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Yes, but the difference is that a Ponzi scheme never created value in the first place and was always zero sum. If Joe's Farm sells corn and Jane's Lumberyard s

by idrios 5y ago

Yes, but the difference is that a Ponzi scheme never created value in the first place and was always zero sum. If Joe's Farm sells corn and Jane's Lumberyard sells wood, you could invest in either, which they would use to expand, resulting in more corn and more lumber and therefore value was created. Meanwhile, if you invest in Jim's Useless Objects you'll end up with only more useless objects that have no real value to anyone. Jim's running a Ponzi Scheme.

xg15 5y ago
How exactly do you define "creating value"? > resulting in more corn and more lumber and therefore value was created. > Maybe they sell to others who disagree and believe that there is still value to be created in the future. The first paragraph implies "value" is an objective quantity while the second one implies "value" is subjective to a particular investor. Both can't be true at the same time. We can all have different believes about future creation of value, but if value is objective then some of those believes will simply turn out to be wrong. The problem is that we need someone to have incorrect believes so we can sell to them - at which point, it's again just a ponzi scheme.
- chii 5y ago
  > value to be created in the future this is the subjective, aka, speculative value. > resulting in more corn and more lumber this is the objective value - it's already realized (aka, this is the profits the company have made). > Both can't be true at the same time. They are different things, and certainly can be true at the same time. > The problem is that we need someone to have incorrect believes so we can sell to them no, we need someone who would speculate that the future value would be higher than today's value, but it's not a ponzi scheme because the company is constantly creating value (as it's profitable currently). Ponzi scheme requires that there's no underlying value being generated, and that all current profits paid out from new investors.

by idrios 5y ago

xg15 5y ago

How exactly do you define "creating value"? > resulting in more corn and more lumber and therefore value was created. > Maybe they sell to others who disagree and believe that there is still value to be created in the future. The first paragraph implies "value" is an objective quantity while the second one implies "value" is subjective to a particular investor. Both can't be true at the same time. We can all have different believes about future creation of value, but if value is objective then some of those believes will simply turn out to be wrong. The problem is that we need someone to have incorrect believes so we can sell to them - at which point, it's again just a ponzi scheme.

chii 5y ago
> value to be created in the future this is the subjective, aka, speculative value. > resulting in more corn and more lumber this is the objective value - it's already realized (aka, this is the profits the company have made). > Both can't be true at the same time. They are different things, and certainly can be true at the same time. > The problem is that we need someone to have incorrect believes so we can sell to them no, we need someone who would speculate that the future value would be higher than today's value, but it's not a ponzi scheme because the company is constantly creating value (as it's profitable currently). Ponzi scheme requires that there's no underlying value being generated, and that all current profits paid out from new investors.