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Now for the million dollar question - how is this different to a ponzi scheme?

55555 8y ago
It isn't JUST a ponzi scheme, but to some degree it sure seems like it is in part a ponzi scheme. Public investors pay back VCs and the entreprenuer and then get shafted. Actually, let's work through the Wikipedia definition line by line. > A Ponzi scheme ... is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[2] One distinction that could be made is that the entreprenuer isn't actually paying investors back himself. Rather the investors are finding new investors and re-selling their shares up the river. > The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. In a very literal sense, when you invest in Uber's Series A and then sell your shares on an exchange after IPO, you are aware that your profits are coming from other investors. However, I think in a pretty meaningful sense people believe the value of the company has increased due to 'product sales or other means'. It seems like a Ponzi-like startup is not illegal because it's not as deliberately deceptive nor is it schemed by a single party/person, but rather it's more the creation of the entire market and what is really causing the profits/payouts is more up-for-debate. (I should have used the legal definition though, not Wiki.)
- plankers 8y ago
  So... you're saying that the entire market is currently churning out legal ponzi schemes? Or is it that the entire market is itself currently a ponzi scheme? Either way, I get the distinct impression that I've seen this movie before and I didn't like the ending.
  - heyoni 8y ago
    They just finished explaining why it’s not really a Ponzi scheme yet you keep calling it one.
    - plankers 8y ago
      Did we read the same comment? Seems to me they just finished explaining all the ways it's similar to a ponzi scheme.
      - heyoni 8y ago
        > It seems like a Ponzi-like startup is not illegal because it's not as deliberately deceptive nor is it schemed by a single party/person, but rather it's more the creation of the entire market and what is really causing the profits/payouts is more up-for-debate. In a Ponzi scheme, you’re led to believe that profits are from sales, luring new investors to partake by lying. Uber is losing money but there’s still hype around it because everyone wants to get in on the ground floor. At the end of the day, they’re going to be releasing truthful quarterly reports rather than fabricating numbers out of thin air. The difference is pretty massive I would say.
- danieltillett 8y ago
  So it is different to a Ponzi scheme in that it has legal deniability, not in effect.
- kopos 8y ago
  The dividends that are paid by the company are the ones that differentiate a public company shares from a ponzi scheme. In a Ponzi scheme, the earnings are from future investors money but there is no concept of dividends ... where one earns based on how the company is actually performing.

It isn't JUST a ponzi scheme, but to some degree it sure seems like it is in part a ponzi scheme. Public investors pay back VCs and the entreprenuer and then get shafted. Actually, let's work through the Wikipedia definition line by line. > A Ponzi scheme ... is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[2] One distinction that could be made is that the entreprenuer isn't actually paying investors back himself. Rather the investors are finding new investors and re-selling their shares up the river. > The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. In a very literal sense, when you invest in Uber's Series A and then sell your shares on an exchange after IPO, you are aware that your profits are coming from other investors. However, I think in a pretty meaningful sense people believe the value of the company has increased due to 'product sales or other means'. It seems like a Ponzi-like startup is not illegal because it's not as deliberately deceptive nor is it schemed by a single party/person, but rather it's more the creation of the entire market and what is really causing the profits/payouts is more up-for-debate. (I should have used the legal definition though, not Wiki.)

plankers 8y ago
So... you're saying that the entire market is currently churning out legal ponzi schemes? Or is it that the entire market is itself currently a ponzi scheme? Either way, I get the distinct impression that I've seen this movie before and I didn't like the ending.
- heyoni 8y ago
  They just finished explaining why it’s not really a Ponzi scheme yet you keep calling it one.
  - plankers 8y ago
    Did we read the same comment? Seems to me they just finished explaining all the ways it's similar to a ponzi scheme.
    - heyoni 8y ago
      > It seems like a Ponzi-like startup is not illegal because it's not as deliberately deceptive nor is it schemed by a single party/person, but rather it's more the creation of the entire market and what is really causing the profits/payouts is more up-for-debate. In a Ponzi scheme, you’re led to believe that profits are from sales, luring new investors to partake by lying. Uber is losing money but there’s still hype around it because everyone wants to get in on the ground floor. At the end of the day, they’re going to be releasing truthful quarterly reports rather than fabricating numbers out of thin air. The difference is pretty massive I would say.
danieltillett 8y ago
So it is different to a Ponzi scheme in that it has legal deniability, not in effect.
kopos 8y ago
The dividends that are paid by the company are the ones that differentiate a public company shares from a ponzi scheme. In a Ponzi scheme, the earnings are from future investors money but there is no concept of dividends ... where one earns based on how the company is actually performing.