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"Passive parasites do not cure all financial ills"


JBird
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http://www.ft.com/intl/cms/s/0/ab7e1c90-f879-11e2-92f0-00144feabdc0.html?siteedition=intl#axzz2gQKXcdkb

 

"While investing in a closed stock market might be a zero-sum game, the reality of the business world is not. The overall market return is not a given, it is the complex result of millions of people’s interactions. Their decisions can and, I contend, do add value in aggregate. The Gotrocks family, sitting back in their rocking chairs, might find their assumption that corporate America will grow equally successfully without active involvement and oversight lacking solid foundation. New businesses can and do raise capital to bring us new ideas and products we never realised we needed."

- David Smith

 

Buffett doesn't argue that: a) market return is a given. b) CEO decisions do not add value in aggregate c) New businesses that raise capital with IPO's don't bring about great new products.

 

When he mentions "active involvement", is he referring to corporate CEOs or portfolio managers actively trying to beat the market? And I don't know why he mentions oversight; Buffett never argues against oversight of public companies.

 

Is it just me or has this man drastically misinterpreted Buffett's thesis?

 

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I had a similar thought the other day.

 

It seems to me that the Marxist (now mainstream) labor versus capital dichotomy is flawed. Capital allocation is also a kind of labor, and there is not really such thing as passive income (dissociating capital from allocation / control). In fact capital in the absence of allocation is useless (cf. "a fool and his money are soon parted").

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