Church of Jesus Christ of Latter-day Saints<\/a> like to complain that it spends far more money on malls and stocks than on humanitarian assistance to the needy.<\/p>\n\u00a0<\/p>\n<\/div>\n
Viewed superficially, this seems undeniably true.<\/p>\n
\u00a0<\/p>\n
However, it seems obvious to me that the complaint rests upon on a plain fallacy of equivocation as well as on a basic misunderstanding of finance and economics. \u00a0I\u2019ll treat the equivocation first.<\/p>\n
\u00a0<\/p>\n
Imagine two extraordinarily wealthy men. \u00a0The first \u2014 let\u2019s call him \u201cTrevor\u201d \u2014 buys a\u00a0Lamborghini Veneno for $4.5 million. \u00a0He loves fast cars, lavish parties, the yacht that he keeps in Monte Carlo, and skiing in Gstaad. \u00a0 The second of our two very rich men \u2014 we\u2019ll call him \u201cRussell\u201d \u2014 buys a $4.5 million stake in the Acme Consolidated Megahuge Corporation. \u00a0Russell has chosen ACM Corp. with an eye to steady income from dividends but also to likely growth in principal.<\/p>\n
\u00a0<\/p>\n
Both Trevor and Russell have spent $4.5 million dollars. \u00a0But, although we use the verb to spend<\/em> in both cases, surely there\u2019s a distinction to be made between the two.<\/p>\n\u00a0<\/p>\n
In buying the Lamborghini Veneno, Trevor hasn\u2019t given a moment\u2019s thought to \u201cinvestment\u201d or prudence. \u00a0He simply likes the car, and he\u2019s got money to burn. \u00a0And burn it he will. \u00a0A Lamborghini Veneno, of course, isn\u2019t a typical car. \u00a0Still,\u00a0according to current depreciation rates, the value of a new vehicle can drop by more than twenty percent after just the first twelve months of ownership. Then, for the next four years, it will typically lose roughly ten percent of its value each year. \u00a0This means that a new car can be worth as little as forty percent of its original purchase price after only five years. \u00a0And we\u2019ll say nothing about the risk of accidents, and so forth.<\/p>\n
\u00a0<\/p>\n
By contrast, if Russell\u2019s reasoning with regard to\u00a0Acme Consolidated Megahuge Corporation is sound, at the end of five years he will have had steady income from his shares and, upon their sale, will have achieved signfiicant capital gains. \u00a0Unlike Trevor\u2019s purchase, his purchase will leave him financially better off, with more money to use for whatever purposes he chooses.<\/p>\n
\u00a0<\/p>\n
To spend money on consumer goods \u2014 whether daily excursions to Starbucks or the latest electronic gadgets \u2014 is very different than spending money on investments.<\/p>\n
\u00a0<\/p>\n
This is a key point to keep in mind when considering the investments made by \u201cLDS Inc.\u201d<\/p>\n
\u00a0<\/p>\n
To be continued.<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
\u00a0 \u00a0 This blog entry continues the discussion commenced in LDS Inc. (Part One): \u00a0 Noisy\u00a0children are a real headache. Two aspirin will make a\u00a0headache go away. Therefore, two aspirin will make noisy children go away. \u00a0 Surely you can see the error in the passage above: \u00a0The term headache shifts its meaning between the […]<\/p>\n","protected":false},"author":1019,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-80613","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\n
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<\/a>