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Stock market investing isn't a zero sum game anymore than VC investing or even Y Combinator. Edit: OK, YC adds much more hands on value to businesses, but the
by hiddenstage 14y ago
Stock market investing isn't a zero sum game anymore than VC investing or even Y Combinator.
Edit: OK, YC adds much more hands on value to businesses, but the investment aspect is exactly the same as it would be if you bought shares over the market.
- ivankirigin 14y agooptions & futures are zero sum in the sense that any money gained is lost by someone else, correct?
- hollerith 14y agoEven if it is zero-sum in dollars, it can be positive-sum in aggregate utility.
- hiddenstage 14y agoEhhh you get into meta when it comes to options and futures, but I would argue they still aren't zero sum. I mean, you could argue almost everything money wise can be looked at as zero sum. If a VC buys a 10% stake in company ABC for $1 million the trade looks like: VC: -$1,000,000, +10% equity (worth $1,000,000) Net = $0 ABC: +$1,000,000, -10% equity (worth $1,000,000) Net = $0 Now let's say ABC doubles their valuation. Now the trade looks like: VC: -$1,000,000, +10% equity (worth $2,000,000) Net = +$1,000,000 ABC: +$1,000,000, -10% equity (worth $2,000,000) Net = -$1,000,000 Obviously the $1,000,000 helped ABC double their valuation, which means that the transaction was not zero sum. Same could be said about all investments and to a lesser extent, options and futures. You can't ignore the context of the trades such as using put options to hedge a long position, for example.
- pg 14y agoI should clarify: I meant the type of trading Yuri describes, where you're trying to make money by identifying stocks that are mispriced.
- analyst74 14y agoThe reason stock market is considered zero sum is not because it's literally zero sum. It's a well understood and highly competitive market, where most gains come from other players in the market.