Don't let nit-picky facts like that institutional investors control substantially more capital than retail investors get in the way of a good narrative.
No, there is no good reason for Tesla to be valued the way it is - but there is no shortage of people willing to buy it without putting too much thought into the price, either.
* https://en.wikipedia.org/wiki/Mutual_fund
Perhaps the Dow Jones was small enough of an index to keep track of manually, but things like the S&P 500 would have been harder (never mind the Russell 3000 or total market):
* https://en.wikipedia.org/wiki/S%26P_500_Index#History
Then there had to be interest from investors. So it's not entirely surprising that it took until the 1970s with Vanguard to really create something.
https://www.goodreads.com/book/show/106835.The_Intelligent_I...
Based on how the stock market didn't die during the pandemic vs. how many people lost their jobs, I'd say they are right to believe that.
And if you're just a regular wage earner with some cash, seeing the labor market being dropped on its head, maybe this stock market thing might be a good idea to try. I mean, some people definitely bought stocks with the $1200 stimulus check. Getting into the stock market (which ended up doing unreasonably well) was a way to hedge against losing your job (which you had a higher likelihood of losing).
I would say it’s far too early to draw conclusions about the pandemic stock market, and certainly to say that an observation which has generally been supported by data for the last century or so is no longer valid.
It feels better to believe that the success of others is due to luck and that your failures are due to randomness. Sometimes, other people are more intelligent / skilled / harder working.
It is certainly possible to beat index funds, many do so, some of them are mostly lucky, some of them are mostly skillful.
It is certainly possible to beat index funds, many do so, some of them are mostly lucky, some of them are mostly skillful. - That is the trick ain't it? The hole point is that there is no way to distinguish between the two (a priori) and no way to deduct if it will lead to future success (posteriori).
There are some good reasons for this:
- If you created such a company, you may still be running it. Jeff Bezos, Mark Zuckerburg, Larry Ellison. By the time you retire from that you're super wealthy and old, there's little reason to start over.
- Founding a company is HARD. Few people who went through that once are interested in doing it again. Paul Graham wrote about how he feels that way, although he did do it again with YC.
But I think the point is fair that success at that level requires not just skill but a lot of luck of being in the right place at the right time with the right idea and the right combination of skill and connections to pull it off. It's extremely unlikely.
You can certainly say Bill Gates and Mark Zuckerburg are skilled and they work hard. But it's clear they were also very lucky.
That's three billion dollar companies so far and counting. Is there anybody else who's done that? Not to my knowledge.
He quite likely has some kind of savior complex, he's quite literally trying to save the world.
A fascinating and incredible human being.
The fact that you think he's doing it for humanity is laughable.
Square is a fine company, but let's face it, it is not changing the world. It's just another payments company with nothing particularly special to make it stand out.
I don't think you can compare him to Elon Musk, except again, the fact that they both work hard. Plenty of people do.
Regardless of whether it is a matter of luck or skill, in practice almost nobody has beaten index funds over long periods like 10+ years.
A scammer will set up a bunch of systems trading some relatively small amount of real money and let them do their thing. After some time, some number of their robots will have actually made a decent amount of money, at which point the scammer will start offering the trading robot for sale on various marketplaces. Hundreds of people buy the robot and quickly find that it doesn't really make money.
I would add this quote from Fooled by Randomness:
Unfortunately, the inherent randomness of stock markets means that, just like millions of monkeys hammering on typewriters for long enough can eventually produce Shakespeare, so can unskilled investors produce great track records. In fact, it is very likely that some will.
Consider for example a cohort of 10,000 investors who, for the sake of argument, are relatively incompetent: each year they only have a 45% chance of being profitable. In other words, you would basically be better off investing based on the flip of a coin.
Nevertheless, despite their lack of skills, after 5 years based on probabilities alone we can expect almost 200 of them to have been profitable every year. They would boast flawless track records and enjoy praise for their exceptional skills.
Of course, in the long run, the randomness that sustains these “acute successful randomness fools” will turn against them. Wall Street has seen many traders, who after years of success have one devastating quarter where they lose everything in one huge blow-up.
Often their short-lived success was due to the fact that they simply happened to be at the right place at the right time, i.e. pure luck.
We often mistake luck and randomness for skill and determinism.