And that exactly is the problem. The game is rigged in favor of folks who already have access to information (or can afford to buy it), not available to regular folks. That is how billionaires double their billions faster than me essentially playing lottery/roulette with my $1000 on Robinhood.
There is probably a useful fact that you know that billionaires don't. It is probably local or related to your technical expertise.
Peter Lynch famously researched companies by watching to see where his family spent pocket money. I recall reading analyses of trading performance by members of Congress -- they generally did about the same as everyone else except in companies associated with their districts.
Anecdotally, it is easier to double small dollars than large dollars. Berkshire Hathaway's growth has eased for ~2 major reasons: 1) Prices have been high for the last decade+, frustrating the core algorithm of value-investing. 2) It is very difficult to put huge amounts of money to work.
The alternative to a world with asymmetric information (and probably impossible to implement at that) is one with zero privacy, where all information is open to everyone always. I don't think we want to live in that world.
The absolutely dismal performance of most hedge funds indicates otherwise. In fact, it's probably easier to generate alpha using small amounts of money. When you're managing billions and billions of dollars, you're severely constrained in the types of strategies you can actually run. This is why, for example, that RenTech's Medallion fund is capped at 10bn.
Just by investing in an index fund, retail investors are getting a pretty great investment, essentially freeloading off of all the hard work the active funds are doing.
I would say that the vision fund was predicated on a audacious idea that was either pure genius or absolutely idiotic. The idea is as follows, instead of investing our huge pile of money into a bunch of different companies, which takes a lot of legwork, let's just fund a relatively small amount and give them a bunch of money. We will give them so much money that it's not possible for them to do anything except totally crush the competition and control the entire market.
The problem with the idea, and the eventual reason it didn't work, was that though it was largest VC fund ever, 100bn isn't actually that much in the scheme of things. There's so much money sloshing around the system looking for the place where it will be treated best. So, in essence, what Softbank ended up doing was bidding up the price of the entire industry, creating massive inflation. If Softbank gives a shi-tton of money , and another VC gives a shit-ton to a competitor, they've both just wasted a shit-ton of money.
I actually don't think Masa is the compete idiotic everyone makes him out to be. He has a very high tolerance for risk, but that doesn't make him irrational. The Vision Fund might not be doing that well, but Softbank's stock is looking pretty good at the moment.
No, it’s not worth it for them to spend $50k in someone’s salary getting them up to speed on the local culture of a place to discover a trade that might be worth 150k.
You’re not getting the math. It’s absolutely worth it for you to spend 2 months of your time to find something worth $150k.
A hedge fund, investing team, whatever you want to call it, has a limited capacity. They need to beat market returns on pool of money so large that spending 2 months to find a 300% return on something with a max investment of $75k is absolutely an incorrect use of time.
Read about opportunity cost to understand why there are many things “worth it” to people without access to something better.
A hedge fund needs to post good returns on the capital it has with the man power it has. They simply do not have enough resources to spend time on netting 100% returns on 50k investments. And they can't hire the problem away either, unless they pay each new employee less than 50k.
Simply outlawing extreme ownership of capital, via high taxes is a way to avoid privacy issues.
Unfortunately, we don’t seem keen to enable people to live their lives. We seem keen on making people ogle these giant initiatives and enterprises.
I don’t believe that’s natural. Growing up “off the grid” until the 90s, I’m still aghast at how sycophantic people act towards Amazon or a Gates like rich person.
Then I started seeing how forced social interaction is for upper middle class especially.
I should point out my family wasn’t poor. On the contrary, my parents just wanted to raise us outside the mainstream.
Don’t get me wrong I, love the gaudy culture. What I’m talking out against is demands to organize it just so. To normalize to the point of absurdity human agency to propping up of finance markets and banal old men’s gambling fetish, lavishing praise and riches on men as “owners” of the things we build collectively at scale is absurd to me.
There’s too much evidence out there suggesting success like that is luck not skill, and continued success like that is due to corruption of human social goals, not a lifetime of extremely good luck.
Continuing to play that social ladder game is hilariously morbid motivation to me.
Why not just have these men take their genitals out and prove who can take more whacks to the sack. That’s really what all this stuff feels like to me.
Lookit Bezos dashing back in to save Amazon. The idea is the place is winning!! Oops reality gets in the way and they stumbled with logistics hard.
Thanks to lavishing Amazon with praise in the form of billions, they’ll power on through it no problem. Tens of thousands of employees spared!
Meanwhile, thanks to the tax system literally millions of people are fucked.
But Facebook is publicly traded. If you truly think this is the case why not just put your $1000 in their shares and let it compound at the same rate as Zuck’s?
On the other hand, incorporating exotic or unusual sources of data makes the market more efficient for everyone. The market is first and foremost a method for price discovery and rewards actors for their contributions thereto.
No, it benefits you too. By just holding an index fund you are freeloading on all of their work. You get efficient allocation while doing and paying virtually nothing.
I think people misunderstand how great and powerful index funds are for retail investors. Moreover, I people massively overhype this alternative data thing. Using alternative data to generate alpha is mindbogglingly difficult. If you just buy from a 3rd party firm, most likely all the alpha has been sucked up. So you need to source it yourself, clean it, analyze it, etc etc. It's really fucking difficult, and very expensive.
Trust me, you're not missing out. Your index fund is probably beating the returns of many firms with billions of dollars in capital and dozens of research analysts.
The game isn't rigged because it isn't zero sum. Billionaires getting richer doesn't normally impact your ability to get richer. And as long as you're free to maneuver how you'd like, it shouldn't really matter to you that someone else is succeeding faster or slower.
Also, it's generally the case that there are more opportunities to turn $1 into $2 than to turn $1B into $2B.
> Billionaires getting richer doesn't normally impact your ability to get richer.
I believe this is not true for multiple reasons.
First - regulatory capture. Once a sector of economy generates a handful of billionaires, legal / regulatory barriers go up which make it much harder for startups to compete.
Second - competitive barriers. Google can acquire all the search channels (eg. paying Apple and Mozilla billions of $$$ to be the default search engine on iOS / Firefox).
Third - price undercutting by subsidizing a subset of the incumbent's product portfolio by profits from other parts of the business. See: Amazon vs diapers.com.
So yes, the game is definitely rigged in favor of billionaires.
What makes MLM schemes bad is not that the people at the top make money faster, but that people who aren't on the top tend to not make any money at all. This is a direct result of the fact that many MLM schemes are actually pyramid recruiting schemes, where you profit primarily by recruiting people beneath you. If everyone is doing this, then recruiting grows exponentially, and it doesn't require many levels before you run out of people to recruit, which prevents anyone below the top levels from making significant money.
Obviously capitalism doesn't have that problem, since it's driven by the sale of goods and services, not by one-time recruiting commissions that we'll some day exhaust.
TL;DR — Your analogy doesn't hold, as the market is not a fixed pie zero-sum game.
Indeed and have. But I have a feeling that the returns that fb would make on their VC investments will be much higher than investment in their stock. There would of course be trickle down effect.
i don't really agree with your point. better information leads to better price discovery for the 'game' at large for longs and shorts (including for unsophisticated robin hood investors). it isn't just about who can 'afford' to buy it; often times it's just about being smarter, or being willing to ask questions that nobody else is asking.
