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Comment by marginalia_nu | Hacker News Reader

> One of the proper, necessary functions of any investment market is to take money away from people who do the wrong things with it.

Why is that?

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because someone has to be on the other side of every transaction

and socially because the goal of the system is to get participants to behave in "optimal" fashion, for a certain very specific definition of "optimal".

Because ideas that don't add value should not be pursued, else you are wasting resources.

Imagine how dysfunctional the world would be if you could never loose money investing in something.

In what sense would such a world be dysfunctional?

Imagine you invested $100 into my company. Let's say my company specialized in doing absolutely nothing, as in, the company had a bank account and produced/sold nothing. In our little toy world where you always make money on investments, two weeks in I returned $150 to you (you've made $50).

This brings up questions like "where did that extra $50 come from", but maybe you get the point of the original comment now.

What if you got 100 back instead of 150?

This incentivizes people to blindly make lots of normally risky and/or stupid investments with no fear of consequences and the potential of high upside if one of them pays off. This lack of consequences is subsidized by someone (taxpayers), who need to fund the burden of all the salaries of the unproductive companies that were paying salaries / buying materials / etc.

Then you lost money due to inflation or the opportunity cost of it being somewhere where it could have made money.

If that money is consumed as capital to further the goals of the business there has to be the possibility that nothing is available that can be returned.

This is the underlying principle of investment, that the money is being utilized by someone for potential economic gain.

If that money is just parked such that its always available for a return then it isn't really an investment.

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