In a perfectly transparent and infinite economy, all investment risk would be evident and calculable. As a result, all business profits from like-term investments would be the same. Citizen Bob and Citizen John would share the opportunity to earn the exact same profit from a 2-year corporate bond, a 2-year loan to a lemonade stand, or a 2-year certificate at their local credit union. Competitor A and Competitor B would earn the exact same profit on a 24-month credit card loan as they would on a 24-month auto loan. They would both realize the same final profit on a 10-year treasury as they would a 10-year interest-only mortgage portfolio.
At a perfect and infinite equilibrium, all investment products of like-term would yield a homogenous profit.
Because of this, it can be said that all business is an attempt to cheat. Every single one of us is trying to cheat the equilibrium. And let me tell you – some people really suck at cheating. I fear I may be one of them.
