David Rosenthal: belief

Transcript context

…I’ll say you this. They’re not investors and they’re not in the investment business. There is investment going on all around them in the markets that they trade in. But the fact that they’re in those markets, they’re not there as investors. They’re there setting up shop as Caesar’s Palace, letting everyone come in and do business with them while they have a slight edge. They’ll lose sometimes, but most of the time they’re going to come out slightly ahead. Let’s say they do have a 50.01% chance of being right. They’re just there to collect their vig on everyone who is willing to trade with them over all these years. At scale it really worked. Jim Simons managed to drain $30 billion into his own pocket out of everybody that he ever traded with. Now, I think where you’re going with this is perhaps similarly along the lines to Caesar’s Palace or a casino. They are not in the investment business but they’re providing a service. Is this where you’re going with this? Well, the investment business, it depends how you define investor. If you want to be all hoity-toity about it—which in this illustrative example I’m being one—and saying an investor is someone who provides risk capital to a business, for that business to create value in some way in the future. Or you lend money to some intrinsic underlying asset so that it can be productive with that capital and produce a return for you as an investor. Of course, lots of things are called investing that are not that. Is it investment if I put money to work, then I get more money back later, I don’t actually care how the money got made, and it’s actually zero sum, I’m just vacuuming it out of…?…

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