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I agree with this take. Being a builder does not generate predictable returns like an index fund or the S&P over the last 100 years. They tell you in school tha

I agree with this take. Being a builder does not generate predictable returns like an index fund or the S&P over the last 100 years. They tell you in school that you should invest money early and watch it accrue, but if we all do that collectively as a society then who is going to build.

webinvest 4y ago
When valuations are high, companies IPO, founders cash out and hopefully go on start new companies. People on the street buy companies for 3x their annual earnings but the stock market regularly buys companies for 8x, 20x, even 80x their annual earnings. This is expressed in each stock’s P/E ratio.
ericmay 4y ago
> Being a builder does not generate predictable returns like an index fund or the S&P over the last 100 years. Sure but investing a modest sum in the S&P 500 as a wage earner, salary earner, or otherwise also requires you to work for someone else your whole life and never get wealthy. That incentive kesp people starting new companies and doing other things - i.e. taking risks.
skybrian 4y ago
The people who get funding will build, presumably? Investing doesn’t prevent people from building. Investments fund building. (Among other things.) This happens literally when banks loan money to real estate developers or other large projects. But we’re in a situation where there was, until quite recently, both too much consumer demand (inflation) and too much investment (lots of wasted investment on silly things). Higher interest rates are an incentive to slow investment and consumption and park money in government funds, where it‘s presumably more inert. I think the answer to “what if everyone does it” is that everyone doesn’t do the same thing. If you have a good idea then you can spend your own money on it, and sometimes you have to, but if it’s expensive then it’s probably better to try to raise money from other people.
danielmarkbruce 4y ago
Predictable? An index fund does not give predictable returns.
- pc86 4y ago
  Over long timelines, and with rare exceptions, yes they do.
  - reducesuffering 4y ago
    Sure, you just might spend 33 years for a 1.4% real return annually https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1990&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=IntlDeveloped&allocation1_1=100 https://www.portfoliovisualizer.com/backtest-asset-class-all...
    - p_j_w 4y ago
      What percentage of 30 year spans give a 1.4% return or less? Better question: what's the cumulative distribution function of a 30 year investment span on an S&P 500 index fund?
      - reducesuffering 4y ago
        Both are relevant. It’s good to know what your average scenario for a 30 year span is. It’s also good to prepare for the worst case…
    - pc86 4y ago
      Yes, you might. The vast, vast majority of people won't. Some people are unlucky. That doesn't mean the entire system is nonsense.
s1artibartfast 4y ago
It is pointless and Mindless to save money purely for the purpose of having more. The point of investing and saving is to have money to spend. When money is spent, it goes to the person who built something, provided a service, or has a good.
- eppp 4y ago
  I think the richest among us seem to disagree with you.
  - s1artibartfast 4y ago
    Different people may indeed have different values, but when we are talking about most people and what they are taught, I think this is true. People are thinking about retirement, buying a house, or paying for their kids education and this is why they save.
- tppiotrowski 4y ago
  I disagree. Money buys you recognition, influence and power. There is no fixed price for these. It's an auction where the rewards go to the highest bidder.
  - s1artibartfast 4y ago
    Is that what you personally are saving up for?
    - tppiotrowski 4y ago
      Freedom. Having money in the bank allows you to control your circumstances. It gives you time to wait for and consider multiple job opportunities. It gives you time to re-skill if the economy shifts or move if your region undergoes an economic depression.
      - s1artibartfast 4y ago

webinvest 4y ago

When valuations are high, companies IPO, founders cash out and hopefully go on start new companies. People on the street buy companies for 3x their annual earnings but the stock market regularly buys companies for 8x, 20x, even 80x their annual earnings. This is expressed in each stock’s P/E ratio.

ericmay 4y ago

> Being a builder does not generate predictable returns like an index fund or the S&P over the last 100 years. Sure but investing a modest sum in the S&P 500 as a wage earner, salary earner, or otherwise also requires you to work for someone else your whole life and never get wealthy. That incentive kesp people starting new companies and doing other things - i.e. taking risks.

skybrian 4y ago

The people who get funding will build, presumably? Investing doesn’t prevent people from building. Investments fund building. (Among other things.) This happens literally when banks loan money to real estate developers or other large projects. But we’re in a situation where there was, until quite recently, both too much consumer demand (inflation) and too much investment (lots of wasted investment on silly things). Higher interest rates are an incentive to slow investment and consumption and park money in government funds, where it‘s presumably more inert. I think the answer to “what if everyone does it” is that everyone doesn’t do the same thing. If you have a good idea then you can spend your own money on it, and sometimes you have to, but if it’s expensive then it’s probably better to try to raise money from other people.

danielmarkbruce 4y ago

Predictable? An index fund does not give predictable returns.

pc86 4y ago
Over long timelines, and with rare exceptions, yes they do.
- reducesuffering 4y ago
  Sure, you just might spend 33 years for a 1.4% real return annually https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1990&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=IntlDeveloped&allocation1_1=100 https://www.portfoliovisualizer.com/backtest-asset-class-all...
  - p_j_w 4y ago
    What percentage of 30 year spans give a 1.4% return or less? Better question: what's the cumulative distribution function of a 30 year investment span on an S&P 500 index fund?
    - reducesuffering 4y ago
      Both are relevant. It’s good to know what your average scenario for a 30 year span is. It’s also good to prepare for the worst case…
  - pc86 4y ago
    Yes, you might. The vast, vast majority of people won't. Some people are unlucky. That doesn't mean the entire system is nonsense.

s1artibartfast 4y ago

It is pointless and Mindless to save money purely for the purpose of having more. The point of investing and saving is to have money to spend. When money is spent, it goes to the person who built something, provided a service, or has a good.

eppp 4y ago
I think the richest among us seem to disagree with you.
- s1artibartfast 4y ago
  Different people may indeed have different values, but when we are talking about most people and what they are taught, I think this is true. People are thinking about retirement, buying a house, or paying for their kids education and this is why they save.
tppiotrowski 4y ago
I disagree. Money buys you recognition, influence and power. There is no fixed price for these. It's an auction where the rewards go to the highest bidder.
- s1artibartfast 4y ago
  Is that what you personally are saving up for?
  - tppiotrowski 4y ago
    Freedom. Having money in the bank allows you to control your circumstances. It gives you time to wait for and consider multiple job opportunities. It gives you time to re-skill if the economy shifts or move if your region undergoes an economic depression.
    - s1artibartfast 4y ago