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Can you provide a citation for this? I appreciate that it is a bit unfair to ask for one here, but I fundamentally disagree with your point and would like to le

Can you provide a citation for this? I appreciate that it is a bit unfair to ask for one here, but I fundamentally disagree with your point and would like to learn more about why you believe it to be true. While I concede that at the extreme high end, there are limited ways to invest without distorting the market yourself, it’s just not the case that returns are higher with less money. If anything, returns are lower, because Fred in this example must pick more conservative investments with his single unit of investable utility - he has only the one to lose! By contrast, Bob is free to make riskier bets with higher payoffs, as his asset portfolio starts with ten units of utility.

WalterBright 6y ago
One example of returns being greater with less capital is your gains are taxed at a lower rate. 0% for gains less than $15,000 for example. > Fred in this example must pick more conservative investments with his single unit of investable utility - he has only the one to lose! Must? Clearly not, as lottery "investments" skew heavily towards lower income people, and the lottery is a terrible investment as it has a negative net rate of return.
CryptoPunk 6y ago
I don't have a source. I make this claim based on: 1. The observation that very wealthy people like Bill Gates and Elon Musk saw their net worth increase at a far faster pace earlier in their career. 2. Basic complexity theory. Managing less assets is less complex than managing more. 3. The range of investments that can absorb one's entire capital without market distortions grows as one has less capital to invest. Say one finds a great opportunity in an ice cream stand on a busy corner that costs $50K. If they only have $50K, they can invest the entire amount and get a great return on investment on their entire net worth. If they have $50 million, that ice cream stand could only efficiently utilize 0.1% of their capital. They would need to find 1,000 similar opportunities to match the return on investment they could have obtained if they were able to invest all of their capital into that one opportunity.
- confidantlake 6y ago
  Most investments are not $50k into an ice cream stand but $50k into the stock market. Also someone with $50 million can still invest into an ice cream stand but someone with $50k cannot be an early investor into a tech company.
  - CryptoPunk 6y ago
    Small businesses are a huge target of investments. As for stocks, micro-caps have historically outperformed large-caps, and micro-caps individually are limited in how much investment capital they can efficiently utilize. >Also someone with $50 million can still invest into an ice cream stand but someone with $50k cannot be an early investor into a tech company. That is mostly due to regulatory restrictions on public offerings, and yes, that contributes to greater income inequality. In a free market however, you'd see low-friction token sales, with thousands of contributors, providing the tech company with its initial capital, not a small cadre of VCs.

WalterBright 6y ago

One example of returns being greater with less capital is your gains are taxed at a lower rate. 0% for gains less than $15,000 for example. > Fred in this example must pick more conservative investments with his single unit of investable utility - he has only the one to lose! Must? Clearly not, as lottery "investments" skew heavily towards lower income people, and the lottery is a terrible investment as it has a negative net rate of return.

CryptoPunk 6y ago

I don't have a source. I make this claim based on: 1. The observation that very wealthy people like Bill Gates and Elon Musk saw their net worth increase at a far faster pace earlier in their career. 2. Basic complexity theory. Managing less assets is less complex than managing more. 3. The range of investments that can absorb one's entire capital without market distortions grows as one has less capital to invest. Say one finds a great opportunity in an ice cream stand on a busy corner that costs $50K. If they only have $50K, they can invest the entire amount and get a great return on investment on their entire net worth. If they have $50 million, that ice cream stand could only efficiently utilize 0.1% of their capital. They would need to find 1,000 similar opportunities to match the return on investment they could have obtained if they were able to invest all of their capital into that one opportunity.

confidantlake 6y ago
Most investments are not $50k into an ice cream stand but $50k into the stock market. Also someone with $50 million can still invest into an ice cream stand but someone with $50k cannot be an early investor into a tech company.
- CryptoPunk 6y ago
  Small businesses are a huge target of investments. As for stocks, micro-caps have historically outperformed large-caps, and micro-caps individually are limited in how much investment capital they can efficiently utilize. >Also someone with $50 million can still invest into an ice cream stand but someone with $50k cannot be an early investor into a tech company. That is mostly due to regulatory restrictions on public offerings, and yes, that contributes to greater income inequality. In a free market however, you'd see low-friction token sales, with thousands of contributors, providing the tech company with its initial capital, not a small cadre of VCs.