It's recursive as well, you now need to store how many levels of indirection of indices you had to resolve, which will in turn take 20TB to store, unless you store that in pi as well, which in turn...
> but I don't see many companies stepping up to provide competing services
Maybe because the US dropped most of its anti trust regulations, leading to ridiculously monopolistic practices such as "acquire everything that may be threatening".
When was the last time you heard about a European cellphone manufacturer, or social media network, or web browser being acquired by an American monopoly?
I can only think of Nokia, purchased by microsoft in 2014. Those phones ran windows CE before that even, so you could hardly have avoided the american tech industry.
All I'm trying to say is, it's impossible for Europeans to both A) be on the internet and B) avoid the US tech industry.
In the EU there is the threat of jail time if a user of your service does something bad and you haven't completed the necessary bureaucracy to be immune to it. This is the opposite of the US. See for example pissmail.
> Like that, a few companies are specialized in sucking public funds and delivering nothing.
Not just public, private funds as well. Typical EU, I call that helicopter regulating: you see a problem, throw a regulation at it, then close you eyes.
GDPR pop-ups are the most obvious example, but there are so many more.
For instance, now apparently companies can opt to send payslips digitally instead of physically (paper). Of course, some smart ass nitpicked that employees could loose or change their mail address, so the company is now forced to store digitally delivered payslips in some kind of European-hosted vault for 10 years. And since no sane company want to be liable for that, we now have a wonderful ecosystem of trash "payslip digital vaults" startups, which companies use to proxy-send employee payslips.
So in essence, my company is now sending my payslips (with name, address, contact details, compensation breakdown, etc) to a stupid start-up with egregious ToS, just because "send it by mail and let the employee back it up" was too simple. Thanks !!!
> Textmate (and its revolutionary text-snippets) were the catalyst to my migration
Hooo damn TextMate snippets, that brings back memories. Hard to convey how hyped I was to use these. That is also what drove me to Mac at that time. I remember writing hundreds of those snippets for every possible C++ construct, and <tab> to fill in variable name, type, loop counters and so on.
I thought about that a lot too, and in the end I think it just comes down to stupid economics: What do you want them to do with all this money?
1) Most top US tech companies are flooded of money. Everyone dumps money in the SP500.
2) This money has to go somewhere. You can't just redistribute it as dividends, otherwise it's an admission that you won't grow and giving you more money would be a 0 sum game.
3) So you have to invest it somehow, somewhere.
4) Obviously you can spend that money buying whatever company you can.
5) Once you've bought realistically enough, you just hire more, and people will think that there should be some kind of linear relationship between resources spent and revenue growth.
6) You can also do grand projects, like the metaverse, convert all you software to blockchains, become AI native, etc. and dump billions on these.
So essentially it's all about projecting growth and potential.
Money that people “dump” into the S&P isn’t going to the company’s bank account. It’s purchasing shares on the market that were owned by other third party shareholders.
For example, in 2025 Meta was a net purchaser of their own stock ($26 Bn).
These companies are awash in cash because they’re generating revenue in excess of their costs. Nothing to do with the amount of money people put into the S&P 500.
Secondarily, this is exactly why I agree that LLMs likely won’t have the impact OP believes it will. Companies hire not just for output, but for
1. Training (future management, future architects, future bankers, future developers)
2. Generally adding smart people to their teams, capturing a cornered resource
3. Showing governments and shareholders that they have created “jobs”
And a plethora of other reasons that I can’t think of.
John D. Rockefeller (pioneer of the modern corporation) is quoted as saying: “Nobody does anything if he can get anybody else to do it. As soon as you can, get someone who you can rely on, train him in the work, sit down, cock up your heels and think out some way for the Standard Oil to make some money.”
Buying back shares it sold at a lower price, right? The lifecycle of a share starts with the transfer of money to a company in exchange for a share. It ends with a buy back, ideally at a higher price.
But still, at the beginning it is a transfer into the company’s coffers.
I’m not sure what the justification is, but I assume it’s some flavor of “so index fund holders don’t miss out on returns”.
It’s crooked because index inclusion drives massive flows at any price. SpaceX understands this and with so much money on the table probably exerted influence (maybe the big AI players contributed too).
Passive funds don’t care about price (quite the opposite, they reward higher market caps in a feedback loop).
But with an IPO, you’re supposed to let the market have some time to find the right price.
Not to mention the changes related to profitability rules etc.
Agree with this sentiment. However, I think the S&P 500 fudged the rule to 6 months which I believe adequately straddles the line between 1. provides time for price discovery and 2. includes a large piece of the market that would otherwise be included if not for the seasoning cutoff.
Agree with you entirely with respect to other indexes including earlier than 6 months.
The last time meta sold stock on the market was a primary stock offering in December 2013, roughly a year and a half after its initial public offering (IPO).
I find it crazy that so many people misunderstand this basic fact about how the market works.
100% correct, but I'll add that companies do use shares in other ways which also matter.
For example shares can be used for buying labor. Either as options or as grants, bonuses etc. It ultimately winds up in the public shares pool, but the first recipient receives it in place if company cash.
The second major use is in acquisitions. Buying other businesses using stock instead of cash is a useful tool often wielded. Again, not released onto the open market, but winds up there eventually.
Plus you can use them as loan collateral, balance-sheet improves and so on. So their price matters and their value to the business extends far beyond the IPO.
“belong” is a flexible word. You’re right in theory but depending on the situation money in your bank account is worth more to you than an equivalent amount of money in a company’s bank account (of which you are a shareholder).
I think this is right, but it can be stated more simply as companies hire to invest in growth, and they conduct layoffs when growth slows (not because of AI or "improved productivity"). Everything else is storytelling and emergent phenomena.
Incentives in companies are such that there is never a shortage of people pitching projects that require more headcount. Growth justifies the decision to hire more headcount, but the connection from increased headcount to growth is tenuous and usually difficult to impossible to demonstrate with any real confidence. It wasn't so difficult pre-industrialization, but mechanization, automation, computerization and now AI have progressively made it harder and harder to really understand the economics of labor. You do need to hire people to pursue new areas, but also every incremental person adds to communication overhead. The effects of this depend on the org structure and the operating environment over time, so what may have been a good idea at the time can flip to net negative due to outside forces beyond the control or foresight of any decision maker. This explains why companies do layoffs while still hiring at the same time.
Facebook doesn't get the money when you buy a share of META -- that goes to the person you bought the share from. They could do an offering to raise money, but they aren't. They've been doing the opposite, they've been buying back shares at a significant rate. Some of it is to offset stock based compensation, and some of it is just stock pumping.
> Facebook doesn't get the money when you buy a share of META
Technically no, but in reality yes, because shares are used as currency.
For instance, META does not acquire companies using cash, they use their own shares as payment. The higher the stock price, the lower the dilution.
Same thing for stock options and RSU.
So, it's true that stock prices don't translate 1:1 to cash inflows, but wherever stocks are currency (employee compensation, benefits, acquisitions, etc), it does translate.
The high share prices do subsidize Meta's share-based compensation, which seems to make up a substantial portion of the total wage bill. High and rising share prices also allow Meta to purchase other companies with Meta shares, instead of having to pay cash, which is beneficial in many ways.
That's an illusion. They book the expense at the cost of the share on grant date, so it looks good on the P&L, but they have to purchase the share at the price on the exercise date, so it's a significant drain on free cash flow.
Given that the thesis of the original post is that companies are swimming in money due to high stock prices; significant drains on free cash flows probably aren't the cause.
This is only sorta true, the total dilution from SBC is very small for most tech companies with some outliers (cough snap cough).
They may not purchase on exactly the vesting date but they certainly do offset the issued shares with buybacks. I think they can choose to reduce those buybacks without as much rigamarole as they'd need to issue new shares for funding, so they can effectively used that as a "back door" way to raise money. I think it might juice their P&L a little too, but I doubt that's why they do it.
"Tech stocks are growth stocks", that's pretty much how the market sees them anyway.
So essentially, they are not expected to be boring businesses yielding stable dividends to investors. That's your aristocrats stocks postioning: J&K, P&G, etc.
What is expected from tech stocks is the opposite: small to no dividend, reinvesting inflows into ever growing new businesses and technologies. A tech stock distributing dividends to shareholders instead of reinvesting in new projects would be seen as a mark of failure to innovate, incapacity to grow.
One tangent from this is that few of the big 'household name' tech products that have become infrastructure for modern life for huge amounts of people seem to be allowed to be mature and stable, they must be kept changing (beyond maintenance) or to offer some other new thing.
Yeah, it's how you pay dividends at capital gains rate instead of income rate. But also, Apple is kind of stagnant.. if they had something better to do with the money they wouldn't be doing the buybacks.
The observation is right but the causality is off. The money comes from extraordinarily profitable lines of business rather than investors. Hiring is driven less by business concerns and more by various layers of management advancing their careers by managing more and larger teams.
Isn't it to some degree? My understanding was with index funds was that the index is required to be backed by some in-kind holding of the component index products by whomever minted the index share. If more people buy the index then more of those in-kind backing products must be held e.g. as collateral. If you're REQUIRED to buy this stock because of your index/etf positions, necessarily the demand goes up, and necessarily the price goes up too. Companies _definitely_ materially benefit from stock price increases.
When people buy into an index fund/ETF, they are buying existing shares of that fund (which are already backed by the component stocks of that index) from other people who already have them. If there are 1M shares of an index fund that tracks the S&P500 floating around out there, and you go into your brokerage account and buy 1,000 shares, you have not increased that 1M figure by 1,000. There are still 1M shares; you have just bought 1,000 shares from an existing owner (perhaps another individual investor with an eTrade account just like you) who wanted to sell them.
In a case where an index fund does have to buy more shares of the underlying components (for rebalancing purposes or whatever), they are buying shares from other people on the open market: institutional investors, hedge funds, prop traders, etc. They are not buying from the company behind the stock ticker.
Yes, companies do sometimes issue new shares to the open market in order to raise cash. But that's not a daily activity; some companies may go years (or even forever) without doing another public offering beyond their IPO. Other companies do it somewhat regularly, perhaps a couple or few times a year. And some just do it when their stock price is high and they think offering more shares would be a good deal for them.
You’re making this unnecessarily complicated. Whether you purchased shares of a company through an ETF or directly, through your personal trading account, that money only goes to the person or entity that you bought the shares from. Maybe with some trading fees going to your broker (uncommon now thanks to the trend set by Robinhood).
This coupled with incentives by middle upper middle mng to grow headcount as that is how you progress in mng career path regardless of need.
If apple blows a few billion on excess headcount, no one will bat n eye. Senior director of internal tool org ABC needs 10 more people to get the next version out when a multi year long miss has no material impact.
> I'd love is some sort of trade that would eliminate my exposure to SpaceX
You can just short SpaceX of an amount equivalent to its share of your SP500 holdings. You will have to pay borrowing costs though, but on something that liquid it will be very small.
Yeah. For comparison, SpaceX will be maybe half the size of MSFT. MSFT is 7.4% of the SP500 index, so for a $1,000,000 portfolio if you were to short MSFT you'd pay 0.25% on the value of that 7.4%, or $185/year.
So eliminating SpaceX exposure will cost you $100 per million of your SP500 ETF per year, or so.
We aren’t talking about penny stocks we are talking about a tech giant. At the scales that any ordinary investor is operating at there will be no liquidity issues with shorting it and if it is in your index fund the short and long positions will directly offset if you size it correctly leading you to have net zero exposure to SpaceX.
They're saying if the stock goes up and you get margin-called on the short, you have to sell index shares, you can't just annihilate the Tesla shares with the anti-Tesla shares and walk away.
I think most people trade synthetic, just because it's faster and you don't have to wait for settlements, but maybe that is different if you trade onshore (I am a foreign investor).
Anyway if you are synthetic your margin is most likely shared between shorts and long on the same instrument, so no, you wouldn't be called.
Yeah you're not wrong. I didn't think about it that way because you can't really break something out of an ETF basket, and you also don't control the ETF basket, but if you think those risks are minimal it's probably fine to just compare dollars-to-dollars.
Personally I would still probably go with the long put strategy unless the price difference is exorbitant.
The ETF that seemingly arbitrarily changes its rules? In such a short time frame too? This change is going proposal to implementation in.. what, two weeks total? I don't know about you but I don't keep up on this stuff unless it hits the news like this one.
You are not entering a contract with a long put. You are buying a contract that, if you want, you can just let expire with no obligation to do anything. It's effectively simple insurance (as opposed to a short position, which is an actual liability, which will eat you alive in exceptional circumstances).
Yes you are, and options are complicated. Actually, the mere fact that you think they are "simple insurance" is enough proof to me that you probably don't understand it enough to safely buy one.
> You are buying a contract
Oh right, you've bought a PUT, now the fun part: you have to manage your position/exposure, could you enlighten me how you do that?
Could you explain me why buying a SpaceX PUT in a high IV regime (e.g. soon after IPO) will have it drop 40% when the IV decreases after 1 month, even though price moved in my favor? It should be simple, it's just a simple insurance product right?
Seriously. Someone, likely not super financially literate, ask a simple question about how to neutralize a stock exposure, and your answer is to advise buying options? Just stop.
Look, I think you're missing my point a little bit. Let's simplify it to risk, since that's what kicked off this conversation.
Your pension or whatever holds an ETF that (soon) contains some SpaceX shares. You buy a put option on SpaceX direct. What's the absolute worst thing that could happen?
Your pension or whatever holds an ETF that (soon) contains some SpaceX shares. You short sell a SpaceX share. What's the absolute worst thing that could happen?
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