Whoever is holding it when the price inevitably falls. When the price is increasing, the money is redirected from any other investment seen as less preferable, and whoever is holding
that loses money. The money has to come from
somewhere.
In order to move the price up, you need new buyers. Eventually you run out of new people to interest in the stock, and the price tops out.
If someone buys it at the peak and holds it, at some point they will either sell it for a loss, or they will hold onto it "forever" which ties up that money for them and effectively makes it a total loss.
In addition, in order to drive the price up, people are choosing to commit money to that purpose and not others. Competitors' stocks will fall. Other types of investments won't be done.
Clearly, it's a game of hot potato where you don't want to be stuck holding the bag, so you play musical chairs and end up changing horses mid-stream.
Let's assume someone has a foreign banknote and doesn't know what it's worth (it's a one dollar bill). He sells it for 20 cents; the next person sells it for 40 cents; and so on. Whoever buys it at a dollar is making a lateral trade unless he finds a sucker.
Anyone who left money on the table is essentially profit-sharing with the next person. In order to make your profit, you had to GET the money from someone else who already had it.
When you sell your $400 stock, someone else buys it, with the express purpose of having an asset that appreciates fast enough to outpace inflation.
It's kind of like the rake in a poker game. If your buyer sells it a year later for the "same" $400, it's not breaking even, it's losing 3% or more. You could posit a theoretical stock that always went up but still was always a loss in terms of real value, because it didn't match the inflation rate.
Let's consider the case of a stock that keeps falling. It's a money-loser for one person after another, and instead of profit-sharing they are distributing loss between themselves, balancing out the profit that has already been taken out. If the freefall rate is too fast for the market reaction time, then someone ends up selling too low, and their loss pays for whoever buys it and sells it at the more stable price.
The issue that people like to muddle is the "pie fallacy" straw man. There ISN'T actually any argument about growing the pie. We all know it gets bigger. There is no dispute about that.
The issue that has popped up over and over again the last few years is that something like (I don't recall the exact nubmers) 80% of the productivity gains have gone to the top 1%, or top 10%.
http://www.google.com/search?q=wages+vs+productivity&tbm...
Your gain also depends on other people losing in another way. If everyone has their money in "safe" investments, there is no demand for your stock. So you need to convince people to put their money in riskier investments instead. And it's risky because most people lose money.
In fact, the whole ecosystem is built on Venture Capital, and most of the ventures fail. As everyone knows, the VCs get paid a fee even if the fund doesn't have a return.
And if it does have a return, there are still all the losses incurred by everyone who put their lives into their startups which ended up not working out, which is something like 9 out of 10 startups. Plus the investors' money which was lost, only made up for by someone else.
And then there is all the wealth NOT created because you can't hire the talent, since it is in a busy-loop at some giant company doing something less useful, like making Skinner boxes, waiting for stocks to vest. Or simply being paid for bodycount, so a competitor can't get them. And then the demotivation that occurs when people have tons of money and find a lot of ways to spend their time other than slaving away on hard problems.
People tend not to push themselves once they've reached a certain level of comfort. What incentive does the Mob Wars programmer have to become an expert developer, now that he's filthy rich from a simple web app?
Creating breakthrough technology depends on expertise, which depends on experience. What might PG, RTM, and TLB have created with their combined abilities in programming?
ViaWeb had some fundamentally great ideas:
> We had a structure editor for
manipulating these templates, a lot like the structure editor they had in Interlisp. Instead of typing free-form text, you cut and pasted bits of code together. This meant that it was impossible to get syntax errors. It also meant that we didn't have to display the parentheses in the underlying s-expressions: we could show structure by indentation. By this means we made the language look a lot less threatening.
>We also designed Rtml so that there could be no errors at runtime: every Rtml program yielded some kind of Web page, and you could debug it by hacking it until it produced the page you meant it to.
http://lib.store.yahoo.net/lib/paulgraham/bbnexcerpts.txt