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"Anecdotes are easy to find on both sides. But ask yourself which is more likely -- that investors are dumb and managers are smart and investors should just tru
by rsync 9y ago
"Anecdotes are easy to find on both sides. But ask yourself which is more likely -- that investors are dumb and managers are smart and investors should just trust managers to do the right thing? Or that investors are smart and need to hold managers accountable because it's the investors' own money at stake, while managers are smart too but always want a longer leash to do their own thing regardless of whether it's good for the company as a whole (e.g. spend more resources on cool side projects)?"
Given that most equity investors no longer make investment decisions and instead blindly buy indexes, there is an enormous opportunity for managers to make decisions that benefit them to the detriment of the investors.
- WalterBright 9y agoIf that is true, why do S&P500 index values continue to rise, decade after decade?
- zero_intp 9y agoHi Walter, this line of questions is not going to lead to a proof of your position. The S&P index removes failures, so your question fails to address survivor bias. Also, you argue the perfect over the good as a reason for status quo.
- WalterBright 9y agoProof, no but strong evidence. Yes, companies fail all the time. Is that due to short term thinking - or simply making too many mistakes? Sure, there are companies that sacrifice long term for short term. Their market caps tank because investors aren't fooled. But the overall growth in the economy and strong long term growth of much of the S&P 500 is ample evidence that investment is not dominated by short term thinking, and that the S&P 500 is not a massive pump & dump scheme.