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> You need to aggregate some capital for investments to occur, you need rich people for high risk investments to be possible. No, you need economic capital for
by boomlinde 14y ago
> You need to aggregate some capital for investments to occur, you need rich people for high risk investments to be possible.
No, you need economic capital for high risk investments to occur. However that capital is distributed is really besides the point.
From an efficiency point of view, high risk investments probably shouldn't exist at all. In a production model where goods and services are produced based on what the people need and can realistically attain in a sustainable manner, rather than tricking people into thinking they need things, you don't need to take very high risks.
- sergiosgc 14y ago1) The risk profile of small investors and large investors is different. Large investors, due to the fact that the utility curve of money is not linear, are more prone to risky investments with a part of their portfolio. 2) High risk investments are needed to get out of local maxima. One easy example is electric cars. They're obviously inefficient today, because oil based transportation is a local maximum for the utility of cars. In twenty years? Probably gasoline powered automobiles will be a minority of sales. Another easy example: private space exploration (spaceX, Virgin Galactic and such). Hardly profitable today, probably very profitable in a few decades.