1/ <Omar voice> all in the game, yo https://t.co/s0BgOyM4iJ
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3/ What is X? What is Y? In USG X is "taxes" and Y is "best efforts by state to enforce a contract, SUBJECT TO RESTRICTIONS such as: * contracts must have consideration * no enforcement of overly onerous terms * no enforcement against minors * proportional payout in bruptcy
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4/ I've made loans to small firms and individuals. I've taken loans as a small firm / individual. I have both defaulted on and have been defaulted on. THIS IS OK.
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5/ What is the interest rate if http://Amazon.com wants to borrow $1 and pay it back tomorrow? A: Roughly 0%. What is the interest rate if my alcoholic uncle Kevin with no job wants to borrow $20k and pay it back maybe in 10 years? A: LOLOLO
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6/ When the state says "we will enforce this contract C with mechanism M subject to exceptions E" it is YOUR JOB to look at that package and price it fairly. No portfolio of loans returns positive on every single loan.
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7/ so I object to the original tweet > Corporate limited liability is short-form for corporate moral hazard and a carte-blanche for managerial malfeasance this is framing it as if in a state of nature all loans get paid back and all contracts are enforced perfectly and fairly
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8/ The state (in our current system) or legal firms (in ancapistan) provider a certain service. THAT IS THE DEFAULT Perfect enforcement and perfect incentives were NEVER AN OPTION. Make a loan to an LLC or don't. If you do, set an interest rate that covers your risks.
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9/ I strongly dislike "limited liability is a con job" for the same reason I dislike "in Vietnam 12 year olds work in factories and THAT IS NOT OK": it assumes that there are trivially available better options, instead of realizing that these ARE the best options available.
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End of conversation
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