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Economic Illiteracy on Steroids

Here’s a direct quotation from a new book written by a best-selling American author – an author who many celebrate as a sage.

This makes the typical pyramid scheme of the original stock market look honest by comparison.  On the stock exchange, at least, those who get in early can win – albeit at the expense of those who come in later.  That’s just the way investing works.*

Would you take investment advice from someone who writes such a thing?  Would you take policy advice from him?  Would take any advice from this person?  Would you take any advice from anyone who reads this book and finds it to be insightful?

Even if we assume that the author is here referring only to shares of stocks in individual corporations, the statement is nonsense.  I’ve neither the time nor the interest to list all of the absurdities that are contained in, or implied by, this one short passage.  So here are just two of them (in no particular order):

– The author either doesn’t know the definition of “pyramid scheme” or he hasn’t a clue what a stock market is (or both).  The successful operation of a market in equity shares – a stock market – does not require an ever-multiplying number of buyers or investors.

– The author cannot possibly explain, given his ‘understanding’ of the nature of investing, why a secondary market in equity shares exists and is viable.  If the author is correct about the nature of investing, most investors throughout the industrial age must have been, and must continue to be, inconceivably stupid to purchase stock shares.  With the possible exception of purchasers of shares of stocks offered in IPOs, why – if investors who get a stock first consistently profit at the expense of investors who come along later – are there so many investors who have come along later and who continue to come along later?  And why do so many of the investors “who come in later” profit from their investments?


* Douglas Rushkoff, Throwing Rocks at the Google Bus (2016), page 175.


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