Jack Bogle, the creator of the first index fund, says
The stock market has nothing—n-o-t-h-i-n-g—to do with the allocation of capital. All it means is that if you’re buying General Motors stock, say, someone else is selling it to you. Capital isn’t allocated—the ownership just changes. I may be an investor, you may be a speculator. But no capital goes anywhere. This is basically a closed system. You have new IPOs and whatnot, but they’re very small compared to this vast thing we call a market
My response to this has always been... if that's true, what is the point in all of this? It's a mechanism that predicts the success of companies, but plays only a very small role in investment? Could we get that money to do something better, then?