Why Stocks are Good Investments

Suppose we go back to the 1800's. Let's say there was a little village where people used mules to plow their fields. Let's say there were 8 people in the village that were farmers. They were able to supply food to a population of 10 people. The other 2 people were merchants. Everything was in balance and everyone was happy.

Now let's move forward to the 1900's. Tractor technology became available. Suddenly it only took 3 people to grow food for 10. That means 5 of the farmers had to find something else to do. So they sold their land to the 3 farmers with tractors and started a small company to build tractors and some other things like televisions. Again everything fell into balance and everyone was happy, more happy in fact, because everyone now had television.

Now lets' go onto the next century. Let's say there are some major advances in robot technology, such as human-like robot vision. Robotic tractors become available. The robots plant the fields, harvest the crops, and deliver the goods to the stores. Not only that, there are robot workers in the tractor and television factories. In fact, no one has to work at all!

Here are the key effects of these technology advances:

• There is enough food and other products for everyone.
• There is very little work.

So, what happens to the people? If they don't work, how do they make money? Will the village to be overflowing with food and other goods and no one have money to buy them? Fortunately, that's not what happens in this hypothetical village. When the robot tractors become available they are too expensive for a single farmer to buy. So they form a corporation and sell shares to all the people in the village. The company makes a lot of money because expenses are low - no workers to pay. The company pays big dividends and everyone has plenty of money to buy products and food.

The point here is that stocks provide a fair and efficient way to distribute wealth that technology provides. With technology there may not be enough jobs for everyone but there is plenty of things that everyone needs. Alternatives to stocks are government 'make work' jobs and welfare.

My conclusion is that stocks are a natural evolution in the economy and it will become more and more common for the average person to own stocks. Eventually the number of jobs goes down as productivity increases.

What we should do:

• Don't worry so much about unemployment when considering the effects of technology advances, except where it relates to short term displacement of workers.
• Invest in stocks.