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Also it should be borne in mind that this kind of activity isn't really making any constructive or lasting contribution to society. It's really just moving mone

by vecter 16y ago

Also it should be borne in mind that this kind of activity isn't really making any constructive or lasting contribution to society. It's really just moving money around slightly more efficiently than previously. I disagree. Efficient allocation of capital is what allowed modern society to advance as far as it did. Capital markets are a tremendous innovation and add tons of value to society. Almost every startup turned major corporation out there was capitalized by the financial markets. You trivialize this value when you say investing is simply "moving money around more efficiently". That money NEEDS to be moved around more efficiently so the most productive members and organizations in society are (a) given the resources to expand their business and (b) rewarded for the value they add to society.

cameldrv 16y ago
Perhaps, but most of those funding decisions were not made in the public markets. Those capital allocations were made by angels, VCs, and the people who committed to investing in the IPO of the company. The only thing that the overall stock market directly controls for capital allocation is secondary offerings, which are a very small part of the allocation of productive capital. The stock market just serves to trade pieces of capital that already exist. Having the stock market be a bit more accurate, particularly on short timescales, doesn't really affect capital allocation.
jey 16y ago
He isn't disputing the fact that it has net-positive value creation. He's just saying that it's a tiny lever in terms of impact. You'll immeasurably increase market efficiency, but you'll still get a lot of money because finance is an area with a very high money-to-value ratio.
JabavuAdams 16y ago
Yes, increased liquidity has allowed us to more efficiently raise capital, but beware the liquidity dogma. Increased liquidity has been good in the past, so anything that increases liquidity must be good. Not necessarily. What are the other effects? How much do we value those? Can we even estimate them a priori? OTOH, I would argue that most web apps proposed on this site aren't really making any lasting or constructive contribution to society. The one thing that can be said is that web-startup founders as a whole are less powerful and perhaps less cynically self-serving than financiers, so they distort government policy less.

by vecter 16y ago

cameldrv 16y ago

Perhaps, but most of those funding decisions were not made in the public markets. Those capital allocations were made by angels, VCs, and the people who committed to investing in the IPO of the company. The only thing that the overall stock market directly controls for capital allocation is secondary offerings, which are a very small part of the allocation of productive capital. The stock market just serves to trade pieces of capital that already exist. Having the stock market be a bit more accurate, particularly on short timescales, doesn't really affect capital allocation.

jey 16y ago

He isn't disputing the fact that it has net-positive value creation. He's just saying that it's a tiny lever in terms of impact. You'll immeasurably increase market efficiency, but you'll still get a lot of money because finance is an area with a very high money-to-value ratio.

JabavuAdams 16y ago

Yes, increased liquidity has allowed us to more efficiently raise capital, but beware the liquidity dogma. Increased liquidity has been good in the past, so anything that increases liquidity must be good. Not necessarily. What are the other effects? How much do we value those? Can we even estimate them a priori? OTOH, I would argue that most web apps proposed on this site aren't really making any lasting or constructive contribution to society. The one thing that can be said is that web-startup founders as a whole are less powerful and perhaps less cynically self-serving than financiers, so they distort government policy less.