There's a point[1] between the earth and the moon where you stay still. The gravity of the earth and the gravity of the moon pull at you with equal force, and if you tip in any direction ever so slightly that's when you begin falling.
We know that wealth inequality is getting worse, and getting worse faster. The rich get richer, and the poor get poorer. It made me wonder: where do you draw the line between rich and poor? Is there a point along the spectrum where you can imagine a magnet pushing the people on the right one way and the people on the left another way?
Of course this would be an average -- there are rich people who go completely broke and poor people who strike it rich, but in principle there should be, right? Time for a mini rabbit hole.
If you sort everyone by wealth, the "rich" start roughly at the top 10% of the population. In the UK, that's roughly ~£1.2M household wealth and above. Below that, your share of the pie is shrinking. No wonder it feels so hard to try and get on the right side of "rich"!
However, notice how I said "your share of the pie is shrinking" and not "you're getting poorer". Getting truly poorer is reserved for roughly the bottom few percent of the UK. These are people with a net worth of ≤ 0, and their debt compounds. But everyone else gains in absolute terms -- the pie gets bigger. Or to borrow another metaphor: "a rising tide lifts all boats". Which brings me to my next rabbit hole...
There are forms of wealth that beget wealth, but wealth isn't zero-sum (overall everyone's quality of life has been improving over time). There are four sources:
Wealth inequality strongly triggers my sense of justice, but at the same time I'm trying to accumulate large amounts of wealth to use it to achieve my goals. The way I reconcile this paradox is that the sort of wealth I seek to acquire is driven by profit rather than rent. I seek to create value for myself and others. If you try to create wealth through extraction especially, I would definitely judge you for it.
I was raised with the belief that interest is forbidden and self-evidently evil (in Islam: riba), though this exists in other Abrahamic religions (usury). If you examine it, I think the reason it's debated at all is because it's the sort of thing that may look fine "in moderation", like drinking or gambling, but where the danger of the slippery slope is real.
Let's break it down under the above lens of profit vs rent. If you lend someone money, you're taking on a risk and deferring your own use of that money. So you price that into your interest rate. Two things can happen: the debt allows the borrower to create net value and pay you back, or they fail and default on their debt.
There's an inherent asymmetry here: the lender's return is fixed no matter what the borrower Creates. If the borrower succeeds, they keep the surplus. If they fail, they eat the loss (and still owe). Lender-return and borrower-outcome only line up by coincidence, and when they do, you've accidentally reinvented an equity deal (or more accurately, a profit-share of some sort).
That to me is a lot more palatable: you give up your capital and take some risk, and if it goes well you make money back that is proportional to how well it went. Normal interest is a way to hedge that risk, but overall the lender makes money on the risk. Lending can still turn predatory though and become outright Extraction.
For example, if a borrower has no alternatives, and a lender takes advantage of that through interest rates that far exceed the risk (e.g. Wonga's 5,853% APR, before the FCA stepped in), they're extracting wealth from scarcity and desperation rather than actually creating value. Similarly, the Visa/Mastercard duopoly, or banks printing money, etc.
All of this is to say that there are ways where I feel like debt is ethical, but they're so narrow that you might as well do the righteous thing and pick equity, if you can tolerate the risk.
When you buy a stock and your wealth grows, you're adopting the wealth creation mechanics of the company whose stock you own. So naturally, you shouldn't buy stocks you find incompatible with your ethics. If you put your money into index funds, you're adopting the wealth creation mechanics of the market as an average.
I won't go into examples, as I'm sure you can imagine companies that fit any of our four categories. How do you decide what companies to invest in, or even what products to own? It can get pretty murky, especially B2B. For example, if I own OpenAI shares, how do I know what end users do with the product? Equally, should I audit whether a fund's LPs are also invested in the IDF?
My general rule of thumb: everything must be clean "one step removed", in either direction. A company I'm somehow connected to must align with my views, but its investors don't have to. Equally, if I accept money from someone, I vet them, not their entire money's ancestry. Trace any money back far enough and you'll hit blood!