Ask HN: What is the difference between investing and gambling? | Hacker News Reader

Ask HN: What is the difference between investing and gambling?

2 pointsRainymood4 comments

I've been pondering over this question for a long time now. I've discussed it with many people already and have gotten a lot of interesting and sort of valid answers but yet I still don't have a satisfying resolution. With all the hype about bitcoin, ICOs, VC, etc. I feel like the line between gambling and investing has become really blurred and I would like to get a more solid grasp on this.

Because nearly any gambling can be seen as an investment, just a really bad one with known odds if you play in the casino for example. In contrast, any investing done can be seen as gambling because you make a bet on what you think the future will hold. This is especially true in venture capital (moonshot bets) and contrarian "investing" (bitcoin, black swan funds, etc.).

I'd love to hear what you guys think is the difference between gambling and investing and spark some discussion.

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Respectability?

But seriously, for most people investing is close to gambling because they cannot purchase assets from an organization in distress and liquidate those assets in narrow markets or utilize those assets to generate profits in other businesses under their control.

If you're in that position, investments sometimes aren't even investments. Ted Turner bought the Atlanta Braves to provide programming for his Superstation. He used the team's cash in hand (an asset of the business he was purchasing) from the existing television contract as downpayment. [1] If things hadn't worked out he could have gone back to being president of Turner Media, the family business...which he was at age 24.

Or to put it another way, good investments have limited or approximately no downside financially and personally. That's not what most people are offered. And like the casino, there's nobody advising most people to take their winnings and go home.

Good luck.

[1]: https://en.wikipedia.org/wiki/Atlanta_Braves#1976.E2.80.9319...

There's more to investing than simply speculating for financial gain. You can invest in ventures you want to see grow for other reasons - for example, YC invests in nonprofits (http://effective-altruism.com/ea/pn/an_overview_of_y_combina...). These are companies that do good things for society, and investing in them demonstrates a desire to see those good things happen faster.

investment on startups could be seen as "countries growth engine", its exponential income, innovation, scale, employment, eco-system, fame, changing others life, etc. Gambling is an entertainment or for some its an addiction/disease.

I like to think of these two in terms of risk. In gambling, there are odds and there is nothing you can do to eliminate or reduce this risk. With investing, there is another factor called idiosyncratic risk, which is not a systemic risk. This is a risk that you have control over and can reduce. Performing due diligence, diversification of portfolio companies, startup check-ins and report outs, second opinion, etc. These are all factors that an investor can control and can reduce the risk of an investment.

Have you heard someone say "diversify your portfolio"? Its to reduce the idiosyncratic risks that are associated with individual companies. Yes, one company may struggle but another may not. It's because there is microeconomics at play for individual companies.

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