Re: poly: Re: Why interest rates may stay low

Perry explains himself:
>> >Imagine tomorrow morning someone came up to you, Robin Hanson, and
>> >asked you to invest your money in something with no way to calculate
>> >the rate of return, no way to calculate the odds of any particular
>> >rate of return, and no exit strategy for 150 years.
>> >You'd tell them to take their prospectus and shove it.
>>
>> Yes, and I'd do this if you changed "150 years" to any time period
>> whatsoever.
>
>I wouldn't. If the term was 2 years and there was a possibility, but
>not an easily quantified one, of high returns, I might say "yes" just
>for the hell of it, given that I was likely to exit within two years
>either way, especially if I knew the people involved and they weren't
>kooks (a lowering, but not an easily quantified one, of risk.) Every
>serious investor maintains a certain amount set aside for "speculative
>investment".

I think I may understand now. If the purpose of this "mad money" fund
is to have some fun, see some action, maybe learn a thing or two,
and maybe impress some assocites, then sure an extra time premium makes
sense. No fun betting now on a horse race in the year 2100.

If, however, I only care about the financial return, then if I have a
good feeling about the investment and knew and trusted the people involved,
and if there was a liquid market for selling my stake later, then holding
fixed my risk and rate of return, I wouldn't care about the time frame.

Robin Hanson
hanson@econ.berkeley.edu http://hanson.berkeley.edu/
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614
Received on Wed Mar 25 23:17:06 1998