I guess every f…

I guess every financial and economics blogger is required to write a post about Thomas Piketty’s “Capital in the Twenty-First Century,” and I guess this is mine. A key message of that book, and of this Institutional Investor Alpha ranking, is that the major driver of modern inequality is not dispersion of labor income or human capital, but rather dispersion of capital endowments and investment opportunities, and that returns to capital will outpace economic growth and make the rich richer in a way that those who make money from labor can’t compete with. The way to make a lot of money is not from labor income, even the labor of investing other people’s money — successfully or otherwise — at 2-and-20 fees. The way to make a lot of money is by starting with a lot of money and investing it well.

(from http://www.bloombergview.com/articles/2014-05-06/billionaire-hedge-funders-made-money-the-old-fashioned-way)That would be exactly correct if you were to just invert it. Capital is begetting increasingly meager returns while (extremely skilled)labor is making billionaires every year.Investing it well is labor, by the way. Try knowing something that managers/algos don’t already know and tell me if it was easy.


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May 7, 2014 · 11:07 am

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