4 ms·

Why not simply require education and completion of some exam? (And no, a college degree is not necessary nor what I'm talking about) That would serve the goal

Why not simply require education and completion of some exam? (And no, a college degree is not necessary nor what I'm talking about) That would serve the goal of keeping the clueless from getting scammed, while also eliminating the kind of legalized classism (and I'd argue, unconstitutional on its face by way of the equal protection clause) that accreditation status represents.

tptacek 6y ago
That's exactly the new standard the SEC just promulgated. Get a Series 7, and go nuts. You'll probably have to spend some time apprenticing at a financial firm, but that seems like a reasonable hurdle if your goal is to become a professional investor. I still feel like the "classism" argument here is extremely weak. Not because investment opportunities aren't classist --- they are --- but changing 501(a) isn't going to fix that. They're structurally classist. Good bets don't want retail money, because retail investors are, as a cohort, a bunch of loons. It might never occur to you to sue over some random, mundane options allocation event, but I promise you, it would occur to someone in the cohort of retail investors. I really believe that retail investors do not have a functioning mental model of how startup investing works. It's hard enough to get people to diversify at all. To invest in startups, you have to place 10 bets, hoping that 1-2 winners pay for all the losers. Ordinary investors freak the fuck out when one of their positions goes to zero, which is the expected outcome in private company investment.
- icedchai 6y ago
  Yep. When you make a private investment (and I have), you have to fully expect to never see that money again. The truth is you probably won't. One time I did get a return, and it was nothing to write home about. I would've been better off buying a tech ETF.
  - tptacek 6y ago
    Historically, as an asset class, VC has routinely underperformed the S&P 500. Even on HN, which is full of startup people, the mental model people have about the investing business model is dominated by the outcomes of successful companies, rather than any notion of portfolios of successes and failures. Another detail retail investors don't have: startup investors re-invest to keep pro-rate shares in future rounds. You have to keep feeding companies money to keep your share. Explain that to my Aunt Rita. Another thing is, the LPs in VC funds aren't putting money in just because they think it'll be a super-successful investment that they want access to; some of them have portfolio allocation rules, and requirements to invest funds in things decorrelated from public markets. Which is just to say, a pension fund goes into these things with eyes wide open, unlike a skittish retail investor and his Lionel Hutzian legal advisors.
- tptacek 6y ago
  (In fact: you can apparently get a series 65 without sponsorship, so the new standard is exactly what you want it to be.)
  - Karunamon 6y ago
    That's.. wow. $175 and passing a test, and you're set for two years. That indeed eliminates the problems I had with the old system.
    - vmception 6y ago
      right, and there is room to get more purpose specific tests created and approved, even outside of the FINRA monopoly, which is the reality I am hoping for.

tptacek 6y ago

That's exactly the new standard the SEC just promulgated. Get a Series 7, and go nuts. You'll probably have to spend some time apprenticing at a financial firm, but that seems like a reasonable hurdle if your goal is to become a professional investor. I still feel like the "classism" argument here is extremely weak. Not because investment opportunities aren't classist --- they are --- but changing 501(a) isn't going to fix that. They're structurally classist. Good bets don't want retail money, because retail investors are, as a cohort, a bunch of loons. It might never occur to you to sue over some random, mundane options allocation event, but I promise you, it would occur to someone in the cohort of retail investors. I really believe that retail investors do not have a functioning mental model of how startup investing works. It's hard enough to get people to diversify at all. To invest in startups, you have to place 10 bets, hoping that 1-2 winners pay for all the losers. Ordinary investors freak the fuck out when one of their positions goes to zero, which is the expected outcome in private company investment.

icedchai 6y ago
Yep. When you make a private investment (and I have), you have to fully expect to never see that money again. The truth is you probably won't. One time I did get a return, and it was nothing to write home about. I would've been better off buying a tech ETF.
- tptacek 6y ago
  Historically, as an asset class, VC has routinely underperformed the S&P 500. Even on HN, which is full of startup people, the mental model people have about the investing business model is dominated by the outcomes of successful companies, rather than any notion of portfolios of successes and failures. Another detail retail investors don't have: startup investors re-invest to keep pro-rate shares in future rounds. You have to keep feeding companies money to keep your share. Explain that to my Aunt Rita. Another thing is, the LPs in VC funds aren't putting money in just because they think it'll be a super-successful investment that they want access to; some of them have portfolio allocation rules, and requirements to invest funds in things decorrelated from public markets. Which is just to say, a pension fund goes into these things with eyes wide open, unlike a skittish retail investor and his Lionel Hutzian legal advisors.
tptacek 6y ago
(In fact: you can apparently get a series 65 without sponsorship, so the new standard is exactly what you want it to be.)
- Karunamon 6y ago
  That's.. wow. $175 and passing a test, and you're set for two years. That indeed eliminates the problems I had with the old system.
  - vmception 6y ago
    right, and there is room to get more purpose specific tests created and approved, even outside of the FINRA monopoly, which is the reality I am hoping for.