An interesting take on the difference between investment, speculation, and gambling.
If you know the distribution, it is investing. If you don't know the distribution, it is speculation. If it just a passing of money between players, then it is gambling.
This can be compared with the dynamic Minsky lending description of hedge, speculative, and Ponzi. Bankers lend money with the payback based on whether there is a likelihood that the distribution of cash flows will cover the loan.
Investment: You can construct a reasonable Bayesian distribution of likely future outcomes (or you can borrow the one revealed by market prices), and with reasonable confidence commit your wealth to support activities that will yield in the future produce valued goods and services in excess of their production cost, and hence are likely to profit.
Speculation: You cannot construct any reasonable Bayesian distribution of likely future outcomes for new technologies. Why not? Because, as Friedrich von Hayek wisely observed, if we could do so we would already be much further along in deploying those technologies than we are. Hence we are in Knightian uncertainty rather than Bayesian risk. There may be activities that will yield in the future produce valued goods and services in excess of their production cost, and hence they may be future profit. But do not ask the odds. Nobody knows, and nobody has any business claiming that they know.
Gambling: This is easy: No money is coming into the system. So what one participant wins, another must lose: zero sum. You can do this, if it gives you a dopamine thrill. But don’t think that you are even speculating. And never think you are doing anything that might be rightly termed “investing”.
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