Econ

See also history.

Supply and demand

• https://en.wikipedia.org/wiki/Supply_and_demand

Induced demand: decrease in price increases demand.

• 1865. Jevons paradox, Khazzoom-Brookes postulate, or rebound effect: increase in fuel efficiency increases overall consumption.
• 1934. Marchetti’s constant: average commute time is about an hour.
• 1968. Downs–Thomson paradox: the average car speed is determined by the average speed of public transport as the next best alternative.
• Risk compensation: people take more risks when they feel safer.
• 1995. Andy and Bill’s law. “what (Intel CEO) Andy giveth, (Microsoft CEO) Bill taketh away”.

https://en.wikipedia.org/wiki/Unintended_consequences

Market failures require government intervention:

1. Public goods such as lighthouses must be provided by the government, since private companies will not produce a good if they are not able to capture the value they create. Markets require the state to enforce property rights, most notably for copyright.

• 1968. Tragedy of the commons by Garrett Hardin.

2. Market power, such as monopoly and cartels, results in goods being underproduced. For utilities and other important goods, government regulation ensures that prices are reasonable.
3. Externalities: Positive externalities result in underproduction and negative externalities result in overproduction, so the government may provide subsidies or fees.

• free-rider problem
• Shadow price is the real untraded price including externalities and without distortions.

4. Information asymmetry: government regulation includes required disclosures and lemon laws. For example, consumers may prefer goods produced without sweatshop labor, but do not usually have that information.

• 1970. The Market For Lemons by George Akerlof.
• Gresham’s law: bad money drives out good. Good money has value close to its commodity value, the value of its metal.
• Adverse selection.
  • Can cause insurance death spiral.
• Moral hazard: incentive to increase exposure to risk for an actor that does not bear the full costs of the risk.
• Principal-agent problem: unaligned interests and priorities, leading to agency cost.

5. Transaction cost.

Market distortion: quotas, tariffs, taxes or subsidies.
https://en.wikipedia.org/wiki/Allocative_efficiency

Sector model of the economy:

• Primary sector: raw materials like farming, fishing, forestry, and mining.
• Secondary sector: manufacturing and construction
• Tertiary sector: service
• Quaternary sector: information services
• Quinary sector: human services
• https://en.wikipedia.org/wiki/Outline_of_industry

Baumol’s cost disease or the productivity paradox: wages in jobs without productivity gains rise.

Dutch disease: a growing sector induces foreign investment and currency appreciation which hurts other sectors.

Marxism

Marxism describes capitalism in terms of class struggle where capitalists exploit labor. Inspires the labor movement and trade unions.

• 1848. The Communist Manifesto by Marx and Engels.
• 1894. Das Kapital by Karl Marx.
• 1860. Unto This Last by John Ruskin.
• 1902. Late capitalism has increasing commodification and financialization of human life, and increasing concentration of capital.
• 1942. Joseph Schumpeter: Capitalism, Socialism and Democracy popularizes creative destruction.
• 1949. Why Socialism? by Albert Einstein.
• 1973. David Harvey: Social Justice and the City, concept of accumulation by dispossession.
• 1981. Fredric Jameson: The Political Unconscious. Criticizes capitalist postmodernism as employing pastiche or juxtaposition without moral judgment (unlike parody).
• 2013. Thomas Piketty: Capital in the Twenty-First Century on the concentration of wealth. Work with Emmanuel Saez and Gabriel Zucman.
• Social murder
  • “What is taking place is not neglect. It is not ineptitude. It is not policy failure. It is murder. It is murder because it is premeditated. It is murder because a conscious choice was made by the global ruling classes” to place profit over human life and human survival. -Chris Hedges
• Base is the mode of production, and superstructure is society’s other relationships including culture, institutions, roles, rituals, religion, media, and state. Base shapes the superstructure, which influences the base too.
• Class consciousness is awareness of class and class interests. False consciousness are material, ideological, and institutional processes that legitimize inequality and conceal exploitation. The ruling class exerts cultural hegemony over beliefs and values that enforce its dominant ideology and misrepresents exploitation as natural, inevitable, and just.
• Labor theory of value: the just price of a good or service is the socially necessary labour time to produce it.
  • “the natural wage of labor is its product… this wage… is the only just source of income… all who derive income from any other source steals it from someone else… interest, rent, and profit… are all usury.” -Benjamin Tucker
• https://en.wikipedia.org/wiki/Internal_contradictions_of_capital_accumulation
• https://en.wikipedia.org/wiki/Gini_coefficient
  • Concentration of land ownership
  • https://en.wikipedia.org/wiki/Attention_inequality
• https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/
• https://en.wikipedia.org/wiki/Georgism
  • Land value tax has no deadweight loss.
• Wealth redistribution
  • Progressive taxation
  • Public services: healthcare, utilities
  • Social welfare and social protection: social insurance, social safety net, social assistance
  • Basic income
  • Social enterprise, impact investing

History

https://en.wikipedia.org/wiki/Economic_history_of_the_world

• Douglass North and Robert Fogel, 1993 Nobel Prize.
  https://en.wikipedia.org/wiki/History_of_capitalism
  https://en.wikipedia.org/wiki/History_of_economic_thought
  https://en.wikipedia.org/wiki/List_of_financial_crises_in_the_United_States

1457 Great Bullion Famine. Europe had a trade deficit from trading spices, silks, dyes, pearls, and gems at markets in Egypt, Syria and Cyprus. This leads to a shortage of gold and silver coins, causing recessions including the Great Slump in England, occasional regressions to the barter system, mining and shipbuilding advances, and increased exploration.

1492 The discovery of the New World and Asia leads to colonialism and imperialism. Mercantilism is the colonial policy of accumulating wealth through positive balance of trade: importing raw resources from colonies, exporting finished goods to the colonies, and imposing high tariffs on imports of finished goods from the colonies. It views world trade as a zero sum game and advocates warfare to secure profitable markets.
1545 Spain opens the Cerro Rico mine (“Rich Mountain”) in Bolivia, which produced 80% of the world’s silver supply.
1565 The global silver trade starts the global economy. The Spanish treasure fleet drives the price revolution, where inflation increases from near zero to 1.2% per year.

1590 Berenberg Bank founded, arguably the oldest bank.

1668 Sveriges Riksbank is the oldest central bank.

Classical economics examines the division of labor, the price mechanism (“invisible hand”), and free trade (critique of mercantilism). Published before the industrial revolution, in an economy very different from what exists today (focused on needed commodities rather than luxury goods).

• Adam Smith, The Wealth of Nations (1776).
• David Ricardo develops the theory of comparative advantage from international trade in On the Principles of Political Economy and Taxation.

1836. Free Banking Era after Jackson wins the Bank War against Nicholas Biddle, the last president of the Bank of the US.

• Jackson moves federal funds from the national bank to pet banks, favored state banks.
• Jackson favors gold and silver.
• Wildcat banks print banknotes which could not be redeemed in specie.

1873 Long Depression

• Panic of 1873. Coinage Act of 1873 reduces the money supply.
• Panic of 1893 leads to a severe depression.
  • Sherman Silver Purchase Act cause a run on US Treasury gold.
• The free silver movement advocates expansionary monetary policy by minting silver coins. Farmers and miners had heavy debts due to deflation, and silver mining drove down the price of silver. 1896 Democratic candidate William Jennings Bryan delivers his Cross of Gold speech attacking urban capitalists and the gold standard.

1907. Bankers’ Panic.

• https://en.wikipedia.org/wiki/Panic_of_1907

1913. Federal Reserve Act

• https://en.wikipedia.org/wiki/Federal_Reserve_Act
• https://en.wikipedia.org/wiki/Federal_Reserve_System

1929 Great Depression follows the Wall Street crash.

• 1931. UK pound leaves the gold standard. UK creates the Exchange Equalisation Account (EEA).
• 1933. Glass-Steagall Act separates commercial and investment banking. Clinton repeals the separation in 1999.
• 1933. Executive Order 6102 makes it a crime for US citizens to own gold, except for jewelry and coins.
• 1934. Gold Reserve Act bans gold export. FDR devalues the dollar by increasing gold from $20/oz to $35/oz. This increases the money supply and lowers real interest rates.
  • Also creates the US Treasury Exchange Stabilization Fund (ESF).
• 1934. Security Analysis book by Benjamin Graham and David Dodd pioneers value investing and coins the term margin of safety.

Bretton Woods, 1944

The dollar becomes the international reserve currency.

• US is the largest economy after WWII.
• International demand for the dollar: international trade and loans are priced in dollars.
• The US earns seignorage by minting dollars. It provides dollar liquidity to match the world’s economic growth, so it runs a trade deficit.
• https://en.wikipedia.org/wiki/International_use_of_the_U.S._dollar

1944. Bretton Woods Conference

• The World Bank ($300B) provides loans and grants for developing nations.
• The UN International Monetary Fund (IMF) ($700B) is the global lender of last resort to national governments.

1944. The Bretton Woods agreement formalizes the dollar as the international reserve currency. It is a system of fixed exchange rates based on the gold standard of $35/ounce. Central banks agreed to trade dollars to maintain their dollar exchange rate.

Postwar economic boom in Belgium, Sweden, France, Spain, Italy, West Germany driven by productivity growth, industrialization, and wealth redistribution.

• 1949. French Les Trente Glorieuses, thirty years of economic growth.
• 1946. US Council of Economic Advisers. Growth model of the economy, concept of fiscal drag and full-employment budget, theory of unemployment as low aggregate demand.

1950. Italian economic miracle driven by manufacturing for the Korean War.

John Galbraith writes The Affluent Society (1958) and The New Industrial State (1967). He describes the power of large corporations and argues for governments to promote social welfare and economic stability.

1959. US becomes a net steel importer.

1953. The Consortium for Iran cartel controls 85% of oil reserves after the Iranian coup. Iranian Oil Participants owned by the Seven Sisters: BP 40%, Royal Dutch Shell 14%, Gulf Oil, Standard Oil (California Chevron, NJ Exxon, NY Mobil), Texaco. BP was forced to take a minority share due to its unpopularity in Iran.

• 1964. US citizens can trade gold certificates, and could own gold from 1975.
• 1968. Black-Scholes model for the price of European-style options and market dynamics more generally.
• 1969. IMF special drawing rights (SDR) are an international currency reserve, replacing gold and the US dollar. The IMF allocates SDRs to its member countries based on their quotas. A country can freely exchange its SDRs for another currency, such as to settle official international payments. SDR value is based on a weighted basket of the dollar, euro, renminbi, yen, and pound sterling.
• 1970. Congress established Freddie and Fannie, federally backed home mortgage companies, to maintain liquidity in the secondary mortgage market. They buy mortgages from banks, pool them, guarantee the payments, and sell them. It issued a mortgage pass-through security, where interest payments made by the mortgage holder pass through to the buyer.

The Austrian school of economics argued for neoliberal policy (free trade and less government regulation/intervention in the economy), because policy will never be as effective as the price mechanism (“fatal conceit”). Shaped Thatcher and Reagan’s response to hyperinflation in the 1970s with Thatcher and Reagan and still influential today.

• Friedrich Hayek, The Road to Serfdom (1943).
• Milton Friedman, Capitalism and Freedom (1962).
• Ludwig von Mises, Human Action (1949).
• Laffer curve argues that lowering taxes could increase tax revenues.
• Supply-side economics argued for higher availability of capital and a low corporate tax rate, which is criticized as trickle-down economics (the disregarded idea that policies that make the wealthy even wealthier will eventually benefit everyone).

Nixon shock, 1971

1971. Nixon shock. Nixon unilaterally ends the gold standard, leading to floating exchange rates.

• Triffin’s dilemma. The supply of gold was fixed, so eventually the US ran out of gold.
• 1968. The London Gold Pool collapses. It was a pool central bank gold reserves, with 50% from the US.
• 1971. Smithsonian Agreement tries to preserve fixed exchange rates and quickly fails.
• 1980. Gold reaches $850/oz.
• https://en.wikipedia.org/wiki/Bretton_Woods_system#U.S._balance_of_payments_crisis

1973 oil crisis. OPEC oil embargo against countries trading with Israel. Recession and stagflation.

• Resource curse

• Steel crisis: cheaper foreign steel ends the US steel industry.

• https://en.wikipedia.org/wiki/Era_of_Stagnation

• 1974. Commodities boom: sharp rise in commodity prices.

  • High sugar prices lead Coca-Cola to switch to high-fructose corn syrup.

• 1977 Trans-Alaska Pipeline System. Alaskan Prudhoe Bay Oil Field is 25% of US oil production.

• 1979 oil crisis in the Iranian Revolution. Oil peaks at $40 per barrel. Recession.

• 1975. Group of Seven (G7) was founded to promote free trade.

• 1975. NYC fiscal crisis. NYC had high crime, causing nearly a million middle class to leave for the suburbs. The Bronx is Burning (1977) documents the spiritual crisis. In 1977, fiscal conservative Democrat Mayor Ed Koch is elected. He fires 7,000 employees and later hires 3,500 NYPD officers.

• 1976. Vanguard creates the first SP500 mutual fund.

• 1976. Sterling crisis. Highest inflation rate at 25% following an increase in M4 money supply. Spike in bond yields and borrowing costs forces James Callaghan’s Labour government to temporarily borrow $4B from the IMF, then the largest loan ever.

• 1977. Mortgage-backed securities (MBS) pool mortgages and sell them as bonds. Created by Lewis Ranieri, head of Salomon Brothers’ mortgage department. Liar’s Poker (1989) by Michael Lewis.

• 1978. ISO 4217 defines three-letter currency codes. Used for international plane and train tickets.

• 1979. US stops grain export to the Soviet Union after its invasion of Afghanistan.

• https://www.newyorkfed.org/medialibrary/media/research/epr/2018/epr_2018_gse-guarantees_passmore.pdf

1980s

• 1979. Savings and loan crisis after the Fed raises the discount rate to reduce inflation. 1/3 of small-town banks (thrifts) fail.

• 1979. Paul Volcker is 12th Fed chair. He curbs 15% inflation by raising the federal funds rate to 20%, causing the 1980 recession. Tight monetary policy raises long-term interest rates and attracts capital inflow, causing the dollar to appreciate 50%, which devastates US industry.

• 1981 OPEC market share drops below 50%. Oil glut hurts Northern Europe, the Soviet Union, OPEC, Mexico, Venezuela, Nigeria, Algeria, and Libya. OPEC cuts production nearly in half to maintain oil prices.

• 1982 US oil imports 28% of oil, down from 47% in 1977. Car energy efficiency rises from 17 mpg to 22 mpg.

• 1985 OPEC market share drops below 33%. Saudi Arabia starts producing at full capacity, dropping oil to $7 per barrel.

• 1990 oil price shock from the invasion of Kuwait.
  https://en.wikipedia.org/wiki/Petrocurrency

https://en.wikipedia.org/wiki/Private_equity_in_the_1980s

• https://en.wikipedia.org/wiki/Barbarians_at_the_Gate
• 1980. Michael Milken develops the junk bond market at Drexel Burnham Lambert. This caused a boom in leveraged buyouts (LBO) until RJR Nabisco and Drexel Burnham Lambert collapsed. In 1990, Milken is sentenced to two years in prison for felony insider trading. Documented in Den of Thieves (1992).
• 1987. Alan Greenspan is 13th Fed chair to 2006.
• 1987. Black Monday stock market crash is a 20% one-day drop. Fed chair Alan Greenspan makes open market purchases and persuades banks to make loans on usual terms.
• 1988. Leveraged buyouts, hostile takeovers, or corporate raids with junk bond cash. Carl Icahn profits from buying and stripping the assets of Trans World Airlines TWA, which files for bankruptcy and is acquired by American Airlines in 2001. In 1989, KKR buys RJR Nabisco, firing 2,000 workers. Barbarians at the Gate (1989). In 2006, KKR and Bain buy the HCA hospital chain for 32B.
• 1985. Plaza Accord devalues the US dollar after a large spike in the US Dollar Index. Yen appreciates.
  • https://en.wikipedia.org/wiki/Trade-weighted_US_dollar_index
• 1987. Louvre Accord stabilizes the decline in the US dollar.
• 1990. Oil price shock from the invasion of Kuwait.
• https://en.wikipedia.org/wiki/Early_1990s_recession
  • 1992. Clinton weakens the dollar, saying “I would like to see a stronger yen”.
• 1991. Japanese asset price bubble and the Lost Decades. Caused by debt-fueled real estate bubble and excessive monetary easing.
• 1992. Black Wednesday: Soros breaks the Bank of England’s peg in the European Rate Mechanism.
  • https://en.wikipedia.org/wiki/Black_Wednesday
• 1994. China devalues the renminbi by half. Greenspan raises US interest rates.
• 1994. Mexican peso crisis: inflation rate spikes to 50%.
  • Chiapas conflict leads to capital flight and higher borrowing costs, putting Mexico at risk of default on dollar-denominated loans.
  • Mexico props up the peso by borrowing US dollars to buy pesos until it runs out of money.
  • IMF bailout restores confidence.
  • Rubin, Greenspan, and Summers.
• 1994. New Treasury Secretary Robert E. Rubin advocates for a balanced budget and a strong dollar to keep US bond yields low.
• 1997. Asian financial crisis. Thailand had fixed exchange rates which increased foreign currency deficit and borrowing. Capital flight causes a credit crunch. Countries are forced to float their currency and increase domestic interest rates, which leads to further bankruptcies. Most countries recover in a year.
• 1998. Russian financial crisis. Russia defaults on domestic local currency bonds.
• 1998. Long-Term Capital Management collapses after losing $2B in one month. When Genius Failed (2000) documents the collapse.

2000s

• https://en.wikipedia.org/wiki/2000s_energy_crisis
• https://en.wikipedia.org/wiki/2000s_commodities_boom
  2000 Commodity Futures Modernization Act. Clinton, Greenspan, and Rubin exclude over-the-counter credit derivatives from CFTC regulation.
  2001 Globalization and offshoring decimates Western manufacturing, especially during the China shock when China joins the World Trade Organiation.
  2001 Enron scandal. Auditor Arthur Andersen collapses. Documented in The Smartest Guys in the Room (2003). In the 2000-2001 California electricity crisis, partial deregulation allowed Enron to manufacture shortages at high profit.
  2002 WorldCom scandal. Leading telecom company invested in long-distance fiber optic. Founder Bernard Ebbers overstates assets by $11B. It is renamed as MCI which is acquired by Verizon in 2006.
  2002 Sarbanes-Oxley Act requires internal controls, audits, and more transparency for off-balance-sheet transactions. makes it a crime to obstruct an official proceeding.
  2005 Bain Capital, KKR, and Vornado Realty Trust conduct a leveraged buyout of Toys R Us, which goes bankrupt in 2017. In 2005, Clayton, Dubilier & Rice, Carlyle, and Merrill Lynch Global Private Equity purchase Hertz, which files for bankruptcy in 2020.
  2006 Ben Bernanke is 14th Fed chair to 2014.
  2007 China allows yuan outside China and an external yuan bond market.

2008 Global financial crisis and Great Recession.

• Subprime mortgage crisis. Collateralized debt obligations (CDO) collapse after an increase in mortgage default rates.
• Collapse of Lehman Brothers, AIG, Bear Stearns. Carlyle Capital Corporation defaults on 17B of debt.
• Fannie Mae and Freddie Mac have large losses in their Alt-A and subprime mortgages.
• Quantitative easing: buy riskier or longer-term assets at large scale. Useful when interest rates approach zero. Stimulates the economy and causes inflation.
• Dodd-Frank Act stabilizes the mortgage security market giving Fannie and Freddie a $190B loan.
• Yale professor Robert Schiller predicts the collapse.
• Michael Burry founds Scion Capital which makes a $800 profit buying credit default swaps to bet against the housing market. The Big Short (2010) by Michael Lewis.
  https://realestate.wharton.upenn.edu/wp-content/uploads/2017/03/618.pdf
  https://en.wikipedia.org/wiki/The_Big_Short

2010s

• https://en.wikipedia.org/wiki/2010s_oil_glut
  Sarbanes–Oxley Act: accounting reform and investor protection.
  2011 Budget Control Act: $900B (potentially $2.4T) increase in the debt ceiling; $917B in cuts over ten years
  2011 Occupy movement emphasizes income inequality.
  2014 Raj Chetty: Where is the Land of Opportunity? The Geography of Intergenerational Mobility.
  2014 Janet Yellen is 15th Fed chair to 2018, and secretary of the treasury since 2021.
  2014 Nobel laureate Peter Diamond writes Saving Social security.
  2015 IMF designates the yuan as a reserve currency.
  2016 J Crew dropdown or trap down. Issue debt at higher priority on existing collateral. This is usually restricted, so J Crew transferred IP assets by investing into a restricted subsidiary. Since the subsidiary is not a loan party it can invest in an unrestricted subsidiary.
  2018 Jerome Powell is 16th Fed chair.
  2018 Treasury Secretary Steven Mnuchin: “a weak dollar is good for US trade”

https://en.wikipedia.org/wiki/2020s_commodities_boom
2020 Serta Simmons uptier: a majority of lenders pay some money to swap their debt into more senior loans. Borrowers can make open market purchases of loans without allowing pro rata participation from all lenders.
2022 Archegos Capital collapses. Bill Hwang’s family office achieved dominant positions in Paramount and Discovery. He used total return swaps where the underlying stocks are held by banks to avoid disclosing his large holdings. He fails to meet a margin call. Goldman Sachs and Morgan Stanley sold quickly to limit their losses.
2023 US banking crisis. Silicon Valley Bank (SVB) fails in a bank run after it sold its Treasury bond portfolio at a large loss.
2023 UBS buys Credit Suisse. Suisse lost $3B after supply chain financing company Greensill Capital became insolvent.

China slowdown. Govt deflates real estate, which affects families, banks, and local govts. Yields down, gold up. Low confidence, high youth unemployment. EV dominance at the cost of profitability.

American Jobs Act removes regulation.

Countries

Europe

• Germany (4.5T)
• UK (3.5T)
• France (3T)
• Italy (2T)
• Russia (2T)
• Spain (1.5T)
• 1T: Netherlands, Turkey, Switzerland, Poland
• 500B: Belgium, Sweden, Ireland, Austria, Norway
• 400B: Denmark, Romania
• 300B: Czech Republic, Finland, Portugal, Kazakhstan, Greece
• 200B: Hungary, Ukraine
• 100B: Slovakia, Bulgaria, Luxembourg, Croatia, Serbia, Lithuania, Slovenia, Azerbaijan, Belarus
• 50B: Latvia, Estonia
• 25B: Cyprus, Iceland, Georgia, Bosnia and Herzegovina, Albania, Armenia, Malta
• 10B: Moldova, North Macedonia, Kosovo.

Banks

Convertible bond: holder can convert into a specified number of shares of common stock. Issued by high growth, low credit rating companies.

https://en.wikipedia.org/wiki/Forbes_Global_2000

Central banks
Federal Reserve.

• https://en.wikipedia.org/wiki/Federal_Open_Market_Committee
• https://en.wikipedia.org/wiki/Federal_Reserve_Act
  US Commodity Futures Trading Commission (CFTC) regulates derivatives like futures, swaps, and some options.

European Central Bank (ECB).
People’s Bank of China.
https://en.wikipedia.org/wiki/European_Investment_Bank
https://en.wikipedia.org/wiki/European_Stability_Mechanism

Bulge bracket banks are the top global financial advisors to institutions and primary dealers in US treasury securities.
JPMorgan Chase (600B, 4T AUM, SIFI 2.5%)
Bank of America or BofA (300B, 3T AUM, SIFI 2%) includes Merrill Lynch.
Citigroup (3T AUM, SIFI 2%). 110B market cap.
Goldman Sachs (2T AUM, SIFI 1.5%)
Barclays (2T AUM, SIFI 1.5%)
Deutsche Bank (1.5T AUM, SIFI 1.5%)
Morgan Stanley (1.5T AUM, 150B, SIFI 1%)
UBS (1.5T AUM, SIFI 1.5%)

Systemically important financial institutions (SIFI) are designated by the Financial Stability Board (FSB) founded by the G20 in 2009. Capital Adequacy Ratio (CAR) is the ratio of capital to risk-weighted assets as defined by the Basel Accords. Tier 1 can absorb losses before bankruptcy, thus excluding intangible assets and equity investments in subsidiaries.

• Wells Fargo (200B, SIFI 1%, a US big four bank)
• HSBC (150B, 3T AUM, SIFI 2%)
• BNP Paribas (3T AUM, SIFI 1.5%)
• State Street (4T AUM, SIFI 1%) is the largest custodian bank and third-largest index fund manager.
• https://en.wikipedia.org/wiki/Template:Basel_Framework

Chinese banks at SIFI 1.5%:

• Industrial and Commercial Bank of China (ICBC) (220B, 5.7T AUM).
• Agricultural Bank of China (180B, 5T AUM).
• China Construction Bank (150B, 5T AUM).
• Bank of China (150B, 4T AUM).
• Bank of Communications (SIFI 1%).

Japan has three big banks:

• Mizuho Financial Group (50B, 2T AUM, SIFI 1%) formed from a merger of Dai-Ichi Kangyo Bank in 2000.
• Sumitomo Mitsui BanCorp (SMBC) (76B, 2T AUM, SIFI 1%) formed via merger in 2001.
• Mitsubishi UFJ Financial Group (120B, 3T AUM) holds MUFJ Bank. Acquired Unified Financial of Japan.

Funds

• Berkshire Hathaway (900B) uses insurance float from GEICO for value investing in diverse sectors.
• Sovereign wealth funds
  • Norway Government Pension Fund Global: 1.5T
  • China Investment Corporation 1.4T
  • China SAFE Investment Company 1T
  • Abu Dhabi Investment Authority 800M
  • Saudi Arabia Public Investment Fund 800M
• Pension funds
  • Social Security Trust Fund: 3T
  • Japan Government Pension Investment Fund: 1.5T
  • Thrift Savings Plan: 800B is the largest defined contribution plan.
  • South Korea National Pension Fund: 600B
  • CalPERS: 450B
  • CalSTRS: 250B
  • China National Social Security Fund: 400B
  • Dutch ABP: 400B
  • Singapore Central Provident Fund: 400B
  • Canada Pension Plan: 400B. Ontario Teachers’ Pension Plan: 180B.
• Index funds
  • BlackRock (110B) 10T AUM. CEO Larry Fink
  • Vanguard 8T AUM founded by Jack Bogle.
  • Fidelity Investments 5T AUM.
• Real Estate Investment Trusts (REIT): Prologis (100B), American Tower (90B). The industry has declined over time.

Other

• Insurance: Progressive (120B), Chubb (110B), Marsh McLennan (100B).
• S&P Global (140B).
• The Big Four accounting firms Deloitte, EY, PwC, and KPMG each have around $50B revenue, all private.
• Big Three management consulting: McKinsey, BCG, Bain have $5-15B revenue.

Private equity.

• Blackstone (1T AUM): 140B market cap.
• Apollo Global Management (650B) owns University of Phoenix, Rackspace (4B), Shutterfly (3B), Smart & Final (3B), McGraw Hill Education.
  • Yahoo (5B) web portal and search engine founded by Jerry Yang in 1994. It acquires the Viaweb web sales platform founded by Paul Graham.
• Kohlberg Kravis Roberts KKR 500B. Simon & Schuster, 2023.
• The Carlyle Group 376B.
• Bain Capital 165B owns healthcare app maker Athenahealth (17B).
• Vista Equity Partners 100B owns Citrix (16B). Its CEO pays 140M in a tax evasion case.
• Silver Lake 100B.
• Goldman Sachs Private Equity 95B.
• Elliott 71B is a vulture fund founded by Paul Singer. It owns Waterstones (400M), Blackwell’s (60M), and Barnes & Noble (700M).
• Dalian Wanda Group 大连万达 is a private property developer with $500B in assets, including theater chains. It acquired Legendary in 2016 for $4B.

Card networks: Visa (600B), Mastercard (400B), American Express (160B). China UnionPay has the highest payment volume.

• Fiserv (90B) owns First Data, which owns the STAR interbank network with 2 million ATMs.
• Fidelity Information Services FIS (40B): payment processor with 75 billion transactions or $9 trillion.

Media

Education

• Ivy League
  • Harvard
  • Yale
  • Princeton
  • Columbia
  • Brown
  • Dartmouth
• Stanford
• MIT
• UC Berkeley
• https://en.wikipedia.org/wiki/MacArthur_Fellows_Program

Entertainment.
Disney (200B): ESPN, ABC, National Geographic, Disney+, Hulu, and theme parks. It was founded by Walt Disney in 1928.
Disney Studios: Lucasfilm (Star Wars), Pirates of the Caribbean, 20th Century, Searchlight Pictures, Marvel Studios
Warner Bros. Discovery: spun off from AT&T in 2022

• Warner Bros. Pictures
• DC Universe: Batman, Superman, Wonder Woman, Suicide Squad
• New Line Cinema: The Lord of the Rings.
• DC Studios: a genre-focused division created in 2016.
• Home Box Office (HBO) and the Max streaming service.
• Discovery+ streaming service.
• CNN

Comcast (150B). Bought NBCUniversal in 2011.
Public Broadcasting Service (PBS) produces Frontline investigations and Nova science programs.

Paramount: CBS (60 Minutes), Paramount Pictures, MTV, Nickelodeon, Comedy Central, Showtime.

Advertising: Big Four media agencies

• WPP plc includes Mindshare (16B)
• Omnicom (19B)
• IPG: Interpublic Group of Companies (12B)
• Publicis (10B)

Sotheby’s (4B) is the largest art broker.

Publishing

• Big Five
  • Bertelsmann (15B): Penguin Random House, BMG
  • KKR: Simon & Schuster
  • Lagardère (3B): Hachette
  • HarperCollins (News Corp)
  • Macmillan
    • 50% of Springer Nature: BioMed Central, Scientific American.
• Education
  • Pearson (9B)
  • Cengage Group and Gale reference databases.
  • McGraw Hill
  • Scholastic
• Houghton Mifflin Harcourt bought by Veritas Capital for $3B in 2022.
• Academic
  • 1869. Nature
  • 1880. Science by the American Association for the Advancement of Science
  • 1948. Cancer by American Cancer Society (1913) and Wiley

Consumer

Consumer discretionary grows above market.

• Automobiles
  • Japan: Toyota (280B, 10B cars/yr), Honda (50B, 4B cars), Suzuki (20B), Subaru (15B), Nissan (10B, 3B cars), Mazda (5B).
  • China: BYD (85B, 3B cars) is the leader. Changan (3B cars).
  • Germany: Mercedes-Benz (70B), Volkswagen (60B, 9B cars).
  • Italian: Ferrari (70B) spun off from Fiat.
  • Stellantis (60B, 6B cars) is the merger of Fiat Chrysler and Peugeot (Citroën). Fiat (Maserati, Alfa Romeo) bought Chrysler (Dodge, Ram, Jeep) after Chrysler went bankrupt in 2009.
  • US: GM (50B, 6B cars) includes Buick. Ford (50B, 4B cars).
  • South Korea: Hyundai and Kia (50B, 7B cars)
  • France: Renault (15B).
• Distributors
• Hotels
  • Booking (130B)
• Household Durables
• Leisure
• Apparel, Accessories & Luxury Goods
  • Nike (150B)
  • TJX (120B)
  • Nordstrom (3B)
• Restaurants and fast food
  • Hamburger and french fries: McDonald’s (180B), Burger King, Wendy’s, Arby’s.
  • Starbucks (90B).
  • Bread: Panera, Au Bon Pain, Subway.
  • Mexican: Chipotle (90B).
  • Salad: Sweetgreen.
  • Fried chicken: KFC
  • Pizza: Domino’s (18B), Pizza Hut, Little Caesars, Papa John’s.

Consumer staples grow below market

• Retail
  • Walmart (500B) has the most revenue. The Wal-Mart Effect (2006) examines Walmart’s supply chain.
  • Costco (370B).
  • Home Depot (300B) and Lowe’s (120B).
  • Drugstores: CVS (80B) and Walgreens (14B)
  • Food retail: Kroger (40B)
• Personal care: Procter & Gamble (400B)
• Beverages
  • Coca-Cola (250B). Confederate Colonel John Pemberton was wounded in the civil war and addicted to morphine. He invents a caffeine drink as a tonic and launches the non-alcoholic version during prohibition in 1886, claiming it can cure many diseases. It pioneers the cola flavor with caramel color, vanilla, cinnamon, and citrus oils.
  • PepsiCo (250B) merged with Frito-Lay in 1965. Americans generally prefer the sweeter drink in the Pepsi Challenge blind taste test. It acquires Tropicana in 1998, Quaker Oats including Gatorade in 2001, Pioneer Foods in 2020.
• Packaged food
  • Mondelez (100B): Cadbury, Toblerone, Philadelphia cream cheese.
    • Nabisco: Oreo, Chips Ahoy!, Ritz crackers, Fig Newtons, Wheat Thins.
  • General Mills (40B): Cheerios, Wheaties, Chex, Lucky Charms, Trix, Cocoa Puffs. Betty Crocker baking mix, Yoplait yogurt, Nature Valley snack bars, Häagen-Dazs ice cream.
  • Kraft Heinz (40B): Oscar Mayer hot dogs, Heinz Ketchup, Kraft Dinner, A.1. Sauce, Lunchables, Capri-Sun, Jell-O, Kool-Aid, Miracle Whip.
  • Hershey (40B): Almond Joy, Kit Kat (US only), Reese’s, Jolly Rancher, Twizzlers.
  • Kellanova snacks: Rice Krispies Treats, Pringles, Eggo, Pop-Tarts, Cheez-It, Rxbar, and international cereal.
  • WW Kellogg American cereal: Rice Krispies, Froot Loops, Corn Flakes, Frosted Flakes, Special K.
  • Smucker’s (15B): jelly, peanut butter, Uncrustables. Jif peanut butter. Dunkin’ Donuts. Folgers Coffee.
  • Conagra (15B): BoomChickaPop and Orville. Frozen dinners like Chef Boyardee and Marie Callender’s.
  • Brynwood Partners: Pillsbury baking mix. Martha White baking mix.
  • Campbell (13B): Pepperidge Farm, Goldfish.
• Tobacco: Philip Morris (160B)

Tech

• Microsoft (3T) owns Github.
  • OpenAI
  • Maia 100 accelerator chip (5 nm, 105b transistors, liquid cooled) and Cobalt Arm CPU manufactured by TSMC.
• Apple (3T). Acquires Palo Alto Semiconductor for $300M in 2008.
• Nvidia (3T).
  • H100 GPU costs $30k.
• Alphabet (2T). Google founded in 1998 by Larry Page and Sergey Brin. Search, Chrome, Android and Pixel, YouTube, Gmail, Meet, Drive, Workspace (Docs, Sheets, Slides), Maps. Buys Motorola in 2011. Steve Yegge criticizes Google+ in 2011.
• Amazon (2T): online retail. By Jeff Bezos, 1994.
• Meta or Facebook (1.5T). Est. 2004 by Mark Zuckerberg.
• Tesla (500B). 2017 Tesla Model 3 popularizes the electric car.
• Networking:
  • Broadcom (650B) gets $20 per iPhone, majority from FBAR filters. Also bought VMWare. Marvell (60B) chips.
  • Vendors: Cisco (180B), Palo Alto Networks (100B), Arista Networks (90B).
• Oracle (350B). Acquired Sun Microsystems in 2010, including MySQL, SPARC microprocessors, Java.
• SAP (250B): leading ERP provider.
• Netflix (300B).
• Salesforce (250B).
• Adobe (200B) makes Adobe Photoshop, Acrobat PDF, and the Lightroom organizer which supports collections, tagging, captions, and simple editing. Adobe also bought Flash and ActionScript.
• Accenture (180B): IT consulting.
• Tata Consultancy Services (170B).
• Intuit (160B)
• IBM (160B)
• Uber (150B) and Lyft.
• ServiceNow (140B)
• ADP (100B).
• Airbnb (100B).
• Semiconductors
  • Taiwan Semiconductor (TSMC) (600B).
  • ASML (400B).
  • AMD (300B).
  • Applied Materials (200B).
  • Qualcomm (250B) makes modems. 5G, 4G, CDMA2000, TD-SCDMA and WCDMA.
  • Samsung (400B) is the largest manufacturer of smartphones including the Samsung Galaxy.
  • Texas Instruments (200B) makes analog chips and embedded processors.
  • RAM and flash memory: Micron (150B) and SK Hynix (100B).
  • Intel (130B) is the second-largest chip manufacturer, primarily CPUs but also network interface controllers, memory, GPUs, and FPGAs.
  • Lam Research (130B).
  • Analog Devices (120B): DSPs and power management for healthcare and industry.
  • KLA (110B)
  • Sony (100B, est. 1946).
  • Motorola (60B).
  • Lenovo (10B).

China

• Tencent 腾讯 (350B) owns WeChat (1B+ users), QQ, and Riot. Founded by Pony Ma 马化腾 in 1998.
• Alibaba (200B) ecommerce.

1968 Whole Earth Catalog counterculture magazine by Stewart Brand.

Apple

• 1977 The Apple II personal computer features color grpahics and supports VisiCalc, the first spreadsheet program. By Steve Jobs and Steve Wozniak.
• 1983 Steve Jobs hires John Sculley as CEO with the pitch: “Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?”
• 1984 Apple launches the Macintosh in a Superbowl ad.
• 1985 Steve Jobs founds NeXT after Sculley fires him from Apple.
• 1997 Apple buys NeXT and reinstates Jobs as CEO. Jobs convinces Microsoft to invest 150 million as an antitrust insurance policy. Jobs and designer Jony Ive launch the iMac in the “Think different” ad campaign.
• 2001 iPod.
• 2007 iPhone.
• 2010 iTunes store becomes the largest music retailer. iPad.
• 2020 Apple introduces the M1 chip, moving from Intel to TSMC.
• 2022. Apple Watch Ultra is 49 mm, vs. 45 mm for older series.

1958 Lisp by John McCarthy at MIT.

• 1975 Scheme in the Lambda Papers by Guy L. Steele and Gerald Jay Sussman.
  1958 ALGOL introduces block structure and lexical scope.
  • Hacker’s Delight (2002) and HAKMEM: low-level arithmetic algorithms.
• 1962 Simula simulation language
  1972 Smalltalk OOP message passing by Alan Kay at Xerox PARC.
• 1973 Actor model by Carl Hewitt.
  1999 RSS web feeds. Atom released in 2005.
  2002 Amazon Web Services (AWS)
  2004 Software as a service begins with Gmail.
  2005 Y Combinator and Hacker News founded by Paul Graham, Jessica Livingston, Robert Tappan Morris, and Trevor Blackwell.
  2005 Andreessen Horowitz.
  2006 Twitter (10B) founded by Jack Dorsey. Bought by Elon Musk in 2022 for 44B.
  2006 Wix (8B) provides a freemium drag-and-drop website builder. Buys DeviantArt.

Industry

https://en.wikipedia.org/wiki/List_of_S%26P_500_companies

Health: [biology.html]

Utilities grows below market: electric, gas, water.

• Electric
  • State Grid of China is the largest utility company with $460B revenue, the third highest.
  • NextEra Energy (150B)
• Cell providers: T-Mobile (200B), Verizon (180B), AT&T (130B).

Industrials

• GE Aerospace (180B), RTX (140B), Boeing (120B), Lockheed Martin (110B).
• Machinery: Caterpillar (160B) and Deere (100B).
• Automation and control: Honeywell (140B)
• Transportation: Union Pacific (140B), UPS (120B).
• Electrical power management: Eaton (120B).
• Heavy industry in Japan: Mitsubishi Heavy Industries (30B), Kawasaki Heavy Industries (5B), IHI Corp (4B).

Materials grows very below market: construction, packaging, paper.

• Linde (200B): industrial gases.
• Chemicals
  • Baowu (80B) is the largest steel producer.
  • ArcelorMittal (70B) is the second-largest steel producer.
    • 1886. J&L Steel in Pittsburgh.
    • 1899. Republic Steel in Youngstown, Ohio was once the third-largest US producer.
    • 1968. LTV Steel buys J&L Steel. Its 1986 bankruptcy last for 7 years and was the largest in the US, with $6B in assets.
    • 2003. Mittal buys LTV Steel and Bethlehem Steel.
  • Nucor (30B) is the largest US steel producer. It melts recycled scrap via electric arc furnaces and continuous casting.
  • Commercial Metals Company (6B) produces steel and rebar in the US.
  • Dow Chemical (60B)
  • BASF (40B).
  • DuPont (30B).
• Mining
  • BHP (150B): petroleum, coal, iron ore, copper.
  • Rio Tinto (125B): coal, iron ore, bauxite, alumina, diamonds.
  • Vale (50B) in Brazil is the largest producer of iron ore and nickel. Bought Inco in 2006 for $17 billion.
• Textiles: Itochu (70B)

Energy has declined over time.

• State
  • OPEC controls 30% of production with 80% of reserves: Saudi Arabia, Iraq, Iran, UAE, Kuwait, Libya, Algeria, Nigeria, Venezuela.
  • Saudi Aramco (2T).
  • National Iranian Oil Company (200B).
  • China Petrochemical Corporation holds Sinopec (China Petroleum and Chemical Corporation) (800B).
  • China National Petroleum Corporation (CNPC) holds publicly listed PetroChina (220B).
• Big Oil
  • ExxonMobil (500B).
  • Chevron (300B).
  • Shell (200B) owns Jiffy Lube.
  • Conoco Phillips (150B) acquired Marathon Oil fields. Spun off Phillips 66 (50B).
  • France TotalEnergies (150B).
  • BP (100B)
  • Marathon Petroleum (60B) refineries.
  • Valero (50B) refineries.
  • https://en.wikipedia.org/wiki/Midstream
• Mitsubishi Corp (100B) is mainly an energy company.

Microeconomics

Decision trees show the order of decisions or chance nodes, with probabilities and costs, and terminal node values (payoffs). We can work backwards to calculate expected value at each node to determine the best action.
Value of information is the change in EV from reordering decision and chance nodes.

Rational choice theory

• Expected utility hypothesis

• Risk aversion

• Certainty Equivalent (CE) is the minimum amount that a decision maker would accept in exchange for a gamble.

• Risk averse if CE < EV.

• Opportunity cost

  • economic profit = revenue - economic cost
  • economic cost = expense - (sunk or unavoidable costs) + imputed costs
  • avoidable costs are not incurred when production is stopped
  • imputed cost or opportunity cost is the value of a resource in its next best use

• Marginal cost MC = dTC / dQ

• Average cost = TC / Q

• Increasing returns to scale: dAC/dQ < 0.

• If MC increases with output, then minimum AC when AC = MC and dAC/dQ = 0

• production function: labor vs. product output

  • Cobb-Douglas production function: total factor productivity, labor, capital

• production possibility frontier plots tradeoff between production of 2 goods.

• Substitute goods vs. complementary goods

  • cross elasticity of demand: change in demand for X vs. change in price of Y

• Transaction cost

https://en.wikipedia.org/wiki/Theory_of_the_firm

https://en.wikipedia.org/wiki/Envelope_theorem

https://en.wikipedia.org/wiki/Boots_theory

Spatial analysis

Friction of distance
Cost distance analysis
Law of rent: rent equals the economic advantage of its most productive use.
Hotelling’s rule

https://en.wikipedia.org/wiki/Human_ecology

• https://en.wikipedia.org/wiki/Spatial_analysis
• https://en.wikipedia.org/wiki/Template:Economic_integration
• https://en.wikipedia.org/wiki/Indicators_of_spatial_association
• https://en.wikipedia.org/wiki/International_Geographical_Union
• https://en.wikipedia.org/wiki/Natural_resource_management
  • https://en.wikipedia.org/wiki/Land-use_planning
  • https://en.wikipedia.org/wiki/Land_change_science
  • https://en.wikipedia.org/wiki/Land-use_forecasting
  • Land change model
• Location theory
  • 1929. Hotelling’s law: in a linear city model, produces should make products as similar as possible.
  • https://en.wikipedia.org/wiki/Central_place_theory
• 1898. Cultural diffusion
• https://en.wikipedia.org/wiki/Laws_of_geography
  • 1969. Tobler’s first law of geography: near things are more related than distant.
  • 1999. Tobler’s second law of geography: external phenomena affect what goes on inside a boundary.
  • https://en.wikipedia.org/wiki/Spatial_heterogeneity
  • Arbia’s law of geography: spatial correlation decreases at finer spatial resolution.
    • https://en.wikipedia.org/wiki/Modifiable_areal_unit_problem
  • https://en.wikipedia.org/wiki/Boundary_problem_(spatial_analysis)
  • https://en.wikipedia.org/wiki/Modifiable_temporal_unit_problem
  • https://en.wikipedia.org/wiki/Neighborhood_effect_averaging_problem
  • https://en.wikipedia.org/wiki/Uncertain_geographic_context_problem
• Thünen rent is the location value of a property, above its agricultural productive value.
• https://en.wikipedia.org/wiki/Spatial_autocorrelation
• https://en.wikipedia.org/wiki/Moran%27s_I
• https://en.wikipedia.org/wiki/Voronoi_diagram
• https://en.wikipedia.org/wiki/Tobler%27s_second_law_of_geography#See_also
• https://en.wikipedia.org/wiki/Tobler%27s_hiking_function
  

Urban structure

• 1925. Concentric zone model by Ernest Burgess explains urban social structure: central business district (CBD), factories, working class zone, residential zone, commuter zone.
  • 100 percent corner is the busiest area, often the crossroads of major streets.
• 1939. Sector model of urban land use by Homer Hoyt: linear high class, middle class, and mixed low class/factories.
• 1959. Core frame model
  • inner core of retail, commerce, and offices
  • outer core of offices, theaters, smaller shops, public administration
  • external frame of social services, education, car services, wholesale services, transport terminals, and light manufacturing
  • Zone of assimilation to better residential areas and zone of discard to mixed poor residential/heavy industry.
• 1945. Multiple nuclei model by Chauncy Harris and Edward Ullman.
• https://en.wikipedia.org/wiki/Template:Cities
• Bid rent theory: central business district
• https://en.wikipedia.org/wiki/Linear_settlement

Macroeconomics

Business cycle or credit cycle: monetary expansion leads to asset price inflation or bubbles, which pop in a liquidity crisis.

• https://en.wikipedia.org/wiki/Debt_deflation
• https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression
• https://en.wikipedia.org/wiki/Template:Financial_bubbles
• https://en.wikipedia.org/wiki/Template:Commodity
• Longer-term Kondratiev waves.
• https://en.wikipedia.org/wiki/Market_trend
• https://en.wikipedia.org/wiki/The_Great_Wave_(book)
• https://en.wikipedia.org/wiki/Albion%27s_Seed
• https://en.wikipedia.org/wiki/Historical_school_of_economics

Fiscal policy via government spending

• Keynesian economics is concerned with state fiscal policy to reduce unemployment. Keynes showed that prices are sticky in the short-term, that expectations/speculation can lead to business cycles, and that the Keynesian multiplier/paradox of thrift makes fiscal policy effective (except for the crowding out effect). Influential during the Great Depression and after World War II, and still influences actions of the Federal Reserve.
  • Ricardian equivalence: tax now or tax later (via loans) does not affect aggregate demand.
• The General Theory of Employment, Interest and Money (1936).

Monetary policy

• short term interest rate
• reserve requirement
• Open market operation. Central bank creates money by buying bonds.
• https://en.wikipedia.org/wiki/Impossible_trinity

1990. New Institutional Economics by Douglass North and Robert Fogel. 1993 Nobel Prize.

• Economic governance: Elinor Ostrom and Oliver E. Williamson. 2009 Nobel Prize.

International trade

Balance of payments

• Current account: net exports, net factor income like investment income, and net currency transfers.
• Capital account. A surplus means capital inflow and higher foreign ownership due to incoming foreign direct investment (FDI).
  • reserve account: central bank’s foreign reserves.
• Every trade transaction creates a current account entry and a capital account entry.

https://en.wikipedia.org/wiki/Reserve_currency
https://en.wikipedia.org/wiki/Gravity_model_of_trade

Rational agents

Game theory

• Collective action problem
• 1967. Bayesian game has private information or incomplete information. Harsanyi, Nobel Prize in Economics 1994.
• Nash equilibrium: no player can gain by changing their own strategy, holding all others’ strategies fixed.
• https://en.wikipedia.org/wiki/Template:Game_theory
• https://en.wikipedia.org/wiki/Algorithmic_game_theory
• Hex
• Theory of Games and Economic Behavior (1944) by John von Neumann.

Social choice theory

• https://en.wikipedia.org/wiki/Mechanism_design
• A mechanism is incentive compatible if every participant can achieve their best outcome by reporting their true preferences.
  • A truthful mechanism is a game where revealing the true information is a weakly dominant strategy for each player.
  • In a strategyproof or dominant strategy IC game, each participant has a weakly dominant strategy, so no participant can gain by spying on how others will act. Stronger than Nash equilibrium IC (NEIC), where if all other players truthful, then it is best to be truthful.
• Monotonicity: if the social choice changes when a single voter changes their valuation, it must change in the direction of the voter’s change in value.
• A Condorcet or beats-all winner would be supported by the majority of voters in a one-on-one race against any opponent.
  • Condorcet paradox: collective preferences can be cyclic and nontransitive.
  • Median voter theorem: the Condorcet winner is the candidate preferred by the median voter, assuming that voter have single-peaked preferences on a 1D spectrum.
  • Tyranny of the majority
  • https://en.wikipedia.org/wiki/Condorcet_winner_criterion
• 1950. Arrow’s impossibility theorem says that no unrestricted domain ranked voting electoral system can produce a ranking with non-dictatorship, Pareto efficiency (unanimity), and independence of irrelevant alternatives. 1972 Nobel Prize.
  • 1973. Gibbard’s theorem: a nontrivial voting system must limit the options to two outcomes or allow strategic voting.
  • Gibbard-Satterthwaite theorem says that every nontrivial ranked voting system is susceptible to tactical voting.
  • Duggan-Schwartz theorem. Multi-winner voting systems that allow ties can also be manipulated via strategic voting.
• Vote splitting is when having multiple similar candidates reduces their total probability of winning.
• First-past-the-post (FPTP) plurality voting is non-IC.
  • Single non-transferable vote (SNTV) generalizes FPTP to multiple winners, leading to semi-proportional representation.
  • Cumulative voting:
• Instant-runoff voting (IRV) repeatedly eliminates the last-place candidate.
  • Center-squeeze effect. The 2009 Burlington Vermont mayoral election failed to choose the Condorcet winner, a centrist candidate that was rarely anyone’s first choice
  • Spoiler effect. The 2022 Alaska at-large congressional district special election.
• Highest averages method allocates seats proportionally so every party has the same seats-to-votes ratio. Satisfies vote-ratio monotonicity and participation, so voting for a party can never cause it to lose seats. Not sensitive to spoiler effects.
  • Largest remainders method or quota methods allocate seats proportionally based on a quota, a number of votes needed to be guaranteed a seat. Leftover seats are handed to plurality voters, parties with the largest leftover votes. Less preferred.
• Ranked choice voting
  • single transferable vote (STV): vote is transferred if their preferred candidate is eliminated or elected with surplus votes. Weakly proportional.
• https://en.wikipedia.org/wiki/Rated_voting
  • Quadratic voting allows voters to pay to express their support more strongly.
• Condorcet’s jury theorem. Majority decision is better with more voters if voters are more than 50% likely to be correct.

Auctions

• Revenue equivalence: any mechanism that allocates items to the same bidders also has the same expected revenue.
  • Revelation principle: if we know which strategy the players will use, we can ask all players to submit their true utility functions, then calculate each voter’s optimal strategy before executing it for them.
• Satterthwaite theorem. No way for two parties to trade a good which is NEIC and ex-post Pareto efficient when they have asymmetric information.
• An English auction is an open-outcry ascending auction.
  • Japanese auction or ascending clock auction. Excludes jump bidding.
• First-price sealed-bid auction (FPSBA).
• Common value auction: item’s true value is the same for every buyer, but buyers have different information about it. For example a jar of quarters.
  • Winner’s curse: winner tends to have overestimated the value.
• Generalized first-price auction. Non-truthful, leading to sawtooth bidding patterns.
• A Vickrey auction is a sealed-bid second-price auction.
• Generalized second-price auction used for ad bidding. Non-truthful.
• Vickrey-Clarke-Groves (VCG) mechanism is truthful.
  • A Vickrey-Clarke-Groves (VCG) auction is a sealed-bid auction.
• Double auction has many buyers and sellers, like a stock auction.
• https://en.wikipedia.org/wiki/Template:Auction

Business

Business: Decision Making and Analysis by Robert Stine and Dean Foster has end-of-chapter problems

Project Management

• Project Management Body of Knowledge
• critical path method
• work breakdown structure (WBS)
• Gantt chart
• https://en.wikipedia.org/wiki/Change_management
• https://en.wikipedia.org/wiki/Time_management
• Planning fallacy
  • Hofstadter’s law: It always takes longer than you expect, even when you take into account Hofstadter’s Law.
  • Ninety–ninety rule: The first 90 percent of the code accounts for the first 90 percent of the development time. The remaining 10 percent of the code accounts for the other 90 percent of the development time.
• 1975. The Mythical Man-Month by Fred Brooks
  • Brooks’s law: adding manpower to a late software project makes it later due to quadratic communication, ramp up time.
  • https://en.wikipedia.org/wiki/Conceptual_integrity
• Seven management and planning tools
  • Affinity diagram: group large amounts of disorganized data
  • Priority matrix: urgency vs. importance

Management

• https://en.wikipedia.org/wiki/Outline_of_management
• Peter Senge: The Fifth Discipline (1990) of systems thinking.
• Business process

Business management software

• Enterprise resource planning (ERP) like SAP: sales, customer relationship management (CRM), procurement and inventory, production capacity, distribution, accounting, HR
• Master data about business entities
  • Parties: customers, suppliers, employees
  • https://en.wikipedia.org/wiki/Product_information_management
  • Financial structures: ledgers, cost centers
  • Locations
  • https://en.wikipedia.org/wiki/Master_data_management
• Reference data, lookup data, or controlled vocabulary is used to categorize other data
  • Units of measurement and conversion rates
  • Country codes
  • Calendar and time information
• https://en.wikipedia.org/wiki/Enterprise_bookmarking
• https://en.wikipedia.org/wiki/Data_governance

https://en.wikipedia.org/wiki/Outline_of_consulting

Competitive Strategy (1980) includes Porter’s five forces analysis.
Market analysis: size, trends, competition, prices

• segmentation, targeting, positioning or differentiation.
  • Demographics: age, gender, occupation, income, marital status, family size, education, home ownership, ethnicity, religion.
    • DINK: Dual Income No Kids
    • Yuppie: Young Urban Professional
  • occasion, quality or convenience, first-time user, usage frequency, brand loyalty, readiness to buy, attitude or enthusiasm, early adopter.
  • https://en.wikipedia.org/wiki/Market_segmentation
• https://en.wikipedia.org/wiki/Marketing_strategy
• https://en.wikipedia.org/wiki/SWOT_analysis
• https://en.wikipedia.org/wiki/PEST_analysis
• https://en.wikipedia.org/wiki/Template:Marketing
• Inventory management
• Customer relationship management (CRM)
• Point of sale (POS) contains payment terminals, cash registers, barcode scanners (universal produce code UPC), and weighing scales.

https://en.wikipedia.org/wiki/Commercialization
https://en.wikipedia.org/wiki/Cost%E2%80%93benefit_analysis

Segmentation
https://en.wikipedia.org/wiki/Product_differentiation
https://en.wikipedia.org/wiki/Osborne_effect

Accounting

Bookkeeping

• A journal is a chronological record of financial transactions.
  • General journal and special journals: sales, purchases, cash receipts
  • Adjusting entries allocate income and expenditure to the period in which they actually occurred
• A ledger is organized by account and includes a running balance.
• Chart of accounts (COA)
  • asset: inventory, accounts receivable
    • property, plant, and equipment
  • liability: accounts payable invoice
  • income: sales
  • expense: payroll, depreciation
    • tax: value added tax (VAT), goods and services tax (GST)
  • equity
• Double-entry bookkeeping
  • Debit transfers value to that account.
  • Credit transfers value from that account.
• Financial statements
  • Income statement or profit and loss
  • Balance sheet
  • Cash flow statement
  • Statement of changes in equity
• Accounting information system
  • github.com/maybe-finance/maybe shows bank accounts and credit cards.

https://en.wikipedia.org/wiki/Time_value_of_money
https://en.wikipedia.org/wiki/Cash_flow
https://en.wikipedia.org/wiki/Rate_of_return
https://en.wikipedia.org/wiki/Annual_effective_discount_rate
https://en.wikipedia.org/wiki/Template:Corporate_finance
https://en.wikipedia.org/wiki/Modern_portfolio_theory
https://en.wikipedia.org/wiki/Capital_asset_pricing_model
https://en.wikipedia.org/wiki/Financial_risk_management
https://en.wikipedia.org/wiki/Hedge_(finance)
https://en.wikipedia.org/wiki/Financial_risk
https://en.wikipedia.org/wiki/Template:Financial_risk_types

https://en.wikipedia.org/wiki/Common_cause_and_special_cause_(statistics)
Unquantifiable uncertainty: https://en.wikipedia.org/wiki/Knightian_uncertainty
https://en.wikipedia.org/wiki/Black_swan_theory
unknown unknowns

https://en.wikipedia.org/wiki/Time_series
https://en.wikipedia.org/wiki/Investment
https://en.wikipedia.org/wiki/Insurance_contract
Loan

• principal

• interest rate

• maturity date

• promissory note

  • A negotiable instrument guarantees unconditional payment
    • Holder in due course. If someone buys a negotiable instrument which ends up not paying, they can enforce payment on all previous holders.

• https://en.wikipedia.org/wiki/Commercial_paper

• Accounting equation or balance sheet equation

  • assets = liabilities + equity
  • owner’s equity = contributed capital + retained earnings
  • retained earnings = net income - dividends
  • net income = revenue - expenses
  • Net worth

• Net present value (NPV) is the present value of future cash flows

https://en.wikipedia.org/wiki/Accounting_methods
https://en.wikipedia.org/wiki/US_Generally_Accepted_Accounting_Principles
https://en.wikipedia.org/wiki/Accrual
https://en.wikipedia.org/wiki/Matching_principle
https://en.wikipedia.org/wiki/Revenue_recognition_principle

• Accrual is cash paid after consumption. Deferral is pre-payment.

Federal state and local tax (SALT) deduction limitation is capped at $10,000.
Pass-through election allows S-corps to pay tax on their income at the entity level, before distributing profits to owners.

Finance

• money market account
• mortgage
• currency swap is an interest rate derivative.
• https://en.wikipedia.org/wiki/Template:Foreign_exchange

Supplementary topics

Algorithmic collusion. RealPage rental pricing, Rainmaker for Las Vegas hotels, and Agri Stats meat processors.

Income elasticity of demand. Demand for most goods increase with income (positive income elasticity). Luxury goods are disproportionately purchased at higher incomes and have an elasticity over 1, whereas necessities have an elasticity between 0 and 1, so they are necessary in the sense that a decrease in income does not affect their consumption much. For inferior goods such as cheap cars, however, demand actually decreases with income: as people become wealthier, they stop buying these goods.

The law of demand states that demand decreases with price (price elasticity of demand is negative). If the price of a good rises, consumers tend to switch to other goods (substitution effect). Further, higher prices reduce disposable income which reduces demand (income effect). At prices above a choke price, there will be zero demand.

There are two rare exceptions in which demand increases with price. First, Veblen goods such as jewelry are luxury goods desired for their high price. They are often positional goods (status symbols); remember Veblen = Vanity. Second, Giffen goods such as bread are inferior goods for which demand increases with price, because the increased cost of purchasing the inferior good actually removes the ability to purchase alternatives.

https://en.wikipedia.org/wiki/Producer_price_index (PPI)

Consumer Price Index (CPI) measures inflation

• Absolute values
• Category importance

Growth

• Diminishing returns
• Network effects
  • Metcalfe’s law: the value of a network is proportional to the square of the number of users. n log n is often a better estimate.
• exogenous growth model or Solow-Swan model of capital and labor. Long run growth determined by rate of technical progress.
  • Inada conditions assume diminishing marginal returns
  • In the older Keynesian Harrod-Domar model, long-run growth is determined by the savings rate.
• Ramsey growth model: dk = f(k) - (n + delta)k - c for capital intensity k = capital / labor, labor growth rate n, depreciation rate delta, and per-capita consumption c.

https://en.wikipedia.org/wiki/Financial_position_of_the_United_States

https://faculty.haas.berkeley.edu/stadelis/Game%20Theory/160MTS_past.html
https://faculty.haas.berkeley.edu/stadelis/Game%20Theory/ec160_midterm_solutions_05.pdf

https://haas.berkeley.edu/wp-content/uploads/EW296Bpracticewaiverexam.pdf

https://newadmits.haas.berkeley.edu/hubfs/+FTMBA/NAW_2019/MBA201AExam.pdf (short answer)
http://faculty.haas.berkeley.edu/HERMALIN/mockexam_answers.pdf
https://haas.berkeley.edu/wp-content/uploads/EWMBA201B-Macroeconomics-Sample-Final-Levine.pdf

https://haas.berkeley.edu/wp-content/uploads/EWMBA201B-Macroeconomics-Midterm-Study-Guide_Spring-2016.pdf
https://faculty.haas.berkeley.edu/hermalin/takehome_exam.pdf

Uniform CPA Exam

https://en.wikipedia.org/wiki/Template:United_States_%E2%80%93_Commonwealth_of_Nations_recessions
https://en.wikipedia.org/wiki/Template:Classical_economists
https://en.wikipedia.org/wiki/Economic_geography
https://en.wikipedia.org/wiki/Template:Economics_sidebar
https://en.wikipedia.org/wiki/Diminishing_returns#See_also
https://en.wikipedia.org/wiki/Dutch_disease#Examples
https://en.wikipedia.org/wiki/Template:Financial_risk_types
https://en.wikipedia.org/wiki/Template:Finance_sidebar
https://en.wikipedia.org/wiki/Urban_economics
https://en.wikipedia.org/wiki/Urban_planning
https://en.wikipedia.org/wiki/Regional_planning
https://en.wikipedia.org/wiki/Environmental_planning
https://en.wikipedia.org/wiki/Transportation_planning
https://en.wikipedia.org/wiki/Land-use_planning
https://en.wikipedia.org/wiki/Template:Human_geography
https://en.wikipedia.org/wiki/Marketing_geography
https://en.wikipedia.org/wiki/Geo_(marketing)
https://en.wikipedia.org/wiki/Industrial_organization
https://en.wikipedia.org/wiki/Spatial_planning
https://en.wikipedia.org/wiki/Template:GDP_country_lists
https://en.wikipedia.org/wiki/Coase_theorem