What kind of attitude is that? If you have savings, one seeks a return on said savings by investing them. That's perfectly normal and rational behavior at all wealth levels.
It is not rational once you have enough money for you and those you care about to be infinitely comfortable for the rest of your lives.
Say you have $100,000 in the bank, and you want to spend $10,000. What's the best use of that money? For a normal self-interested person, a rational use would be to invest in whatever will give the largest return, in order to have enough money for living expenses, retirement, children, whatever.
Now, say you have $100 million, and you want to spend $10 million. What's the best use of that money? Seeking a purely financial return is completely pointless. It will have absolutely no impact on your life or future, or those of the people you care about. So as a person with a normal amount of self-interest who also cares about other things in the world, the most rational behavior would be to donate it to a cause you care about, or start some purposeful organization, or anything that will have a positive impact on something or someone you value. At this level of wealth, just making more money has no positive impact on anybody, even yourself.
I guess it's possible that Pelosi is saving up in order to start a SpaceX competitor or buy an NBA team or something once she leaves Congress, but she's 81 so that seems unlikely.
> At this level of wealth, just making more money has no positive impact on anybody, even yourself.
except that having capital makes it easier to gain more capital, so you could very well end up with more impact by aggressively investing for a few years before donating.
Ok, say you invest that $10 million and a year later it's grown to $12 million. That's a decent return, but what was the opportunity cost of investing in Microsoft instead of, I don't know, funding 100 people on GoFundMe who are going to die if they can't afford surgery? The US government uses ~$10 million as the value of a human life when they analyze the cost/benefit of various policies. And it's a compounding investment - a dead person contributes nothing to society, but a living one might contribute quite a bit. That's just one example though, you could make an argument for any number of worthwhile uses for that money. Even something like venture capital or political organizing, which aren't exactly selfless philanthropic endeavors.
And again, I'm talking about 10% of what's in the bank. You could donate $10 million, invest $60 million, and still have an absurd amount left to buy a few houses or whatever you want for yourself. All while risking nothing, if you hold onto $10 million or so to secure your future.
My argument is that there's some threshold after which you have enough money to support yourself, and to invest to maintain your way of life, and to do something purposeful with the rest. And I think that threshold is below $100 million. I agree that it takes money to make money, but as you say, after "a few years" of investing, you do something with it. When does that happen? Do you need to hit a billion first?
You seem to have a fundamental misapprehension of capitalism.
If you invest your capital, it's not being hoarded in a money bank like Scrooge McDuck. It's being put to use by the companies and institutions you invest in to provide products and services.
Now I'm all for donating to charity, and it's a much better option than leaving massive wealth to your offspring, in my opinion.
But investing your money is totally rational at any wealth level and it's good for society, and necessary for capitalism to function.
If I buy some MSFT shares on the market, is my money being put to use by Microsoft? I see this kind of sentiment all the time but it seems to rely on a VC model of investment where you’re buying shares from the company/founders. I am dumb about this stuff so please someone correct me.
What happens is your money goes to whoever owned the shares and they use it somehow. That same money could theoretically be used to buy shares infinitely, except for fees, and the company would see none of it.
The effect on the company though is demand will drive the price up. Shareholders like higher prices so tend to reward CEOs who get them. This (hopefully) leads to an efficient company where they try their best so shares go up in value due to present or expected future performance which is good for the economy on the whole compared to having a bunch of inefficient companies.
It's true for shares at issuing. After that, typically, the company sees no funds from shares changing hands. Folks buy shares because they want dividends or capital appreciation. A few to show up at AGMs. But after the shares change hands once, the idea that the Noble Capitalist Heroes Of Galt's Gulch make the world turn by purchasing shares is false.
Companies can issue shares down the road, and they do for compensation, so people buying shares and pushing the stock price up is actually an ongoing assist. But, yes it's complex.
I agree with everything you say. My argument is not that investment is bad, but that as your wealth increases, your interest in getting even richer should decrease, and your interest in getting non-financial returns should increase.
If you have $100 million dollars, and you're investing in the stock market purely because that's the way to get the highest financial return, that is not rational, unless money is literally the only thing you care about. Presumably there's something else you care about, like the environment, or some political movement, or eradicating malaria, in which case investing all of your money in making more money is not the best choice. You probably still want to invest some of it, to maintain your lifestyle and maintain enough cash to use for the stuff you really care about.
This is the crux of the issue. If you have $100 million and you can't think of a single worthwhile use for any of it besides making more money, that's either a literally unbelievable lack of imagination, or incredibly cruel. It is so, so easy to do a huge amount of good with that much money. It's not easy to figure out how to do the most amount of good possible, that's probably an unsolvable problem, but it's not necessary.
I understand that investing in the stock market is supporting the economy and increasing liquidity and potentially helping a company and that's all good, but it is laughably easy to think of something better, if you don't need to worry about a financial return.
I'm all for people donating money, but they don't have to. It's theirs and they get to do what they want with it, without the burkamans of the world guilt tripping them. If they want to invest their savings until such a time as they have something better to do with it, more power to them.
After all, you wouldn't want me telling you how to spend your money.
I think a reasonable amount of guilt tripping is healthy for a society. Obviously hoarding money shouldn't be illegal, but it should feel like anti-social behavior that most people disapprove of. It's like signing up to be an organ donor, or getting vaccinated, or being friendly to your neighbors. You shouldn't be forced into anything, but you should be socially pressured to make the choice that benefits your community.
Something of it smacks of hypocrisy. I think you should be guilted into donating 5% of your wealth by that reasoning. Yeah you don't have 100M, but just like them a 5% donation won't materially affect your quality of life. How do you feel about that? Do you still feel it's anti social behavior not to do that?
Yes, I'm doing pretty well as an American software engineer, I should be pressured to donate some of my wealth (and I do). It's not a flat rate for everyone though, it's like tax brackets - as your wealth increases, you're expected to contribute a higher percentage back to the community. In a perfect world, taxes would be enough, and charity would be unnecessary because we'd all agree about how to fix all the problems in the world and just set tax rates accordingly. Obviously this is impossible, but in a slightly less perfect but maybe achievable world, we'd use taxes to cover issues with really broad agreement, and more fluid social norms to encourage charitable giving to cover the rest. In my view, there's not much moral difference between technically legal tax avoidance (like offshore accounts or tax inversion) and hoarding excessive wealth while people in your community are dying because of poverty.
> It's being put to use by the companies and institutions you invest in to provide products and services.
Only if you pretend that all stock trades happen when new stock is issued. That definitely isn't the case. As far as I understand there is a lot of trading between portfolios, where the company that originally issued the stock doesn't necessarily benefit except by increasing the value for future stock issues.
You've got a fringe position there. If you want to defend it, be my guest. I believe it's pretty obviously a given. You're basically picking a fight with capitalism which, while far from perfect, it's the best system we've tried to date.
That's a straw-man. I've said nothing questioning capitalism. The stock market isn't a necessary component of capitalism any more than subprime lending is.
The cost of the stock market is clear. The stock market causes and amplifies inequality. This isn't controversial.
But I find proponents of the stock market have trouble defending it, when asked to really be clear about the benefit to society -- to people.
> That's a straw-man. I've said nothing questioning capitalism. The stock market isn't a necessary component of capitalism any more than subprime lending is.
The stock market, no, but the ability to invest/allocate capital is quite fundamental to capitalism. The stock market is merely one incantation of that. Let's take your criticism as only pertaining to the stock market.
> The cost of the stock market is clear. The stock market causes and amplifies inequality. This isn't controversial.
I'm not going to give you that one. The stock market enables the public to invest in these companies. That's why they're called public companies.
If you ditch it, suddenly only wealthy venture capitalists can do that. This has been happening more and more with companies starting private longer and longer thanks to abundant private capital that doesn't bring the onerous regulations of being a public company. Unfortunately that seems to be increasing inequality, as the public has been cut out of these kinds of riskier but high growth investments.
I'm sure there is a better way of doing it, but it isn't as cut and dried as you suggest.
Let me strengthen my position by adding that it is also moral and ethical to seek a return by investing, providing you make reasonably ethical investments. Maybe not in the coal industry or whale meat industry - but any number of things can be perfectly ethical and even beneficial to society at large.
It is not immoral or unethical for somebody to have or earn more money than another. All people try to increase their wealth however they can. At lower income levels that is very difficult but the behavior is the same.
How much money is enough if you already have $100M and to gain more, you have to manipulate and cheat?
But even without changing the question, $100M invested in a very low risk manner will generate considerable cash flow (if you regularly take some profits). So without even spending your "savings", you can live very comfortably.
However, a special thing happens when you are high net worth. You suddenly have a lot of lenders begging to loan you money at very low interest rates. They need a place to put money, and they know you have assets to cover any loan they might give you. So you, the wealthy individual with $100M in assets, CAN still go buy nice stuff even if your cash flow from your investments isn't huge.
Honestly, unless you just need to show people how much money you can drop because you're so rich you don't care, you don't actually have to spend any of your money to live bigly.
> How much money is enough if you already have $100M and to gain more, you have to manipulate and cheat?
Yeah, that's not a good at any wealth level.
> But even without changing the question, $100M invested in a very low risk manner will generate considerable cash flow (if you regularly take some profits)
Sure. But individual risk appetites vary and at that wealth level you can afford to diversify like crazy - and should in my opinion. I'm not sure what that had to do with anything.
Manipulation and cheating is wrong regardless of the amount of money. Tossing the monetary value just aims to inflame passions and try to make an emotional appeal.
What kind of attitude is that? If you have savings, one seeks a return on said savings by investing them. That's perfectly normal and rational behavior at all wealth levels.