DISCUSSION OF SECOND APPROXIMATION

the rate of return a new influence? Is there really anyimportant distinction between the rate realized on abond, which is interest pure and simple, and the rate real-ized on any other investment? Are they not all simply in-terest, and is there anything else behind this interest be-sides human impatience? Is not the sum invested simplythe discounted value of the return expected with dueregard to the risk element, which has not yet been con-sidered?

The answer, as should now be clear, is that the rate ofreturn over cost really is a new element, not included inthe first approximation, however mixed that elementmay be, in practice, with the elements considered earlier.When labor and satisfactions are concerned there is some-thing more than exchange. The labor of planting a fruittree is not the same thing as the discounted value of thefruit yielded by the tree, even though the value of thelabor and the value of the fruit may be equal at a giventime. The satisfaction from eating fruit is pleasure andthe labor of planting it is pain, and these can be directlycompared, despite the fact that in, practice they areusually compared only indirectly in terms of their ex-change equivalents.

Instinctively we feel the presence of this factor of rateof return over cost whenever we invest in a new enter-prise. To invest in the original telephone enterprise, orin a railway under construction, seems somehow differentfrom today buying telephone or railway securities. In thelatter transactions we feel we are dealing with men—trading; in the former we feel we are dealing with Natureor our technical environment—exploiting. In fact, I camenear selecting the term exploitation for a suitable catchword rather than investment opportunity to express the

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