Lukewarm Take #3: Investments are Risks

Posted on December 31, 2020

Happy New Year! Squeezing in one more of these before midnight.

A common argument supporting owners and investors is that they deserve to make more money than everyone else because they are “risking their own capital” on the investments they make and properties they purchase. This risk is what makes innovation work and what provides people with less credit shelter.

Of course, there is apparently a limit to how much this risk is actually allowed to be. During the Great Recession banks were bailed out rather than allowed to face the consequences of their risky investments. In 2020, landlords demanded help because they faced dealing with the consequences of their investments.

If investors and owners aren’t facing true risks, then the argument that they “deserve” more due to their risky position in ventures is clearly incorrect. What purpose do these people serve then?

Have a great new year everyone!