Just pointing out how you can siphon off massive amounts of money from passive investors because they invest in a certain fixed way. Smart entrepreneur (he's smart after all) would also likely raise his capital from a wealthy family office, thus take very few risks himself.

Private equity roll-ups are another example -- you buy one amazing asset at 15x earnings, roll up a few other ok or "meh" businesses that you can buy at 5 to 10x earnings, and go public with a group that then trades at 20x earnings. Preferably while loading it up with a ton of debt before going public. Who buys that? Why your pension fund, of course.

The p/e is basically irrelevant. You want to buy a company that is somehow broken (hence why p/e is irrelevant - if the company was barely losing money, the p/e would be infinite).

Buying a broken company allows you to fix the flaw(s), and then sell the fixed company back to the market. Even if the p/e were the same, if done correctly, you make a killing on the deal.

I think you’re partially correct, but you’re missing out on the asymmetry of the risk/reward payoff. People often forget that there is a lower bound to losses (zero), but no upper bound on price (and therefore profit).

Also, most of these bets that have super high payoffs are initially made when others were walking away from similar bets. There’s significant research to support this, too.

Also, everyone can’t build a $200mm skyscraper, there are limits to how many of those we need.