A staple of free market theory is that it will allocate capital efficiently. This has generally come to mean capital will find its way to the ideas that utilize it so well that the invested capital will be returned, along with a premium that covers the time value of money, the risk borne by the investor and in the most favorable instances, an undefined premium reflecting just how great the idea really was.

As money and margin became institutions and drove global business plans over the last two decades (private equity, sovereign wealth funds, Goldman-Morgan-Lehman axis etc), rather than invention and product/service development, the allocation of capital became concentrated and narrow. It wound up in “sure things” that could deliver the golden fleece - the 20% return - that also covered the heavy fees charged by those that managed the funds.

“Sure things” are often staples societies need to live…energy, housing, food, health care. Out of this capital allocation and concentration of investment, global societies did not get measurably better or more efficient energy infrastructure, housing markets, food supply and distribution and least of all, reliable, affordable, quality health care. What we have gotten is more expense and less supply.

The theory of a free market to allocate capital efficiently breaks down in the execution. Liquidity got concentrated in the hands of financial engineering. From that there came a waterfall of ways to hedge, go short and go long any sure thing. But there did not come an allocation of capital that fostered invention and development of the ideas that secure economies and reward wise investors.

Money flowed swiftly to few sources. It did not flow freely and steadily throughout the broad range of global demand’s needs. It’s how you get a locked up, debt-ridden global economic train that cannot produce any steam to carry itself forward.

Above all, money must be in constant motion, from investors’ hands to borrowers’ ideas to labor’s pocket to merchants’ cash registers. This loop is essential and fundamental for forward economic motion. A strategy of investing in sure things concentrates capital in scant few places that rely on societies suffrage to generate return to a limited investor base. This loop is detrimental to global economic motion and it’s the one we’ve got.