>I really don't understand this sentiment, as if a professional gambler would not gladly gamble with novices...
The existence of a financial elite hinges on the existence of a non-elite that actually does the work. If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite.
In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.
> If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite.
Nobody is complaining about people placing their paychecks in index funds though. Index funds are a reasonably good proxy for the future health of the economy, so your gains from it will likely represent real growth. By contrast, gains made from cryptocurrency and speculative stock must be coming from someone's losses.
Index funds go up because more people want to buy them than sell them, cryptocurrencies go up because more people want to buy them than sell them.
Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.
> our investment in an index fund doesn't increase the number of productive assets in the world
Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.
Index funds are positive sum because companies are positive sum. You buy shares in a productive enterprise, which then generates revenues, and profits. These profits are returned to shareholders via dividends or buybacks, or just through the accretion of value within the enterprise.
On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world.
The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.
> your investment in an index fund doesn't increase the number of productive assets in the world
Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.
Amazingly, some people are complaining about index funds. It’s a pretty fringe position, but it comes up frequently enough that “should index funds be illegal?” is one of the recurring headings of Matt Levine’s newsletter.
Index funds being illegal just means they're illegal for the poor and middle class. Any person with sufficient wealth could construct a personal index fund manually by buying the individual stocks. You would probably need millions to make this a worthwhile exercise.
Somewhat related, I really want to see someone offer some kind of customizable index fund. Let me start with a base index, and then exclude or include companies at will. e.g. start with the S&P 500, kick out companies like Exxon and Facebook and add in Tesla (pre inclusion), while the service auto weights investments appropriately.
Hmm. It looks like Wealthfront offers direct indexing for reasonably small account sizes. But it's not clear from this description if they actually allow customizing stock picks. Could be worth investigating. Their fees might also make it unattractive.
> In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.
Maybe, but are you insinuating that no back breaking work would need to be done if money weren’t to exist?
Pretty sure the introduction of money reduces the total amount of backbreaking work to be done. Instead of hauling grain to trade for axe heads and carrying those back to your farm, you carry coins, paper, or in modern times, tap a few buttons on your smartphone.
The market would need to find ways to perform the back-breaking work, either by wages increasing or the development of automation. Supply and demand. The more people who can accumulate wealth and capital, and intelligently manage that wealth, the greater the reduction in the labor supply (as they will fund their expenses using investment returns versus engaging in labor activities to do so).
Money is an abstraction, but the status quo as a whole (monetary policy, capital markets, labor policy) is designed to ensure a supply of labor. Capital begets capital [1], so those who don't have will engage in riskier behavior to get off the wage slave treadmill.
[1] https://news.ycombinator.com/item?id=16592414 ("I think capitalism is much simpler: capital begets capital. Those who have capital will accumulate more capital, almost infinitely, until the capital/income ratio reaches an equilibrium who knows how high (in the absence of major corrections like wars and hyper inflation). Add inherited wealth and low taxes. Capitalism's winners are those who already have capital. Thomas Pickety's book "Capital in the 21st Century" cogently illustrates this using massive tax return based data sets.")
I do actually wonder if the FIRE movement will come under criticism in the coming years. Does the economy still work if too many people are checking out of their careers in their 30s and 40s?
But yeah, it's mostly the financial elite freaking out that their kids might actually have to be a wage slave for a living.
FIRE folk (and every retiree) are going to get killed by inflation over the next ~5 years. The thing about retirement is that you're on a fixed income, and if you're doing it right you move capital from risk assets like stocks into more deterministic investments like bonds as you get close to needing them. The value of bonds and cash is about to get crushed; it's very hard to plan how much you need to live on when living costs may go up 5-10x or more in the next 5 years.
I really doubt FIRE is popular enough for them to matter in practice. I suspect very few can stand pinching pennies for the 10-25 years it takes to save up the capital.
Money being lost or won is not that. It's a signal that the public as a whole has benefited from the endeavour or not. Loses are a really important signal to stop wasting scarce resources .
The existence of a financial elite hinges on the existence of a non-elite that actually does the work. If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite.
In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.