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>"Another great example of how finance mumbo-jumbo destroys industries." Finance, the art of getting capital to where it can be utilized most efficiently, has

>"Another great example of how finance mumbo-jumbo destroys industries." Finance, the art of getting capital to where it can be utilized most efficiently, has created vast, vast, vast amounts of wealth, everywhere it is practiced. Destroys industries? Please. It has created and bolstered more industry than anything you can name. It's the reason you own a car and a house. Finance is not a bad word.

Retric 14y ago
You overstate your case. Finance is capital allocation not capital creation, car companies could just as easily operate by directly leasing the cars they made vs using 3rd party's to finance the transaction. Finance increases the market for things beyond who can directly afford them which drives up prices, see home housing markets around the world. However, on net it's still generally considered a good thing.
- tatsuke95 14y ago
  >"car companies could just as easily operate by directly leasing the cars" ...which is finance. So why don't they do that, if it's just as easy? And where does the money come from to front the cost of building the car that is to be leased? Because the lessee won't cover the cost for quite some time. Yep, finance. I realize there's a populist movement, especially among the younger crowds that frequent the interwebs, that influences people to hate everything Wall Street. But I don't think people realize what a fascinating and, more importantly fundamental, role finance has played in history. Present day Silicon Valley does not exist without it. It does, in fact, create capital.
  - Retric 14y ago
    It does, in fact, create capital. No, it allocates capital. VC's don't directly create capital they take money from investors, take their cut, invest the rest and then you get Silicon Valley. It might seem like a semantic argument, but what your suggesting would be the same thing as arguing that Walmart manufactures TV's. They are involved in the process, but a lot of bad policy shows up when people confuse bank balances with actual capital. PS: 'So why don't they do that, if it's just as easy?' A lot of car companies do that ex: http://www.hondafinancialservices.com/ http://www.hondafinancialservices.com/. Whenever they advertise 0% interest that's the car company handling the loan. However, car companies often resell these loans to third party's to get their capital back. There is a lot of capital out there that's looking for safe investments and repackaged loans fit the bill.
    - tatsuke95 14y ago
      >" It might seem like a semantic argument" I guess it is semantics: http://en.wikipedia.org/wiki/Financial_capital http://en.wikipedia.org/wiki/Financial_capital
Duff 14y ago
Maybe "finance" was the wrong word. Whatever you want to call the worship of ratios like "return on equity" without an understanding of the business, that practice is dumb and destroys companies that actually create value. Dell is a great example -- be a computer manufacturer that owns almost no assets related to the business. Their Taiwanese suppliers like Asus are laughing their way to the bank as the Dell management patted themselves on the back for improving some ratios.

Retric 14y ago

You overstate your case. Finance is capital allocation not capital creation, car companies could just as easily operate by directly leasing the cars they made vs using 3rd party's to finance the transaction. Finance increases the market for things beyond who can directly afford them which drives up prices, see home housing markets around the world. However, on net it's still generally considered a good thing.

tatsuke95 14y ago
>"car companies could just as easily operate by directly leasing the cars" ...which is finance. So why don't they do that, if it's just as easy? And where does the money come from to front the cost of building the car that is to be leased? Because the lessee won't cover the cost for quite some time. Yep, finance. I realize there's a populist movement, especially among the younger crowds that frequent the interwebs, that influences people to hate everything Wall Street. But I don't think people realize what a fascinating and, more importantly fundamental, role finance has played in history. Present day Silicon Valley does not exist without it. It does, in fact, create capital.
- Retric 14y ago
  It does, in fact, create capital. No, it allocates capital. VC's don't directly create capital they take money from investors, take their cut, invest the rest and then you get Silicon Valley. It might seem like a semantic argument, but what your suggesting would be the same thing as arguing that Walmart manufactures TV's. They are involved in the process, but a lot of bad policy shows up when people confuse bank balances with actual capital. PS: 'So why don't they do that, if it's just as easy?' A lot of car companies do that ex: http://www.hondafinancialservices.com/ http://www.hondafinancialservices.com/. Whenever they advertise 0% interest that's the car company handling the loan. However, car companies often resell these loans to third party's to get their capital back. There is a lot of capital out there that's looking for safe investments and repackaged loans fit the bill.
  - tatsuke95 14y ago
    >" It might seem like a semantic argument" I guess it is semantics: http://en.wikipedia.org/wiki/Financial_capital http://en.wikipedia.org/wiki/Financial_capital

Duff 14y ago

Maybe "finance" was the wrong word. Whatever you want to call the worship of ratios like "return on equity" without an understanding of the business, that practice is dumb and destroys companies that actually create value. Dell is a great example -- be a computer manufacturer that owns almost no assets related to the business. Their Taiwanese suppliers like Asus are laughing their way to the bank as the Dell management patted themselves on the back for improving some ratios.