What if investing is evil?
🔸 Plus: How professional shoplifters work 🔸 A new law to stop sexual harassment at work 🔸 The kids aren’t doing paper rounds anymore 🔸
Your 2-minute guide to demystifying money and making you richer
The markets, year-to-date
S&P 500: 5,728.80 ⬆️ 20.79%
FTSE 100: 8,177.15 ⬆️ 5.90%
Bitcoin: $68,707.53 ⬆️ 55.43%
GBP to USD: $1.2953 ⬆️ 1.77%
GBP to EUR: €1.1913 ⬆️ 3.31%
(As of market close on Friday)
But … isn’t investing in some way unethical?
When you first begin saving and investing you may develop a sneaking feeling of bougie guilt: What if my money ends up financing bad companies or bad people?
Let’s say you buy stock in Meta, the company that owns Facebook and Instagram. Meta has gone up 200% over the last 5 years. It’s probably a good stock to have in a retirement portfolio. (If you disagree, ask yourself if you’re going to stop using Whatsapp anytime soon!)
But … isn’t your buy-order on Meta helping billionaire Mark Zuckerberg build his fancy home on Hawaii? Isn’t your cash now funding the people who keep teenagers addicted to esteem-destroying video feeds?
These are good questions. They go to the fundamental nature of capitalism.
So let’s unpack that a bit.
Obviously, we live in a capitalist society. That isn’t going to change anytime soon. (If you like capitalism, congratulations! You can stop reading this email and continue with the rest of your day, unfettered by a nagging conscience.)
But if, on the other hand, you have noticed that not everything under capitalism is perfect and delightful, you may be wondering whether investing will make the situation worse.
Here is a way to think about that
Under capitalism, there are three types of people:
The capitalists, who own the companies and the profits they make.
The workers, who are paid less than the full market value of their labour, which is where profit ultimately comes from.
The consumers, whose money funds the other two groups of people.
Everyone in society fits into one of those three buckets. It doesn’t matter how much you dislike the economics. You’re one of them. You may even be inside two or three of the buckets at the same time.
If you have a job, your boss is profiting from your labour. Workers are the most exploited group in the system. By mathematical definition, employees must be paid less than the money they make for their employers. If they were paid more, those companies would go bankrupt. So if you have a job you are definitely doing the one thing that the capitalists most want you to do — work.
If you are a consumer — and that includes anyone who has ever paid cash for food — you are funding the entire system. The capitalists want your money! You keep giving it to them! They couldn’t ask for more!
The traditional solution for all this exploitation was first proposed by Karl Marx
If the workers seized the means of production, and shared ownership of it, then everything would be fair. The profits could be distributed in an equitable way.
Historically, Marxism has turned out to be more complicated than everyone thought, to put it mildly.
While you are waiting for utopia to arrive, however, there is something you can do to liberate yourself from the ranks of the oppressed.
You can read a different Marxist, Thomas Piketty, who is currently a professor at the London School of Economics. In 2013, he published the single best book on modern economics, “Capital in the 21st Century”. We have discussed his work on Moneyin2 before, here and here.
Piketty asked a simple question: Why are the rich, rich?
He examined tax records going back hundreds of years. He found:
The central division between the rich and everyone else is that the rich get their wealth from assets — stocks, bonds, and property — whereas the rest of us get our net worth from wages.
This split between the people who own assets and the people who depend on wages is the driving force of inequality.
And although Piketty doesn't say it out loud, his diagnosis of the problem also contains the solution: If you are sick of being exploited by capitalism then the answer is to move yourself into the group of people that owns the companies: The investors. The stockholders. The capitalists.
You can do that slowly, bit by bit, by saving some of your money from each paycheck and buying assets in a diverse portfolio of equities, such as an S&P 500 ETF.
Although this feels like a very capitalist thing to do, it’s also a very socialist thing to do
Anywhere that workers share the fruits of their labour — where their remuneration is based on a “share” — functions like this. Every co-op, community-owned enterprise, kibbutz, and commune. John Lewis, the department store whose “partners” take home a share of the profits, works like this. Alaska’s state oil fund works like this. Defined benefit retirement funds work like this. The UK state pension system works like this. Owning stocks — literally, “shares” — works like this.
Socialism, if socialism ever arrives, will work like this.
The only difference is that by investing you are buying into the system now, with your saved cash, to secure your own future, instead of waiting for the revolution to rescue you.
This is what the rich do. It is why they remain rich.
Or you can continue to sit on the sidelines.
But remember, by opting out you’re simply doing what the capitalists want — working and spending and funding their homes in Hawaii.
This is why Moneyin2 exists, to show you the ropes! The Moneyin2 Guide to Wealth is a good place to start.
Want to know more about stocks?
And for dessert …
What the average annual returns of the S&P 500 look like (above) based on the number of years of holding them. From Ben Carlson.
How professional shoplifters work. Terrifying.
A new law comes into affect requiring employers to prevent sexual harassment. Not just stopping it after they find out.
Staff at Jump Trading are paid an average of £795,000 each. The fund employs only 271 people.
The kids aren’t doing paper rounds anymore. They’re earning money online as influencers instead.
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