Gambling

There's an odd phenomenon you can observe in the UK.  I've noticed it recently a couple of times on the flagship morning news programme "Today" on BBC Radio 4.

When talking to investors or businessmen and trying to disparage their efforts to make money, particularly on the stock market, the interviewer will accuse someone of "gambling".  Gambling, you see, is bad, while investing, presumably, is good.

But is there really any difference?

One of today's (and "Today's") news stories is the apparent suicide of Adolf Merckle after losing a huge amount of money, a large chunk of it apparently "gambling" that Volkswagen shares would fall when, in fact, they rose spectacularly.

Was this a gamble, or an investment that went wrong?

The old proverb claims that you have to "speculate to accumulate".  In the sense that any investment involves risks and that higher returns involve greater risk, this is true.  Putting money in the bank is low risk (we all hope - though even this is not completely certain).

Investing in shares is higher risk - there's usually more chance of a company going bust and wiping out the value of your shares than there is of the bank disappearing - but the return on the investment may be greater.  Note the word "may".  There is no guarantee, of course.  Most equity investments at the start of 2008 will have suffered a pretty painful loss in value during the course of the year.

"Shorting" shares - taking a view that their price is too high and that it will therefore fall - can be riskier still, in the sense that you can lose more money than your initial stake if you get things badly wrong.

Does that mean that an investment in shares is a gamble?  I think so.  I think that much (most?) of what we do in life involves risk and so many activities are, in a sense, a form of gambling. Does an investment magically transform itself into a gamble when it goes wrong?  That would be ridiculous.

So why do BBC interviewers still persist in trying to put their interlocutors on the back foot by accusing them of gambling?  I think it tells you more about the BBC, and perhaps the persistent anti-business streak of much of the British establishment, than it does about the people they interview.