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There are lots of other ways for people with limited money to lose it, and there always will be. Casinos, lottery tickets, credit card debt, frivolous purchases

There are lots of other ways for people with limited money to lose it, and there always will be. Casinos, lottery tickets, credit card debt, frivolous purchases, etc. I can’t think of any reasonable argument why allowing a free-thinking adult to, say, put a bit of savings into a friend or relative’s new startup is so much worse than the rest of these that it needs to be illegal.

ska 7y ago
It's the imbalance of power. I don't think accreditation is perfect, but it is fairly reasonable. It is really, really easy to take advantage of naive investors. Sure, there are probably examples of sophisticated investors who don't meet the criteria. But the numbers are tiny, and probably much smaller than the numbers who think they are, but are in fact not. Don't forget, you are still allowed to lose your life savings at "regular" investing. And Casinos have different regulations constraining their ability to fool punters... Accreditation was introduced as risk management, after all. Any time you do something like that you can have a few outliers who are negatively affected. But if the policy is basically sound, overall it is a net win. I think that is the case with accreditation. It's not there to stop you from investing $10k in your friends startup. It's to stop companies from bilking $10k from thousands and thousands of people. Could your friends & family case stand to be eased up a bit? Probably. Does it account for much in the overall scheme. Probably not. Bear in mind the difference between intent and efficacy. All of the things you mention also have regulation or legislative constraints that in theory are also supposed to make it harder for people to naively get themselves in trouble. Why should investment be different? For what it's worth, I also think it should be easier to invest small amounts in higher risk ventures - but that counterbalance should be to put limits on the structuring those ventures are allowed to do in order to offer it. Keep everything relatively simple and transparent, keep the terms and structure easy to understand without having to pay a decent lawyer 2k every time to review...

ska 7y ago

It's the imbalance of power. I don't think accreditation is perfect, but it is fairly reasonable. It is really, really easy to take advantage of naive investors. Sure, there are probably examples of sophisticated investors who don't meet the criteria. But the numbers are tiny, and probably much smaller than the numbers who think they are, but are in fact not. Don't forget, you are still allowed to lose your life savings at "regular" investing. And Casinos have different regulations constraining their ability to fool punters... Accreditation was introduced as risk management, after all. Any time you do something like that you can have a few outliers who are negatively affected. But if the policy is basically sound, overall it is a net win. I think that is the case with accreditation. It's not there to stop you from investing $10k in your friends startup. It's to stop companies from bilking $10k from thousands and thousands of people. Could your friends & family case stand to be eased up a bit? Probably. Does it account for much in the overall scheme. Probably not. Bear in mind the difference between intent and efficacy. All of the things you mention also have regulation or legislative constraints that in theory are also supposed to make it harder for people to naively get themselves in trouble. Why should investment be different? For what it's worth, I also think it should be easier to invest small amounts in higher risk ventures - but that counterbalance should be to put limits on the structuring those ventures are allowed to do in order to offer it. Keep everything relatively simple and transparent, keep the terms and structure easy to understand without having to pay a decent lawyer 2k every time to review...