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0 pointsspinchange3y ago0 comments

The Yard sale model in this post demonstrates that rich people are not necessarily better at allocating capital even if/as they accumulate and compound it faster.

The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.

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imgabe3y ago

It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment.

In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.

matthewdgreen3y ago

What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Presumably you could update this model to give some people “better investing skills” and others worse skills. (In practice you’d just bias the coin flip against the ‘worse’ investors.) I suspect that once inequality has crept into the game then even having “better investing skills” is outweighed by the advantage of being already-rich. But I haven’t run the simulation to see how much investing advantage gets wiped out by wealth inequality: seems like it would be a fun project to code up with my 15y/o.

imgabe3y ago

> What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth.

Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.

What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?

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imgabe3y ago

It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment.

In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.

matthewdgreen3y ago

imgabe3y ago

> What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth.

1 more reply

j / k navigate · click thread line to collapse