The Future of Investing

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Felix Salmon:

American workers are facing a double whammy here: they’re losing access to private equity at exactly the point in time where private equity is becoming a very large and important part of the international capital markets. Meanwhile, it’s the rich foreign clients of Goldman Sachs — the global rentier class — who are getting that coveted access to equity in Facebook.

The two separate whammies here are:

  • The fact that fewer companies are going public, opting instead to finance themselves through private equity and trading their shares via investment banks who set up private exchanges to match well-heeled buyers and sellers. Ordinary schmoes like you and me don’t have the opportunity to invest in companies that do this.
  • The steady decline of defined-benefit pension plans, which were managed by professionals who had access to a wide variety of investment opportunities, and the accompanying rise of defined-contribution plans like 401(k)s, which are managed by ordinary schmoes like you and me who have access to a very limited range of standard investment funds.

In other words, you and I don’t get to invest in Facebook. Only rich people with access to the special private exchange set up by Goldman Sachs get to do that. And if this trend continues, you and I won’t be able to invest in any of the hottest companies of the future. Only rich people and big fund managers will be able to do that, which means that the returns on their retirement portfolios will be a whole lot higher than yours and mine. And that’s on top of the fact that their returns are already higher than ours, thanks to their access to a wider range of hedge funds and investment vehicles.

Felix isn’t happy about this: “What we don’t want is a world where most companies are owned by a small group of global plutocrats, living off the labor of the rest of us. Much better that as many Americans as possible share in the prosperity of the country as a whole by being able to invest in the stock market.” Agreed — but like Felix, I don’t have any bright solutions to this. And who knows? Maybe this is just the flavor of the day on Wall Street and the public stock market will make a comeback shortly. But the overall story of the past couple of decades has been the steady funneling of all the richest investment opportunities to a smaller and smaller class of the super rich, and this trend fits right in. It’s a problem worth thinking about.

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THE TRUTH IS...

what drives Mother Jones' team of 50-plus journalists. The truth is powerful, as evidenced by how hard those with something to hide, or profit to gain, seek to discredit it. The truth, stated boldly and reported meticulously, is what draws so many readers to Mother Jones.

And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

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