Re: Extropy Investing Group

Eliezer S. Yudkowsky (
Mon, 13 Oct 1997 20:18:09 -0500

Ramez Naam (Exchange) wrote:
> Since I work in infotech, my investments are currently concentrated
> there. Following the general strategy of picking market leaders in a
> fast-growing market, I would recommend a distribution of investment
> capital among the following companies:
> Microsoft
> Intel
> Compaq
> Dell
> Sun
> Netscape
> Oracle

Whoa! Microsoft, there, is trading at 60 times earnings. 20 is considered
rich. And Microsoft officials keep warning everyone that next year's earnings
will not rise as sharply.

In my opinion, this bull market is a bubble if I ever saw one. People are
buying a stock in expectation that it will rise, rather than in expectation of
receiving dividends. The only way to make money on this stock market is if
someone else pays an equal amount of money. In short, it's a pyramid scheme,
not an investment strategy.

Microsoft is in a somewhat better position than most. Because it gives large
stock options to its employees, Microsoft actually benefits from the money you
spend on its stock, so you are, in a sense, "investing" in it.

But in my opinion, you shouldn't "invest" in stock unless the corporation
gets your money, such as in an Initial Public Offering. Otherwise, you are
gambling either that the pyramid scheme can continue indefinitely,
or that you can pull out before it collapses. If you want your wealth to
generate wealth, you have to actually give it to someone who can use it... not
buy pieces of paper and hope you can sell them for more than you paid.

It's a pity Zyvex (nanocorp) doesn't take small investors.

--       Eliezer S. Yudkowsky

Disclaimer:  Unless otherwise specified, I'm not telling you
everything I think I know.