Sovereign wealth funds: globalization's appetite for risk

As senior managing director of a rapidly growing high-tech company that was - until quite recently - overwhelmingly dependent on "angel" investors, I can readily attest to the joys of financial liquidity. When ordinary individuals accumulate wealth and can invest as they please, good things happen to ambitious entrepreneurs and their start-ups. Call it the wisdom of greedy crowds.

The same principle holds for the global economy: when the system is flush with cash and bursting with investors properly incentivized to spread it around, globalization tends to accelerate. When money is tight, that's historically when trade protectionism kicks in, along with anti-immigrant sentiment.

Simply put, rising income is a gift that keeps on giving, primarily because investment risk is more easily discounted. The more money I've got, the greater my appetite for risky business. Good things may come to those who wait, but even greater sums accrue to aggressive investors.

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Tom says:

A basic primer designed to present ground truth on a new element that some commentators inevitably describe in unnecessarily fear-mongering ways.