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This is a pretty clear Chesterton's Fence [1] example. The scams that occurred prior to enacting these standards were massive. If you want to look at a modern

This is a pretty clear Chesterton's Fence [1] example. The scams that occurred prior to enacting these standards were massive. If you want to look at a modern example of such things, consider the cryptocurrency ecosystem and the many scams that occurred [2] 1 - https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence 2 - https://twitter.com/patio11/status/1032024732214812673 https://twitter.com/patio11/status/1032024732214812673

deleted 6y ago
[deleted]
gojomo 6y ago
Modern scams don't show the 'accredited investor' rules are helpful. These "are you rich enough?" limits, on just a few classes of potential investments, did not and can not provide any protection against rampant risks like: * Enron (an audited public company approved for widow-and-orphan investing) * Madoff * Fake-documentation or risk-oblivious home lending * At-home Forex or securities trading in arbitrarily exotic or leveraged ways (Robinhood! Futures! Expiring options!) * State lotteries with awful odds & deceptive advertising preying on the decision-biases of the poorly-educated * Prosperity gospel solicitations So rather than proving the value of Accredited Investor restrictions, your example scams (some crypto), and others, just show them to be an ineffectual symbolic Maginot Line, not a wise Chesterton's Fence.
- chii 6y ago
  the accredited investor rules are not meant to reduce all risks - just risks associated with non-disclosures. Things like enron cooking the books, or madoff ponzi schemes are going to happen regardless of the accredited investor certification. But what you can't know is whether having early stage startup and other investments require accredited investor certification means fewer people get trapped into investments they don't fully understand. I think it does.
  - gojomo 6y ago
    What makes you "think" that? A hunch? Blind trust in ~90-year-old regulatory structures? How many people reviewed the Enron disclosures? How many amateur daytraders & Robinhood investors read all the disclosures of the "public" securities they hop into and out of? Aren't all levels of investors leveraging the greater attention of a smaller group of experts? Couldn't some non-millionaires – there are a lot of them, with many diverse skills! – be the kind of highly-attentive 'leads' who help vet firms for larger networks? Is an inherited-funds millionaire, no matter how dumb or lazy, more immune from the risks of non-disclosure than a young & ambitious non-millionaire? How about a non-millionaire with graduate degrees in business, finance, law? Why not test competence, not net worth? Would you also only allow the high-net-worth to do other risky activities, like drive private cars, play contact sports, camp on public lands, visit the beaches? How about raise children? There, a life is at stake. Do we dare let these gullible, barely-adult non-millionaires, the kind of rubes who would throw all their money away on unwise private investments if the SEC didn't save them, have children? And if slick founders can easily fleece these childlike non-millionaires through deceptive promises, what chance do these wisdom-constrained individuals have against slick politicians? Is it really prudent to let non-millionaires vote?
chrisco255 6y ago
Right, but it's not the 1920s any more. We live in this highly connected, information rich, rapidly changing world, that is fundamentally different than the 1920s in many ways. The general public is far more savvy about investments, risks, and bubbles in general than they were in the past. Today, private equity tends to capture almost all of the value before a company goes public. The crazy thing is that a foreign citizen can invest in an American start up without any of these credentials, yet a US citizen cannot.
- nullc 6y ago
  The cryptocurrency ecosystem broadly demonstrates otherwise: its full of outright scams operating a billion dollar scale.
- jcranmer 6y ago
  The 90's heralded a lot of optimism about the Internet's role in making information ever easier to access. What we've discovered in the 21st century is that it also makes disinformation easier to access. And perhaps more so, since democratization of content generation means there's fewer chances for curators to pull disinformation. I don't think it's easier for an average person in the 2020's to differentiate between investments, risky investments, and outright scams than the 1920's, were all the regulations to be waived away.
  - chrisco255 6y ago
    I think a person in 2020 is far more savvy about the risks than someone in 1920. For one, they're aware of crashes, bubbles, etc. and have probably even lived through at least one of them. They also don't have to trust the advice of a single broker over the telephone. The 2008 real estate bubble was driven by the same kind of speculation that drove the 1920s stock bubble. We are probably already deep into a stock bubble today, in 2020. And yet retail investors can plop down tens of thousands of dollars on stocks through Robinhood or a myriad of other apps, paying no attention to underlying fundamentals in the business.
    - 6y ago
elihu 6y ago
The thing about Chesterton's Fence in this case is that the fence might exist for more than one reason. A law that prevents poor people from being scammed can also enable rich people to cherry-pick all the most lucrative investments.
- hguant 6y ago
  It cuts both ways - the most lucrative investments are also the riskiest ones. We tend to look down our noses (sometimes masking it as sympathy) at those who spend their money on lottery tickets or gambling, taking on large amounts of risk for a chance of an _extremely_ lucrative payoff. What's the difference between the state lottery saying you have a 1 in 650 million chance of winning, and someone pushing a new bio-tech stock, with all the financial disclosures attached?
  - vageli 6y ago
    > It cuts both ways - the most lucrative investments are also the riskiest ones. We tend to look down our noses (sometimes masking it as sympathy) at those who spend their money on lottery tickets or gambling, taking on large amounts of risk for a chance of an _extremely_ lucrative payoff. What's the difference between the state lottery saying you have a 1 in 650 million chance of winning, and someone pushing a new bio-tech stock, with all the financial disclosures attached? You don't get disclosures attached as an accredited investor, that's the whole point.

deleted 6y ago

[deleted]

gojomo 6y ago

Modern scams don't show the 'accredited investor' rules are helpful. These "are you rich enough?" limits, on just a few classes of potential investments, did not and can not provide any protection against rampant risks like: * Enron (an audited public company approved for widow-and-orphan investing) * Madoff * Fake-documentation or risk-oblivious home lending * At-home Forex or securities trading in arbitrarily exotic or leveraged ways (Robinhood! Futures! Expiring options!) * State lotteries with awful odds & deceptive advertising preying on the decision-biases of the poorly-educated * Prosperity gospel solicitations So rather than proving the value of Accredited Investor restrictions, your example scams (some crypto), and others, just show them to be an ineffectual symbolic Maginot Line, not a wise Chesterton's Fence.

chii 6y ago
the accredited investor rules are not meant to reduce all risks - just risks associated with non-disclosures. Things like enron cooking the books, or madoff ponzi schemes are going to happen regardless of the accredited investor certification. But what you can't know is whether having early stage startup and other investments require accredited investor certification means fewer people get trapped into investments they don't fully understand. I think it does.
- gojomo 6y ago
  What makes you "think" that? A hunch? Blind trust in ~90-year-old regulatory structures? How many people reviewed the Enron disclosures? How many amateur daytraders & Robinhood investors read all the disclosures of the "public" securities they hop into and out of? Aren't all levels of investors leveraging the greater attention of a smaller group of experts? Couldn't some non-millionaires – there are a lot of them, with many diverse skills! – be the kind of highly-attentive 'leads' who help vet firms for larger networks? Is an inherited-funds millionaire, no matter how dumb or lazy, more immune from the risks of non-disclosure than a young & ambitious non-millionaire? How about a non-millionaire with graduate degrees in business, finance, law? Why not test competence, not net worth? Would you also only allow the high-net-worth to do other risky activities, like drive private cars, play contact sports, camp on public lands, visit the beaches? How about raise children? There, a life is at stake. Do we dare let these gullible, barely-adult non-millionaires, the kind of rubes who would throw all their money away on unwise private investments if the SEC didn't save them, have children? And if slick founders can easily fleece these childlike non-millionaires through deceptive promises, what chance do these wisdom-constrained individuals have against slick politicians? Is it really prudent to let non-millionaires vote?

chrisco255 6y ago

Right, but it's not the 1920s any more. We live in this highly connected, information rich, rapidly changing world, that is fundamentally different than the 1920s in many ways. The general public is far more savvy about investments, risks, and bubbles in general than they were in the past. Today, private equity tends to capture almost all of the value before a company goes public. The crazy thing is that a foreign citizen can invest in an American start up without any of these credentials, yet a US citizen cannot.

nullc 6y ago
The cryptocurrency ecosystem broadly demonstrates otherwise: its full of outright scams operating a billion dollar scale.
jcranmer 6y ago
The 90's heralded a lot of optimism about the Internet's role in making information ever easier to access. What we've discovered in the 21st century is that it also makes disinformation easier to access. And perhaps more so, since democratization of content generation means there's fewer chances for curators to pull disinformation. I don't think it's easier for an average person in the 2020's to differentiate between investments, risky investments, and outright scams than the 1920's, were all the regulations to be waived away.
- chrisco255 6y ago
  I think a person in 2020 is far more savvy about the risks than someone in 1920. For one, they're aware of crashes, bubbles, etc. and have probably even lived through at least one of them. They also don't have to trust the advice of a single broker over the telephone. The 2008 real estate bubble was driven by the same kind of speculation that drove the 1920s stock bubble. We are probably already deep into a stock bubble today, in 2020. And yet retail investors can plop down tens of thousands of dollars on stocks through Robinhood or a myriad of other apps, paying no attention to underlying fundamentals in the business.
  - 6y ago

elihu 6y ago

The thing about Chesterton's Fence in this case is that the fence might exist for more than one reason. A law that prevents poor people from being scammed can also enable rich people to cherry-pick all the most lucrative investments.

hguant 6y ago
It cuts both ways - the most lucrative investments are also the riskiest ones. We tend to look down our noses (sometimes masking it as sympathy) at those who spend their money on lottery tickets or gambling, taking on large amounts of risk for a chance of an _extremely_ lucrative payoff. What's the difference between the state lottery saying you have a 1 in 650 million chance of winning, and someone pushing a new bio-tech stock, with all the financial disclosures attached?
- vageli 6y ago
  > It cuts both ways - the most lucrative investments are also the riskiest ones. We tend to look down our noses (sometimes masking it as sympathy) at those who spend their money on lottery tickets or gambling, taking on large amounts of risk for a chance of an _extremely_ lucrative payoff. What's the difference between the state lottery saying you have a 1 in 650 million chance of winning, and someone pushing a new bio-tech stock, with all the financial disclosures attached? You don't get disclosures attached as an accredited investor, that's the whole point.