First of all, I want to say that I’m not a communist (although reading the news and seeing how the world works questions my belief…). However, I see “equal opportunity” as a common talking point about why someone is deemed as a “failure” and laziness as an excuse for not being able to pull one by one’s bootstraps. We’re going to be breaking down why “equal opportunity” doesn’t exist and is simply a pathetic excuse to justify crony capitalism.
Capital is the biggest breaking ball to the equal opportunity myth because one with large amounts of capital has more opportunities compared to one who doesn’t. Since this is a financial blog (ironic yes), let’s take a look at an investor example.
Let’s say there’s two people: Fat Cat Matt and Bob the Builder. Fat Cat Matt is a billionaire who has access to private equity, venture capital, and hedge fund investments along with public equities while Bob the Builder only has the latter and is stuck as a retail investor. Historically, index funds have performed on average ~7-10% per annum which is the bulk of retail investors such as Bob the Builder. Meanwhile, Fat Cat Matt is able to invest in accredited opportunities which conservatively earn ~20% per annum. Additionally, retail investors are unable to participate in these opportunities because SEC laws dictate that one must have either $1 million in assets excluding the primary residence or earn at least $200,000 a year. Only 2% of Americans meet this threshold and the rest of us in the 98% are out of luck! It basically takes money to make money.
Additionally, hedge funds are allowed to get away with shady tactics such as front-running stocks which entail either dumping a bunch of cash on a stock pre-market for a long position or selling a ton of stock on a bearish position. Either action would cause a large movement in stock allowing the edge fund to profit off the movement while screwing over the retail investor. While this is illegal, there is a gray area loophole where a hedge fund can do such actions and then publish a media piece. Don’t just take my word for it; here’s Jim Cramer describing these shady tactics when he used to run a fund.
Back to my example, let’s say Bob the Builder signs up with Robinhood since every rich prick tells him to invest instead of spending all his money on hookers and drugs. He initiates several positions on companies he likes but little does he know, Robinhood sells order flow data to Citadel and other similar funds so they can bet against him. If the hedge funds decide to use the shady tactics mentioned above, there goes Bob’s life savings! If a large hedge fund were to undergo a similar situation, they get a bailout because they are deemed as too large to fail while Bob prays that his unemployment checks don’t run out.
Now I’m not saying that all hedge funds are evil because there are good funds out there that don’t rely on these shady tactics. But because retirement and pension plans are one of the largest investors in these hedge funds, a large hedge fund collapsing not only affects the fat cats but also the workers and the proletariat for you leftists. Thus, we’re all interconnected and the stock market is basically a game of musical chairs.
I usually have at least weekly conversations with a good friend of mine who also happens to be a fellow writer on this site and sometimes we talk about our upbringings and our school systems couldn’t be any different. His school district had academies dedicated to different career paths such as finance while my school district regularly sent cops with dogs in to make sure we weren’t slinging drugs or hopping the fence to ditch school. Even the best school district in my area paled in comparison and I realized that we both had very different opportunities growing up. While there are pros and cons to each, one can’t deny that escaping the poverty cycle growing up in a bad neighborhood is difficult. Two Cents actually has a good video describing why it’s actually expensive to be poor. And we aren’t even talking about non-monetary costs yet such as the fact that physical and mental abuse rates increase inversely with the net worth of a household and this cycle often leads to a life of crime. In fact, I’ll freely admit that if I grew up in a worse neighborhood and didn’t have the opportunities that I had, I most likely would resort to crime or be dead.
In capitalism, it requires money to make money. Additionally, making money is exponential as it becomes much easier to make money when you already have money (eg. making 10% of $1,000 vs. 10% of $1,000,000). For those of you who are in a good financial position, be grateful for the opportunities you had and understand how easy it is to lose it. For those of you who are not as fortunate, I’m sorry to say but you’re screwed. While it definitely is possible to break out of the poverty cycle, statistically the odds are stacked against you and I wish you godspeed.