Stock Ownership is Company Ownership
I included this in a newsletter last year and wanted to come back to it with an update:
Dave Portnoy of Barstool Sports posted a ridiculous tweet that got over 3 million views where he said:
My problem with the stock market is it’s just one big casino where the people in charge rig it to (expletive) over the little guy and make all the money for themselves.
My response to this kind of emotional outburst is simple:
Owning a share of stock means you are a part owner of that company.
A company like Ford broke ownership of their company into 4 billion little pieces, each one represented as one share of their stock.
There’s no gambling involved in long-term ownership of companies.
The only people who think the stock market is gambling are people treating the stock market like a casino.
If you don’t ‘believe’ in stock market investing at all, that means there is literally no publicly traded company in the United States that you want to be an owner of.
That’s impossible.
So, let’s be clear, investing in the stock market isn’t gambling and it isn’t some nebulous unknown. You are buying small ownership stakes in companies.
In the case of a total stock market index fund, you are buying an ownership stake in over 4,000 companies.
This is not gambling, it’s investing.
Tim, one of our community members, responded to my newsletter with this thoughtful reply:
I disagree a bit. Stocks are very disconnected from the companies they represent.
The company receives money once initially at IPO, and maybe if they sell more shares later. But I don’t really feel like ownership is the right way to put it. It’s technically true, yes, but I have no influence on the company, nor do I help them by buying the stock – there’s no relationship. I can go to their investor meetings and have a microscopic vote (in some cases), but anyone can get that information.
The stock market to me is a bunch of pieces of paper, with different company names written on them. “This one says Ford! Would you give me $12 for it?
My response to Tim:
I fundamentally disagree on it not being ownership as that is precisely what it is.
Very simply: If you own 1 out of 4 billion shares of Ford, sure it doesn’t feel like much with your voting and share of income.
But play that to its logical extreme: What if you kept buying shares until you owned all 4 billion shares.
Do you own the company then? You bet!
Or take a small business like ChooseFI. I think we have 200 shares that Jonathan and I each own 50% of. If I sold you one of them personally, you damn well own 0.5% of this company.
Just because the numbers are small doesn’t mean the logic doesn’t hold for publicly traded companies!