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You could buy shares in GS or any other public company investing in private companies and/or underwriting IPOs, so there's that. That said, the idea that public
by _yosefk 11y ago
You could buy shares in GS or any other public company investing in private companies and/or underwriting IPOs, so there's that. That said, the idea that public capital markets are widely considered to be a way to increase equality, of all things, is stunning to me. I thought/think that people supporting capital markets view them as a method for companies to raise capital in exchange for a share of future profits, and that people opposing capital markets view them as casinos, pyramid schemes, etc., and that the point of extra regulation for public companies is to protect investors, while the point of having less-regulated private companies is to lower the cost of raising capital for those ventures that can make do with a small number of rich investors.
Even if people widely consider the stock market to be an "equalizer", it doesn't seem obvious that adding more early-stage small-cap stocks to the market serves that purpose, because these companies are more likely to go bust, with a small fraction of them capturing most of the growth, and an index with a share in all those companies is not unlikely to underperform a large-cap index. (Incidentally, this is related to the reason that widespread stock ownership seems to me more likely to increase rather than decrease inequality - the prices of these things have a high variance; taxing and redistributing wealth and/or capital gains sounds like a surer path to equality, if that's what you want.)
- golemotron 11y ago> That said, the idea that public capital markets are widely considered to be a way to increase equality, of all things, is stunning to me. Never underestimate the power of spin. Private just has to look worse than public on equality, and it does. I wouldn't be surprised to see an article about this in the next few weeks as journalists compete for eyeballs.
- _yosefk 11y agoI've already seen such an article, but I still can't imagine hordes of protesters fighting for the privilege to invest in unicorns, especially now that much of the bubble has popped.
- Ologn 11y ago> I thought/think that people supporting capital markets view them as a method for companies to raise capital You are correct, people supporting capital markets do view/promote them as a method for companies to raise capital. If you look at the data though, this turns out to be misleading. The amount of money companies raise in initial or subsequent stock offerings through the public capital markets are a fraction of what they raise through other methods. Less than 7% of corporate investment capital is raised through stock offerings. Also, this is not just the case nowadays, it has been like this since the 1940s, and even before that.
- marcosdumay 11y agoThe entire point of financial markets is turning a huge amount of speculation into a small amount of productive liquidity. It is not a bad idea by itself, and 7% is not an extraordinarily small number. In fact, it looks hight to me. There are lots of problems to be found in the details, but the picture you paint isn't a dark one.