Same with farming. “Amortize the cost” only works if margins and credit markets allow it. A small farmer facing price volatility, weather risk, and thin margins doesn’t have the same access to capital markets as a Fortune 500 manufacturer.
The whole point of efficient markets is to reduce those frictions, to better allocate risk and capital so that good projects (whether in manufacturing or farming) don’t just work “in theory.”
For me, no better system exists in the world. It’s not perfect but until there is something that works better I will have the agree with it.
Exactly what I am lamenting in my original comment. Investors chase returns, i.e. money for its sake.
As long as that is conceptually a thing, it is a no-brainer to fund a bad company if you are sure its shares will go up in price during the term of your investment; it is also in your interest (and acceptable within the “money for its own sake” framework) to ensure its shares do go up by helping hype it up; etc.
This all, I believe, is a source of strong and far-reaching negative externalities, which I am far from sure are trumped by its potential benefits.
> A small farmer facing price volatility, weather risk, and thin margins doesn’t have the same access to capital
Why do you need access to capital in order to price in the risks or the cost of relevant insurance? (That’s what I meant by amortising, I might have used a wrong term.)
Why are you “facing thin margins” like it is not an open market where you set your prices and your margin is your choice?
On farming: margins aren’t simply “a choice.” Prices are set in global commodity markets, not by a farmer unilaterally. Thin margins are structural, and access to capital or insurance is exactly what helps them survive volatility rather than get wiped out.
I am not sure why you think farmers get to set price on a commodity item. They don’t and because of that will often leverage future contracts or other hedges to bake in prices early.
