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The fact that someone used a vehicle that limits your yearly contribution to $5500 a year to amass $5 billion is worth investigating. The investment return need

by xkjkls 5y ago

The fact that someone used a vehicle that limits your yearly contribution to $5500 a year to amass $5 billion is worth investigating. The investment return needed for that is close to 60% annually, an inconceivably high rate of return for any long period of time.

seafoam 5y ago
"an inconceivably high rate of return" I don't think that word means what you think it means
- medvezhenok 5y ago
  I mean, considering no-one has achieved that rate of return (in the public markets) with compounding ever, that's probably a fair observation. The closest was the Medallion Fund, but that's a non-compounded return at $10B AUM. But also somewhat irrelevant as the main point of the article focuses on that first investment ($2K -> $33M in 2-3 years via private Paypal shares).
  - gravypod 5y ago
    I have no skin in the game but "in the public markets" is a very key part of this discussion. If he did purchase his stock allocations from founding PayPal (regardless of of if this was legal) this would have not been in the public market. This is an extremely high risk time and money investment that could have been worth $0 the next day. This is why a lot of people end up trying to start a startup. To get huge financial gains for themselves.
    - xkjkls 5y ago
      Yes, this is what is being criticized. Other investors have no ability to do this, and there is little to know what to verify that the stock that was purchased was actually fairly evaluated. If it wasn’t then he was able to invest far more money tax free than should be allowed.
      - gravypod 5y ago
        I'm not quite sure I follow. Most people who work for a startup (<10 people) and receive stocks get a similar deal. I've had to buy exercise options at previous companies. I also know people who have had options for $0.10/share for stocks that were then trading at $1.00/share after IPO. If I worked at a startup pre-Series A, I got 1000 shares at $0.001/share, and then 1 year later they got a Series A and my shares became valued at $0.01/share, and then in a few more years we IPO'd and my shares became worth $100/share the IRS shouldn't have the ability to say "woopsie, yea, you actually paid too little taxes because that company that succeeded was actually worth way more than we expected back when it looked like it was going to fail" That's just my opinion. I'm not sure if I'm misunderstanding something here. A startup is a high risk prospect. If you buy shares of a startup you're essentially putting money into a shredder in hopes that people pay you a bunch of money to play with the confetti. When a pre-Series A startup offers me "$50k/year in stock options" I instantly value that at $0/year in income mentally because there's no guarantee for any return. Its like options trading penny stocks.
        xkjkls 5y ago
        Sure, start ups are insanely risky, but that doesn't mean stock in them can't be incredibly undervalued, and often is. Any tax incentivized investment plan, that allows investment in private companies, whose worth is going to very difficult for the government to judge, given there is a lack of public bids on them, is ripe with opportunities for fraud.
jppope 5y ago
Yes... the investment return from Facebook
w0mbat 5y ago
If you think "being very good at something" should be illegal, you are going to hate the Olympics.

by xkjkls 5y ago

seafoam 5y ago

"an inconceivably high rate of return" I don't think that word means what you think it means

medvezhenok 5y ago
I mean, considering no-one has achieved that rate of return (in the public markets) with compounding ever, that's probably a fair observation. The closest was the Medallion Fund, but that's a non-compounded return at $10B AUM. But also somewhat irrelevant as the main point of the article focuses on that first investment ($2K -> $33M in 2-3 years via private Paypal shares).
- gravypod 5y ago
  I have no skin in the game but "in the public markets" is a very key part of this discussion. If he did purchase his stock allocations from founding PayPal (regardless of of if this was legal) this would have not been in the public market. This is an extremely high risk time and money investment that could have been worth $0 the next day. This is why a lot of people end up trying to start a startup. To get huge financial gains for themselves.
  - xkjkls 5y ago
    Yes, this is what is being criticized. Other investors have no ability to do this, and there is little to know what to verify that the stock that was purchased was actually fairly evaluated. If it wasn’t then he was able to invest far more money tax free than should be allowed.
    - gravypod 5y ago
      I'm not quite sure I follow. Most people who work for a startup (<10 people) and receive stocks get a similar deal. I've had to buy exercise options at previous companies. I also know people who have had options for $0.10/share for stocks that were then trading at $1.00/share after IPO. If I worked at a startup pre-Series A, I got 1000 shares at $0.001/share, and then 1 year later they got a Series A and my shares became valued at $0.01/share, and then in a few more years we IPO'd and my shares became worth $100/share the IRS shouldn't have the ability to say "woopsie, yea, you actually paid too little taxes because that company that succeeded was actually worth way more than we expected back when it looked like it was going to fail" That's just my opinion. I'm not sure if I'm misunderstanding something here. A startup is a high risk prospect. If you buy shares of a startup you're essentially putting money into a shredder in hopes that people pay you a bunch of money to play with the confetti. When a pre-Series A startup offers me "$50k/year in stock options" I instantly value that at $0/year in income mentally because there's no guarantee for any return. Its like options trading penny stocks.
      - xkjkls 5y ago
        Sure, start ups are insanely risky, but that doesn't mean stock in them can't be incredibly undervalued, and often is. Any tax incentivized investment plan, that allows investment in private companies, whose worth is going to very difficult for the government to judge, given there is a lack of public bids on them, is ripe with opportunities for fraud.

jppope 5y ago

Yes... the investment return from Facebook

w0mbat 5y ago

If you think "being very good at something" should be illegal, you are going to hate the Olympics.