and 4-quarter GAAP profitability requirement → waived

- Nasdaq’s seasoning window (90 trading days) → cut to 15

- FTSE Russell’s seasoning window → cut to 5 days

Meanwhile, Danish pension fund excludes SpaceX citing governance and valuation (Musk holds approximately 42.5% of the equity, but commands roughly 83-85% of total voting control): https://www.reuters.com/legal/transactional/danish-pension-f...

> S&P 500’s 12-month seasoning and 4-quarter GAAP profitability requirement → waived

S&P hasn’t announced a final rule change yet.

Are you seriously under the illusion S&P is second guessing or reconsidering its plans? There's no evidence of that.

> the illusion S&P is second guessing or reconsidering its plans?

There is no second guessing because no decision has been made. A consultation was put out. I’m expecting it will be adopted in parts. Like, the market hasn’t priced in a full rebalancing.

People buying into space x are basically telling Musk to do anything he wants with their money, no questions asked...

Retirement accounts have to passively invest, but not in S&P500 specifically I think. I'm sure there will be passive funds that don't adapt the rules change.

edit: Google informs me that you can change the stock allocation in your 401k at any time.

Oh, I wasn't sure if you were referring to the X link in the original post.

Yeah I don't know what's going on, they banned me for being a spambot or something. Then they unbanned me again, I got the email, but the site hasn't caught on it seems. If it's still banned in a few days I'm gonna remind them about the DSA again. Technical issues are not an excuse to get out from legal obligations.

>Yes it can, since they changed the rules to force over $30 trillion in passive 401k and retirement money to buy SpaceX at IPO valuations.

Why not just say SpaceX is being added to the SP500?

You can complain about the discretion to add it to the SP500. But that's irrelevant in terms of whether or not its "forcing" people to invest in it. Arent you upset people are forced to invest in Apple, Bank of America, etc.?

They should have to float on the market for a certain amount of time before being added to any index. This would reveal what the market value of the stocks actually is.

"Why don't you just say that this store is selling pants that smell of poop, it's irrelevant that someone pooped in them because they also sell other pants that no one pooped in. Aren't you upset that they also sell you pants without poop in them?"

All these things are apparently valued at trillions of dollars these days. Where's the trillions, or hundreds of billions worth in improved quality of life? What has gotten better other than the ability to produce more crap?

In terms of SpaceX (the space portion of it) they've produced the cheapest way to get any payload into space. If you pay anybody else, you will overpay drastically depending on who you want to take your payload into space.

In terms of AI, we've seen even here on HN everything from mathematical problems that remaind unsolved, being solved, mathematical proofs being used to disprove theories, heck we even learned more about alzheimers, new antibiotics, precision targeting in oncology, using AI to flag healthcare anomalies in imaging. The benefits are easy to miss, but they're snowballing into place, there's definitely an explosion of useless crap, but you have to look for the real things and you will come to find, that AI is giving us things we otherwise either might not have discovered or wouldn't have within our lifetimes.

I have yet to see an application outside of harnesses and LLMs itself where adaptation has happened on a larger scale. Devs are fine with babysitting their LLMs. People like to use LLMs to improve their mails and so on. But outside of that, the adaptation is not there yet.

Don't get me wrong. I love LLMs and use them myself. But the biggest gain for me is easier context switch and text manipulation. It's not the: replace X with a bunch of LLMs every CEO is dreaming of. So yes, you have higher productivity, but is the eval of those companies legit? x doubt.

Markets value future cash flows, not today's cash flows.

By the time you see the applications, the market will have moved on to value the next set of future cash flows.

If the market only valued the obvious, investors would jump in to buy the price up, until it met the average expectations.

The market might be wrong, but the question is not: "Have you yet to see?", but rather, "What do you see in the next three to five years?"

Otherwise, how could investors ever invest in a startup?

Startups never have revenues to justify their initial valuations.

It's a bet on the future.

Investors are future looking.

Consumers are present looking.

We didn't see LLM harnesses coming even two years ago. Now they generate billions per month.

Investors can't wait until reality materializes to make their estimations of the future.

That's why investing is hard.

You have to try to predict the future.

> Markets value future cash flows, not today's cash flows.

Sir, this is a casino/Keynesian Beauty Contest.

Markets value what the market participants think the other participants will value. On occasion, this intersects with reality.

One third of all software code is written by AI. At the frontier AI labs it's 80%+. It has completely upended the software industry. How is that not a massive adaption?

> One third of all software code is written by AI.

I find it interesting that using lines of code as a metric is making a comeback.

The number of lines of code doesn't matter any more. A better metric is AI-assisted commits, which has the same statistics.

You couldn’t have picked a better argument to show how this bias is exactly what’s making tech people think this shift is ubiquitous. “It works extremely well for coding, in which I am a domain expert, so why wouldn’t it work for all the other domains I absolutely know nothing about?”

ChatGPT has 700 million users. What do you think they are using it for? It's upended entire industries.

How many millions of emails do you think are composed using ChatGPT? How many legal briefs were reviewed by AI? How many businesses use AI generated art? How many kids do their homework using ChatGPT?

The GP is arguing that AI has struggled to replace humans, but in so many roles AI is doing the heavy lifting and humans are copying its output.

The entire education industry, so many students ask ChatGPT to help with their homework, and lots pass it off as their own work. Many students have quit going to office hours & tutoring, and ask AI for personalized answers instead. The education industry has no answer, and is struggling to deal with this.

The homework "help" industry (i.e. paying for answers) is dead. Chegg stock fell 99% because of ChatGPT.

Stock photography is rapidly dying, nobody will pay for shutterstock when ChatGPT can generate a passable image for free.

ChatGPT is killing studio photography, it can generate great looking studio photos for free.

Same with basic graphic design / custom art commissions.

SEO / copywriting has been almost fully replaced by AI. Companies no longer pay writers to churn out SEO slop, and now the web is full of AI generated SEO spam.

Customer service as a job is dying and is rapidly being replaced by AI chatbots.

I can go on, but these are the major ones.

You have no data to support what you're saying, you sound anecdotical, and on top of these flaws in your argument, you proceed to make a point mentioning "industries" that are neither formally upended, nor at all significant in the great scheme of things in terms of value produced or perceived. I believe the education industry is fundamental and one of the most important industries in the world, but it hardly moves markets, nor is filled with high-paying customers.

On top of that, you are showing another stark bias in considering the US experience as the global experience. It is not, and education in particular works way differently, aka, it's not a business wild west.

Cognitive surrender in writing emails is another shaky ground: do you honestly think that AI's worth the tens of trillion the tech bros are claiming it'll be worth as a glorified email-maker?

I will add that my point still stands. If you say this:

>>ChatGPT is killing studio photography, it can generate great looking studio photos for free. Same with basic graphic design / custom art commissions.

the only point you're proving is that you don't understand shit about photography as a business, nor about design as a business. AI is being rapidly integrated, for sure, but it has not upended those industries, and the average mediocrity it produces (because of its very nature) is not even close to replacing what you claim it is.

You have no data to support what you're saying, you sound anecdotical, and on top of these flaws in your argument, you have shifted the goalposts, to the point that you don't even know what you're replying to.

You asked about data, and I have it, and here it is: Chegg's CEO explicitly stated in their earnings call that ChatGPT was directly responsible for their collapse. Chegg stock fell 99%. You can verify this fact yourself. ChatGPT led to the near-destruction of a $14 billion company.

On photography and design: your counterargument is entirely assertion. You're claiming I don't understand those industries without demonstrating that you do. There is demonstrable fact AI has absolutely upended both industries. AI has gutted the commodity tier that constitutes the vast majority of revenue volume. Product shots, website graphics, social media content, marketing material. AI produces this content for free, at a quality so good that millions of people don't realize it's created by AI. You only consider the high-end, professional market, which so far has been relatively untouched.

Your only valid criticism is that my argument is US-centric. Fair enough. But ChatGPT has 700 million users globally, and you've produced zero evidence that non-US markets are insulated from the trends happening in the US.

Chegg shares drop more than 40% after company says ChatGPT is killing its business https://www.cnbc.com/2023/05/02/chegg-drops-more-than-40perc...

It doesn't even work that well for coding.

Otherwise Github wouldn't have 14% down time in the last 3 months.

What is a larger scaler for you? What is "outside harness an LLM"?

What is _the proof_ if all the proofs are not _proofs_?

I don't babysit my LLM based services which are used by coaches and clients around the world. One of my LLM based solution get 30-4k daily hits and I have users coming back on the regular to use it. without babysitting, doing things that would take them hours of manual work and research.

I don't babysit the developers I work with and our clients, which both use LLM's themselves and at scale with their clients, serving all kinds of LLM powered services to millions of users worldwide.

You are not "seeing" the large adoption because:

- The technology is "a few years old" in its usable state - The corporate adoption cycle is slow - You have to understand the technology to use it in a good way, which most corporate devs and PM's do not

So it will take a bit for the "obvious" adaptation on large scale.

But you won't "know" when the large adoption happens.

Silent inference is growing every day, and that is what real adoption looks like - not an LLM being in your face chatbox, but running in the background, sorting, finding, fixing things, aligning data, figuring out analytics, tuning the ads, cleaning the datasets.

> In terms of AI, we've seen even here on HN everything from mathematical problems that remaind unsolved, being solved, mathematical proofs being used to disprove theories, heck we even learned more about alzheimers

What a story this is

My understanding is that it’s better than doctors themselves. But it’s probably the same as with autonomous driving: the bar isn’t just “be as good as humans”, it’s “be flawless”.

It’s actually quite a lot worse than even doctors in training except for highly constrained experimental settings and a few very nice applications that are mostly too tedious/impractical for a human to do or are very basic detection tasks.

I am a radiologist and researcher predominately focused on AI.

I work with pathologists and radiology is way ahead of us with AI use in clinical setting (but still not very far). Only things that get serious use are lab-developed (ie not commercial) image analysis algorithms for very limited (tedious, error-prone and ultimately not that often used) biomarkers. Don't believe the hype.

You could also look at the market, one of the biggest players, Paige, was acquired for about 30% of the money they raised.

Thanks for the informed take :)

Do you think this will result in more routine/boring/tedious tests? Is the bottleneck on these things the human time to analyse them?

I don’t think so, not beyond the current trend in medicine which is going up anyway.

For some things, like 3D volume segmentation of structure or disease (e.g. CVA/stroke volume, cardiac muscle mass, iron quantification) the bottleneck is the time it takes so we currently use approximations like single longest dimension, circular regions of interest, etc. AI will dramatically increase accuracy allowing for more accurate treatment and easier large scale research with quantitative endpoints.

Other things people think of like detection of aneurysms, fracture, lung nodules are not “hard” but AI has already added and will continue to add the second-reader benefit which will reduce detection errors. For this category the clinical benefit is as of yet unclear and we know that increased detection does not necessarily translate into improved patient outcomes and can in fact make them worse from over-diagnosis which means investigation related harms and over-treatment.

We were already in a phase of “over detection” in much of radiology with advances in imaging technology so the incremental benefit of current AI remains to be seen and I personally think is going to be much more limited. I had a case recently where a 2 mm brain aneurysm was missed on 3 CT scans over 10 years but was picked up by AI so now is being followed annually. This is too small to treat considering the risks and a serious argument could be made that 10 years of stability is proof enough that this is almost certainly clinically irrelevant for this patient.

Far more interesting areas of AI in imaging are in acquisition of acceleration (i.e. the medical equivalent of upscaling) which can dramatically decrease costs and increase accessibility as well as analyzing imperceptible features.

It may not be a popular take here but in my opinion the future of radiology is like what we see in software engineering today - a skilled human equipped with AI will outperform humans without AI and AI without humans, the latter of which we are still several years away from prototyping due to various technical hurdles.

Thanks :) Very interesting.

> in my opinion the future of radiology is like what we see in software engineering today - a skilled human equipped with AI will outperform humans without AI and AI without humans

I suspect this will be the case across the board. It's a useful tool, but it's just a tool. It's not a replacement.

A friend of mine, a dermatologist, told me that LLMs are quite performant for melanoma analysis. Based on their own statistics, LLMs are able to beat humans with ~10 years of experience in the field.

They will never beat the human instinct tho, but they can be great tools sometimes. Unfortunately, LLMs mostly produce garbage.

Whenever it comes to medical diagnosis I would caution anyone to be careful with what “beat humans” really means.

In real life pathology is a spectrum not a binary and physicians are not trained to be 100% accurate instead optimizing sensitivity and specificity considering pretest probability as well as the harms of overdiagnosis and under diagnosis for a given scenario.

For something like melanoma which is relatively easy to diagnose with a superficial, extremely low risk skin biopsy and where early staging dramatically improves outcomes you would want to design around overcalling (high sensitivity) rather than maximize accuracy given the significant harms with false negatives and minimal harms with false positives.

An AI may be more accurate at classifying melanoma/not melanoma but if it does not meaningfully improve on the clinical threshold of biopsy/no biopsy or result in less biopsies that accuracy is wasted and may even be detrimental.

Note: I am just using this as an example to illustrate the considerations.

You do realize that today’s multi-modal LLMs are actually able to understand images? They’re tokenized very much like language is.

The better question is are there any sources that AI is better than human readers? I haven’t heard anyone make this claim outside of single/few disease classification tasks and even those are mostly 2D.

Anecdotally, my practice has most FDA approved AI deployed as we are an evaluation site and very rarely is the AI result useful. Over the past few months we have been cancelling contracts as these cost quite a lot of money (in some cases eating >50% of the study interpretation cost) for little to no benefit and a LOT of noise.

Last time I checked thoroughly (roughly two years ago), AI (in the form of small ML models) mostly outperformed radiologists in areas where the gold standard is "one level" above imagining wise. By that I mean that you train a model to detect on an X-ray what would normally need a CT. Or train it to see on a non-contrast CT what would normally need contrast or an MRI, or biopsy, and so on.

Essentially the cutting edge reaches up to 99% of human performance on the task it is trained, which is good enough for triage but not for a final diagnosis. However, magic sometimes happens when you train a model to detect something, which you already know is there, on an examination that is cheaper, faster or less invasive than the human"gold standard". Conveniently, this dataset exists since it's common to first do a cheap examination like an X-ray, and then escalate if nothing is found (or if something is found that you want to see better, or a number of other possibilities).

Examples of AI outperforming humans like this includes AI detecting sacral fractures on x-rays better than radiologists (who normally take a CT to conclusively exclude it), detecting potential precursors to pancreatic cancer on non-contrast CTs (where contrast or an MRI is usually required) and detecting an occluded coronary artery on an ECG without the archetypical "ST-elevation changes".

See the link below for references: https://pmc.ncbi.nlm.nih.gov/articles/PMC9478257/ https://www.nature.com/articles/s41591-023-02640-w https://rebelem.com/a-winning-hand-in-cardiology/

So AI, as a general rule, doesn't usually match or exceed the upper bound of the "gold standard" medical performance. But it tends to carry the quality of the upper bound downwards towards the faster, less expensive and invasive methods. In some cases, like in the case of EKGs, that's huge. In some cases it saves time, in some cases it decreases miss rates from tired radiologists or triages their review feed. And in some cases it's not very useful.

LLMs doesn't come close to specialized radiology models at the moment, because LLMs are more about applying knowledge than creating new correlations. Of course that's also hugely useful, but that's a bit of a different topic to unpack.

With these kinds of things, I want to see comparisons to trained, alert humans. Cut out all the distracted, stressed, tired, incompetent, intoxicated cases from the baseline. That includes rushed doctors at the end of a long shift.

A self driving car doing better than a drunk on the freeway doesn't reassure me that it'll do better than sober me in a snowstorm.

That would be a fine bar if you could ensure your doctors or nearby drivers aren't distracted, stressed, tired, incompetent, or intoxicated.

Non sequitur. The core idea is that if you have just self-driving cars you won't be trained enough to drive properly next time you're caught in a blizzard, because you never drove for the last 5 years.

I also question if the kind of person who actually drives while drunk - knowing perfectly by thousand of society inputs and peer pressure that it is wrong - will care enough to buy a self-driving car.

It doesn't, but I'm not going to trust my own safety to a self driving car that can only be said to be better than the worst drivers. It's a bad baseline.

I’ve seen the same. But I don’t see that as a glowing beacon of progress.

A whole lot of doctors, if not most, didn’t pick their profession out of an interest in medicine…

I don't need anything launched into space.

Math problems being solved doesn't make necessities easier to afford.

New healthcare discoveries seem moot when only the wealthy get access (Elysium anyone?).

I'm not seeing how a typical person is getting any benefit. The only visible change they are seeing is getting exposed to more elaborate scams.

Those people are not in the economy.

And they can get their diseases cured by an AI discovered fix, via medicare.

People want to buy SpaceX, not Twitter, Tesla, xAI. Unfortunately Elon has been conflating the three.

Plenty of people want to buy Tesla. Not saying they're prescient, but the market cap represents that.

I remember when the music industry would release albums with one good song and make you buy the crap instead of selling the single at a lower price.

> they've produced the cheapest way

Were we struggling to do this before? Was the overall percentage reduction in costs? Was some other achievement held back because we couldn't accomplish this? What is now enabled?

> to get any payload into space.

A limited set of payloads into space. No vehicle can get "any payload" to space at a fixed price.

> The benefits are easy to miss,

You've listed a bunch of reasons to publish papers. What is the actual ground level change that's occurred? Are those antibiotics produced? Do they actually work just as predicted? Why is that first world problems are exclusively listed but basic problems like world hunger are never even approached?

> or wouldn't have within our lifetimes.

And your life, your actual life, benefits, how?

> Were we struggling to do this before?

We literally couldn't.

> Was the overall percentage reduction in costs?

Starship will bill NASA 1/20th what SLS does.

> What is now enabled?

LEO. Artemis. Out of all of these companies, being confused about SpaceX is super weird.

If SpaceX was only Starlink or only Starlink and rockets it would be an horrible circumvention of the rules.

But now he's also trying to get the indexes to pay for the giant cash fire called X.ai and the far right huddle Twitter too.

I have zero interest in owning anything of either of those companies.

Granted, I only skimmed some high-line numbers, but isn't their only profitable project Starlink? SpaceX is functionally a satellite internet company that happens to make rockets.

> isn't their only profitable project Starlink? SpaceX is functionally a satellite internet company that happens to make rockets

Yes. The thing that’s going public is almost entirely an AI play.

> Starship will bill NASA 1/20th what SLS does

Is that before or after the program achieves profitability?

I think you missed the core of their question: What has actually gotten better in practical terms for the average American?

> What has actually gotten better in practical terms for the average American?

Starlink has made connectivity cheaper and more available. Earth imaging has made various food production processes more efficient. Weather forecasts have become more accurate.

If you’ve genuinely missed the massive economy that LEO has become, it will be a fun thing to catch up on.

> Starlink has made connectivity cheaper and more available.

Yeah that's working out great for the average American isn't it (https://natlawreview.com/press-releases/2026-consumer-trust-...)

> Earth imaging has made various food production processes more efficient.

I'm not even going to bother sourcing the fact that food prices have only massively gone up negating any gains in productivity. The average American struggling to buy basics like eggs and meat aren't feasting on more efficient food production.

> Weather forecasts have become more accurate.

I'm sure the growing homeless population is happy to know they can better predict the weather they'll be sleeping in.

This is all totally worth supporting a nazi billionaire

> that's working out great for the average American isn't it

Yeah. It did. My neighbour’s rates went up. He switched to Starlink.

> not even going to bother sourcing the fact that food prices have only massively gone up negating

This is like arguing fertilisers are useless because prices went up.

> homeless population

Not super relevant!

> all totally worth supporting a nazi billionaire

Nobody said that. But it doesn’t mean the benefits go away.

weather forecasts is really good right now (in my experience forecast for rain/cloud cover/wind speed at hour granularity is amazingly good) and earth imaging for food production has been done for decades. I do not think SpaceX has improved nor will improve on these.

SpaceX’s main customer is Starlink. With that in mind: if Starlink takes over all the ISPs in the world its market value should be comparable to Comcast - $89 Billion.

> do not think SpaceX has improved nor will improve on these

It has massively improved both. The cost, resolution and frequency of imaging has decreased alongside launch cost.

> if Starlink takes over all the ISPs in the world its market value should be comparable to Comcast - $89 Billion

Why? Comcast isn't "all the ISPs in the world." (And Comcast doesn't get defence contracts to build and maintain military networks.)

Do we apply a bar this high for any other company/job/business? Saving gov/tax money aka "billing NASA 1/20th what SLS does" doesn't count as worth it to you?

Reusing rockets reliably rather than "throwing them away" is a great achievement and I'm surprised people have to justify it on HN

> Reusing rockets reliably rather than "throwing them away" is a great achievement and I'm surprised people have to justify it on HN

You can milk a cow only a set number of times!

Yes, because you're not designing the cow. Progress on rocketry (and reusability) is not completed, btw, there's a lot still to improve.

Stock prices indicate the present value of all future dividends, so it's not about what has happened but about the risk-adjusted expected value of all which is to come.

What probability you assign to arrive at that expected value and how you adjust for risk is on you.

That proof has almost no significance because the average mathematician cannot spend 2 million dollars on inference.

On one order, correct, but it's still on the order of hundreds of millions to billions.

Also, keep in mind that a stock price discounts expected future cash flows. Is it likely that SpaceX will have a near-peer competitor within a few years? No, it's not, and that market share is being priced-in.

Is it likely that SpaceX will have actual reasonable demand? Their major customer is Starlink. How legitimately confident are we in the numbers with regard to price reduction vs creative accounting to offload costs to Starlink and subsidize the launches to appear to offer huge cost reductions?

If there exists sufficient demand for the product of space launches then it's probably reasonable to expect their to be a near-peer competitor soon, but that's only if SpaceX were to be profitable, which it isn't, even with the subsidization by Starlink on the order of many billions.

> If there exists sufficient demand for the product of space launches then it's probably reasonable to expect their to be a near-peer competitor soon

Space is not that easy. Even with unlimited money, it'll probably take 10 years to build a rocket like starship. Going from nothing to orbit needs a lot of money but more money doesn't make that faster.

There is about 3 chinese orbitallaunchers with some reusability support flying & about as much scheduled to debut this year.

But other than that, yeah - outside of China, progress has been horrendously slow & Blue Origin, the only other US company that demonstrated a partially reusable rocket just had a devastating pad explosion, destroying one of their 2 rockets and their only launchpad.

Sure but SpaceX can get you into orbit for $1400 per kilogram, and future projection and goal is $100 per kilogram. The competition is at $15,000 per kilogram. I think it's a no-brainer for anybody trying to get anything into orbit. Unless someone figures out superior tech that surpasses SpaceX, I'm just not seeing why anyone would spend more for less capable and costly rockets.

Doesn't SpaceX charge 2 to 3 times their internal cost to external customers? ISRO is still more expensive, IIRC they charged ~US$60 million (roughly $6000/kg) for the OneWeb launches whereas after the recent price hikes SpaceX is supposedly charging ~US$74 million on a larger rocket (~$4200/kg), but that's far from an order of magnitude difference like your comment suggests, which I assume would be using the $25 million they charge Starlink internally (IIRC ISRO's internal cost is much higher, around $40 to 50 million, but that's still not anywhere near an order of magnitude). Using internal cost from one provider and external price for another is somewhat misleading.

> future projection and goal is $100 per kilogram

This can't be treated as meaningful, given other projections and goals (Mars colony, etc.).

At the rates you quote, $1 T (the size of the market) is 714,285 tons of stuff in the space each year. I don’t think there is enough space in space for that much cargo.

I guess for a trillion dollars vine can built Elysium. Generating solar power in space (vs. on the ground) makes as much sense as running AI inference in data centers in space.

Space solar power makes perfect sense once you have sufficient in-space industrial infrastructure available, so that all the actually heavy stuff (structural materials, solar panels, antennas) stuff is manufactured from local (Moon, asteroid) resources & only the most high tech stuff is launched from Earth (electronics, engineers).

The space solar arrays on geostationary orbit would get basically 24/7 sunlight with no weather effects & constant thermal environment. On the ground ad the microwave antenna level you get clean electricity to use for whatever, at any time of the day.

how many packages have you shipped so far to space? SpaceX could disappear tomorrow and most people wouldn't notice. Your satellite TV might get slightly more expensive. Those rare people that don't have LTE internet access and need starlink are exception.

Sorry but SpaceX has done absulutely nothing for space other than take billions in GOV funding and never delivering what they promised years ago. Hell the only cargo they ever shipped was a banana...

They've shipped lots of satellites into low earth orbit, that's their starlink business and it's where all of the revenue in spacex comes from, and it is a good business in itself.

Comments like these make me feel like we're living in different worlds. I use LLMs multiple times a day and they've significantly improved my quality of life. They are also steadily becoming more useful over time (e.g. now solving math problems).

I suppose many do live in different worlds.

I haven't found anything out of LLM's that has improved my life. It was a fun little toy but could never find a use case. But clearly, your mileage varies greatly from mine. That's cool.

I just personally don't the use in more when what I think many need is less. But that comes from essentially this point of view - “Better than a thousand hollow words is one word that brings peace.” ― Buddha

I use LLMs daily, both as chat applications and "vibe coding".

I wouldn't say it "significantly improved my life" however. Everything AI has done for me right now is a "Nice to have" but it doesn't fulfill my needs.

I do too, and pay $200/month, but anthropic’s margins on that revenue are negative.

What’s the long term plan? Make it up on margin? 100% tariffs on Chinese open weight models?

I don’t plan on pulling from my 401k for decades, so the long term plan is the part I care about.

Enterprises are paying API prices, which are ~9x the price of the plan for the same usage. A lot of people on the plans are not maxing them out either.

Why would Anthropic margin's be negative? Inference is practically free for them, so what costs do they have for an additional subscription?

It’s because people value different things. I could not care less if LLMs make me push code faster to prod. Couldn’t care less if they improve my emails grammar. Couldn’t care less if they crack one unsolved math problem.

You do not care about these things in general or it's the idea that an LLM is involved that makes you not value them?

I’d love it if for once someone on here saying LLMs are some life changing apparatus would give a single example.

My wife was diagnosed with several chronic conditions in the last year. AI tools both diagnosed her before a doctor did (which helped us find the right docs to care for her by figuring out what to look for). One of her conditions (Mast Cell Activation Syndrome) comes with a ton of dietary restrictions. Its helped us immensely in planning meals and identifing food triggers. All of this would have possible with out AI as a tool but would have led to much more pain and suffering and likely taken much longer to figure it out. It's easy to dismiss (especially given the hallucinations) but it's been legitimatly life changing over the last year

> - Significantly increased my productivity as a software engineer

I don't understand this. It increased productivity of every developer in the western world, so it didn't really give you an advantage. Your output is more valuable, but your colleagues' output is more valuable too, and your competitors' output too, and so on. So you're doing more things at the same salary and it's not like your company or your employer is making more money than usual or awarding you more eoy bonus. If your "life-change" is "I'm writing more code" without any other advantage (and with the possible disadvantage of your role changing, or being at risk), why is it desirable?

Intrinsic motivation. I find developing software inherently enjoyable, and being able to build things faster with less friction simply makes me happy.

I can give some recent examples.

- Significantly increased my productivity as a software engineer.

- Using it daily for Chinese-English translation. Significantly better than pre-LLM translation software. Also, great at teaching grammar, nuances, etc.

- General Q&A. Like "Googling" but much faster. This is probably the most common use case for me.

> - Significantly increased my productivity as a software engineer.

This is exactly the point that keeps coming up that folks are struggling to grasp, myself included. How are you measuring this? It certainly makes me feel productive, but I'm not sure I can confidently say it has actually made me more productive. It's made the easy stuff a no-brainer (e.g. boilerplate, simple logic) and the moderate stuff really hard. Never mind the hard stuff. Vetting the code has become a whole other job on its own. The only folks I've found who confidently claim it increases productivity appear to be online (and without evidence), because no one in person is willing to claim that and show it.

I'll share my experience.

I've never been a developer. Dabbled in frontend web for a bit (HTML/CSS/JS, no large frameworks) and felt like if I really dedicated some time to learning how to code, I'd be pretty decent at it. It's always intrigued me, and I've always had an itch to build things, but just never found the time. I'm in marketing now - I own an agency.

Over the last 6 months since the coding models really began to step up and get good, I've built several dedicated apps to support my business:

-Profitability optimizer and forecaster based on unit economics and current ad efficiency.

-Creative strategy tool that ingests brand and product data and helps explore primary and secondary personas and emotional motivators.

-Reporting tool that processes natural language queries and connects to multiple data sources to fetch results. Can schedule reports to post directly to Slack or email.

All robust and hosted on Railway. Team members can use them. Clients can use them. OAuth via Google.

Would any of this have been possible for me before the rise of frontier LLMs? Absolutely not. Learning the frameworks alone would have taken me longer than it's taken to just... build. Rapidly build and deploy. Total game changer for me.

Oh - and I'm building a game on the side. LLMs know Godot.

I can agree with the skeptics that LLM generated code is usually crap. I rarely accept its output without significant edits unless it's truly boilerplate, and I want to avoid the need for that kind of code in the first place.

For me, the killer use case is debugging. I hate wasting time debugging something that should work except for mistakes, and now I do that probably 75% less than I used to because AI does it for me.

I don't know if it makes me that much more productive, but I certainly enjoy my work more not having to do as much tedious debugging, and it feels like I waste a lot less time doing it.

I have an example I share a lot.

I have about a dozen programs that are now close to ten years old, all running quietly in the background on my computer doing various tasks. I originally wrote all of them as JavaScript/Node programs. That was fine at the time, but the memory usage really adds up, since each one needs its own V8 runtime (anywhere from 50 to 100 MB per process).

I have basically zero familiarity with Golang, but I was able to use an agentic harness to run in the background and convert every single one of those scripts into Go equivalents. Because I've accumulated lots of before-and-after data, it was easy to confirm that the new versions matched the behavior and accuracy of the originals.

End Result: memory usage dropped from tens of megabytes per program to just a couple of megabytes each.

I've been able to build things that I otherwise would not have been able to build, in the free time that I have:

- a VST audio plugin

- a wedding website with RSVP functionality

- a relaxing game for my wife

At work, I've been able to build much more than I would have been capable of in the past. I'm a backend eng, and it allows me to build much much nicer frontends than I've ever been able to do in the past.

And before you tell me that the code is crap - it doesn't matter! It may or may not be good code, but it works and serves it's purpose very well. Anyways, I'm I'm not launching a rocket, or putting software into cars.

I linked to an example in the comment. In that particular case, I'd say probably 10-20x faster. I do embedded, backend, web and mobile app development.

I also notice these things. Otoh i spend definitely less than 50% of my time typing in code so it is impossible that it gives more than 2x speedup. And sometimes i lose time babysitting and rewriting stuff so all in all it is kinda no productivity gain.

> It's made the easy stuff a no-brainer (e.g. boilerplate, simple logic) and the moderate stuff really hard. Never mind the hard stuff. Vetting the code has become a whole other job on its own.

Not everyone has the same requirements, skills, usage patterns, and outcomes. It's that simple.

What a lot of folks are struggling to understand (myself included) is how this actually reflects on the quality of life?

You're more productive? Nice ... for you or your business/employer? Do you also get more free time out of it? With all this free time you could actually travel and do a language school for 3 months. That sounds like an improvement in quality of life to me. Not better translations in that language.

The life of my family (we have a good life) hasn't become significantly improved with LLMs. We still struggle with the same problems as before. These companies don't solve the big problems of societies and that's why I feel like their value is not justified.

I've found regarding nuances I discover in language learning it will really fail me. It will tell me the incorrect path, I correct it, it apologizes, then just to see I tell it that latest one was incorrect actually, it apologizes and I can put it in an endless loop of getting it to apologize as I correct it into the opposite of something over and over.

> Significantly increased my productivity as a software engineer.

You’re going to have to define productivity as it applies to software engineering. With LLMs we’ve primarily seen the number of PRs over time being discussed as a proxy for LoC, as well as the speed of bootstrapping a small project. None of these have a known correlation with economic output. They just feel good, to the programmer, their manager, or both.

> Using it daily for Chinese-English translation. Significantly better than pre-LLM translation software. Also, great at teaching grammar, nuances, etc.

Yes dealing with language is the one area LLMs are actually designed for. But what’s the TAM for machine translation?

> General Q&A. Like "Googling" but much faster. This is probably the most common use case for me.

And now you’re missing any kind of traceability for the information that you “learn,” since it all gets spaghettified and then recombined into a pile of plausible slop with no attribution. Where before you had to do slightly more work to find the information you needed, now it’s available faster but you’re at complete mercy of literally 3 American companies plus the CCP for the accuracy of that information. Most people somehow seem happy with this arrangement.

> You’re going to have to define productivity as it applies to software engineering.

I meant it in a colloquial way. I just get more done, faster.

> And now you’re missing any kind of traceability for the information

Modern LLM assistants provide sources and references. While it can sometimes be just "slightly faster", it can genuinely save hours of research on complex ones. Also the "slightly faster" can add up to hours saved with frequent use.

We have some exotic chicks the kids picked out, and 4 were going to die of brooder pneumonia.

An LLM correctly diagnosed it, and figure out that we could treat them with Nutri-drench Sheep Supplement, since Tractor Supply was sold out of the chicken version, and they are very similar.

Of course it then immediately recommended we use hemp bedding that would kill them a different way, but the saleswoman sanity checked all of the above,

100% survival rate.

Everyone’s thriving. Chickens would follow the medical advice again, I guess.

Immediate medical and childcare advice from LLM are pretty life changing.

Interpreting reports, avoiding drug interactions, or knowing when to seek medical care. And before people object- I can literally use the same LLM my doctor does to check these things, without waiting 2 weeks for an appointment.

I helped my parents work through bacterial culture results when my dad was hospitalized with sepsis, and had them ask their doctor for specific follow up tests.

I rebuilt my gas furnace and fixed my dishwasher with AI as an assistant.

Those aren't the fun parts tho. My favorite is touring art museums ancient historical sites with an LLM guide. It can give me a short academic essay about every artist, painting, or artifact. It can pull out details quirky stories about the history that I specifically would find interesting.

I cant recommend this enough. Its like visiting with a 10 PhD docents in art history.

How do you trust a book, blog, tour guide, or art history teacher?

How do you trust the placards under a piece of art?

The short answer is you accept that it isn't perfect and move on with life. I have found multiple errors in all of those things. Human tour guides are especially the worst at making things up.

Part of navigating life is dealing with imperfect information and uncertainty.

Just like with a friend, coworker, or spouse, you use your judgment and track records to decide when to trust what is being said based on subject matter and stakes.

Domain matters. I have found it good at history, but less trustworthy in others. For examle, the llm gave me a bunch of bogus advice as I repaired my dishwasher based on weather models that weren't accurate. There is also a lot of bad information on Reddit and Appliance blogs. Repairman are almost as bad as the tour guides, willing to lie straight to your face. I deal with it the same way.

Because generally speaking people have a firm grasp on truth and lies are intentional, predictable, and rare. LLMs have a tenuous grasp on reality at best and make things up constantly.

I used Gemini to fix my new boiler by taking various photos and asking it for help. It saved me a plumber call-out (this was a user error issue, nothing safety critical).

Gemini also told me about some obscure procedures to fix my wedding paperwork after it’d been submitted with typos.

It does have to be an LLM; when people talk about AI these days, they're talking about LLMs; that's the common framing of the discussion. Linking to unrelated ML to argue that AI has benefits is disingenuous.

> when people talk about AI these days, they're talking about LLMs

If AI means LLMs now, somebody should probably tell Waymo, Sora, Midjourney, Stable Diffusion, and AlphaFold/Go. They must've missed the memo.

Some guy vibe coded a tasks app client that I really like. Not life changing but I couldn't find one that suited my needs since de-iPhoning before this one.

From experience, whenever someone asks in that particular tone and is actually provided with examples, they proceed to bend over backwards to "prove" that it's secretly not much of an improvement at all/AI psychosis/a mirage/actually harmful/<insert other substitute for "I don't like it therefore you must be wrong" reason here>.

I asked - I don't have an opinion either way. I use LLMs, I just don't find them life changing, but I would never deny that in a world with infinite data something that can do a pretty good first pass at parsing and summarizing and organizing it with little effort on the creation end is a good thing.

I think it is a typical example of where N% (N tends to zero) of the population GREATLY benefits AI models, while the next bracket (casual users) enjoy some benefit, but the vast majority would not feel any difference if they lost the tech tomorrow.

Let me rephrase that to you: The vast, vast majority of people, even in the western world, even the white-collar part of the population, are not whales or power users of AI models.

I use ChatGPT daily. And I never spend more than $25/month. If I lost it, it would suck, but it would not affect my life significantly. I then see people spending $100 / day on Claude Code tokens, programmers in startups / tech companies rack up thousands a month in bills. These people are literally spending 100x more than me, a casual user.

Yeah, I suspect they follow some sort of whale economics - where a relatively small userbase (in the big picture) and providing them with a huge chunk of their revenue.

But still these companies are being valued as if they're some omnipresent companies which humanity simply can't live without.

So, let's see. LLMs made my overall coding output significantly faster, even factoring in review time and tech debt. My employer should technically benefit from this, but it doesn't really, because all its competitors use the same AIs and all their engineers increased their throughput in a similar way. So I'm not sure that I, my colleagues or the whole segment I work in really benefited from AI in any measurable way.

Your clients and your competitors' clients did benefit from this overall faster coding output though.

Eventually your employer benefitted too, from more & happier paying customers.

Finally you indirectly befitted as well - through continued employment, salary and bonuses and stock (if you own any).

But that didn't happen in reality, did it?

Clients - I don't see anyone delighted that apps are better, or cheaper, or more secure. If anything, I see more enshittification, more half-baked ideas and more fear that security is worse now that we let AIs write almost all code.

Employers - They didn't really sell more or expanded their customer base. They would have, if they had the exclusive advantage, but now everyone has AI. They can cram more features in their software quicker, but so can their competitors, and AI is not magically opening any untapped market. If anything, everyone is now doing the same thing - trying to get their software on the AI train, with mediocre results so far.

You - did you benefit really? The job market is shit due to the death of ZIRP, the nature of the job itself is changing and there's a lot of uncertainty around. If anything, employees are now laid off more, not less, and salary and bonuses are not increased in any measurable way.

It looks like to me that we have to dance this particular dance because if we don't do we're left behind. That's fine, it happens every now and then. It might even be that in the future we will have tangible advantages from LLMs - better automated health care, better learning opportunities come to mind. That has to be demonstrated. But now, in year 2026, what's one advantage of AI? Having less and pricier RAM? Being able (and expected) to write more code in less time?

Even if they are, it still doesn't justify the ridiculous levels of overvaluation. They are not essentials and their consumer demand is extremely elastic.

I don't know if its really improved my life at all. Sure I can put together quick and dirty single-use programs faster I guess, but I feel like losing that practice has actively made me a worse developer.

> Do you use Grok multiple times per day?

No body who has a choice is using Grok

> Is Grok solving Erdos problems?

Mēh! At a slower rate than models a fraction of the price

> No body who has a choice is using Grok

The Grok app had over 100 million downloads in 2025, over 60 million active users, and generated $350 million in revenue. That’s a lot of people being forced to use it.

Comments like these make me feel like AI is a computer in the hands of a monkey, and that too the computer which is unreliable.

Another generic, useless comment which absolutely refuses to mention any particular aspect, eg how your life has been improved. It's so tiring

And when pushed all we get is another teaser of "Significantly increased my productivity"

Starlink a generational leap in Internet connectivity. The Starlink satellite constellation is over 10,000 satellites. It is hard to comprehend. Also, they will soon add mobile phone service. That will be yet another generational leap. I watched a (sadly) short YouTube video about the SpaceX factory in Seattle (area) that produces one Starlink satellite per day. That is incredibly fast. That alone sounds like a generational leap in satellite manufacturing. (Oh yeah, and they have a somewhat less technically impressive factory in Texas that produces millions of Starlink antennas per year.)

Final sad note about Starlink: It is helping Ukraine to win the war. It makes their mid- and long-range drones almost impossible to jam. (Most short-range drones use fibre optics these days to avoid jamming.)

Id be more enthusiastic if I could buy starlink at a valuation based on starlink. Instead we’re getting a shitsandwich of a combo stock with a pile of regulatory manipulation on top

Why is this comment downvoted? It is factually correct. The reason why Ukraine has such an upper hand in the last 3-6 months with mid- to long-range drones is access to Starlink, even within Russian territory. Russia does not have the same, so it is harder to navigate their one way attack drones.

Try to keep perspective, these valuations are just functions of the stock market the end result of some spreadsheet. They have nothing to do with quality of life. Why would you relate those two things in the first place?

They are fundamentally different, but people desire they be aligned. The public expects the economy to producing higher quality of life for us, otherwise what is it doing? And for whom? But whether it actually does so is a function of other things. That gap seems bigger than usual right now with AI and tech eating the whole economy.

In the long run stock prices are justified by sales which happen by producing things people want.

Quality of life doesnt matter. What matters is the choices people make to spend their money on. This is what drives profits.

If you are upset about people spending their extra productivity and labor hours on poision and mental laxitives, i would mostly agree. This is a failure of culture to adapt to distratcions and shiny objects

It would be very nice if we had a system where the money was backed by some kind of consensus about quality of life. But what we have has more to do with compulsion.

The more dollars there are, the more deeply in debt we are. If these were interpersonal debts where we all owe the dollars to each other such that they go away when whatever promise is eventually kept, that would be a tight knit society. But instead we're all indebted to the banks, so instead we have a lot of collateral at risk, and a lot of uncertainty about whether it's a stable arrangement.

If there isn't enough money to satisfy the asking prices set by the owners of these abstractions, then we can always go deeper into debt until there is. Or we could have a debt jubilee and let the prices re-settle to something more in tune with reality.

1. Valuation is based on the estimate of future profits. It has absolutely nothing to do with what have already been delivered. It's not a prize, it's an estimate.

2. There's a potential to optimize a lot of economic activity in there.

> Where's the trillions, or hundreds of billions worth in improved quality of life?

Stored in pension funds in the hope that by the time the current working class goes to pension age, there is enough left.

Isn't that the market cap of the company? That doesn't mean the company creates trillions of dollars of value. It just means the number of shares times the last per share trading price is trillions of dollars.

One would assume that the "market cap" of the company is equivalent to it's *worth*. Asking how Anthropic is worth $1tn+ is a valid question when it doesn't do much, apart from the promise of making a large fraction of the world unemployed and the rest under the thumb of unethical American tech supremacy. It's arguably built on the largest intellectual property theft in the history of mankind. That's generally what people worry about. Whether that's "true" or not I guess is how you frame your world view.