[mikeash]

It's important because it means that capital is not being allocated optimally.

From an individual point of view, sure, you really can't control stuff like that, and you're better off concentrating on making your own stuff better.

But that's not the conversation here. This discussion is about the whole system, and particularly the statement that "this is how innovation works."

[kami8845]

Who would you personally feel more comfortable lending money to, a complete stranger (who might very well need it more -- aka optimal distribution of resources) or someone within your family or close circle of friends, where you have some level of confidence that they will simply run off with your money or squander it?

[mikeash]

Virtually everyone finds the stranger more comfortable. They may not say so, but a quick look at their finances will reveal most of their assets in bank accounts, stocks, bonds, etc., and almost none in the form of loans to family members.

[kami8845]

Quite a perverse strawman from someone who just a second ago asserted what "this discussion is about".

[mikeash]

Uh, you're the one who asked who I'd be more comfortable lending money to. If it's not relevant then why did you bring it up?