Are investors and speculator activities necessary to the system of production, or could businesses function just fine without them?
Because I feel like sometimes businesses don't really have to resort to having to sell portions of there business to investors and stuff...
Investors and speculator activities play a significant role in the system of production. While it is true that some businesses can operate without external investment, the vast majority rely on investors and speculators to fund their operations and fuel growth. Here's why:
1. Capital: Businesses often require substantial capital to start, expand, or innovate. Investors provide this capital in exchange for a share of ownership, which enables businesses to finance their operations, purchase assets, hire employees, and invest in research and development.
2. Risk sharing: Investors help businesses mitigate risk. By spreading the financial risk among multiple investors, businesses are less vulnerable to the potential negative consequences of business failures, market fluctuations, or economic downturns.
3. Expertise and network: Investors often bring valuable expertise, connections, and industry knowledge to the table. They can contribute strategic guidance, mentorship, and open doors to new partnerships or customers that businesses might not have access to otherwise.
4. Market liquidity: Speculators, such as stock market investors, provide liquidity to the system by buying and selling shares. This liquidity ensures that businesses can easily raise capital by selling shares to interested parties, even after the initial investment.
5. Market efficiency: Speculator activities, such as buying and selling stocks or commodities, contribute to market efficiency. By reacting to available information and anticipating future events, speculators help set prices that reflect the true value of assets, enhancing the overall functioning of financial markets.
However, it's important to note that not all businesses rely on external investment or engage with speculators. Some businesses may operate solely through self-funding, retained earnings, or other sources like bank loans. The decision on whether to pursue outside investment or engage with speculators ultimately depends on the nature, scale, and growth aspirations of the business.