[drogo]

You say:

"We know that stock picking isn't any more effictive than random chance (that's the theory behind index funds)" If this were the case, why aren't index funds comprised of startups and penny stocks? Index funds are usually comprised of stable companies that have an excellent track record. This means it's not random.

I think you are getting the idea wrong. The point is that in a liquid and efficient market like the stock market the price will reflect all available information on the company and you should not expect anything more than random returns. In the case of startup there is no price, and in most cases the price is likely to be zero.