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As an alternative there's always Matt Levine's "Certificate of Dumb Investment" proposal: https://www.bloomberg.com/opinion/articles/2018-09-24/earning-the-righ

by agency 5y ago

As an alternative there's always Matt Levine's "Certificate of Dumb Investment" proposal: https://www.bloomberg.com/opinion/articles/2018-09-24/earning-the-right-to-get-swindled https://www.bloomberg.com/opinion/articles/2018-09-24/earnin... 1. Anyone can invest all they want in a diversified portfolio of approved investments (non-penny-stock public companies, mutual funds and exchange-traded funds with modest fees, insured bank accounts, etc.). 2. Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.) 3. To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.” 4. Then you take the form to an SEC employee, who slaps you hard across the face and says “really???” And if you reply “yes really” then she gives you the certificate. 5. Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling. 6. If an article ever appears in the Wall Street Journal in which you (or your lawyer) are quoted saying that you were just a simple dentist, didn’t understand what you were buying and were swindled by the seller’s flashy sales pitch, then you go to prison.

cm2012 5y ago
This is the funniest thing I've read this year
- loeg 5y ago
  Subscribe to Money Stuff! It's free and full of similar gems. https://twitter.com/matt_levine/status/994296126055608320 https://twitter.com/matt_levine/status/994296126055608320
dwohnitmok 5y ago
I enjoy Matt Levine's pieces and I understand this is meant to be humorous and far from serious, but it's also instructive to think about how such a scheme could go wrong, because it illustrates how hard incentive problems are. I think the big problem would be if the "Certificate of Dumb Investment" by happenstance didn't seem so dumb anymore (a couple of lucky, high-profile investments really take off and are in the news for weeks) and then say a million people (< 1% of the U.S. adult population!) pile in to the next dumb investment and get all their money stolen. No matter what they've signed, that's still a million people who've gotten their money stolen and they'll be out for blood, communicating on forums, in-person, etc. Beyond the brute fact that a million people have had money stolen, which is bad, there's the secondary problem that if just another 1% of that million still complains to newspapers, there's no way that the government could arrest 10,000 people at once without major public backlash, especially if those people play their cards well and can spin a media story of "victims of financial fraud further being punished by the government." If you've got 10,000 examples to choose from, there are bound to be sympathetic stories which capture the public attention. And then at that point, if the government chooses not to prosecute those cases, the floodgates are loose and the "Certificate of Dumb Investment" has lost most of its power and purpose.
- DangitBobby 5y ago
  Yeah, it's funny as a joke but not really a sound principle. We have all sorts of people screaming "that's a stupid investment!" for stupid investments. The problem is not that the nay-sayers aren't heard. It's that the buyers are convinced everyone else is a h8er or sheeple, and will buy whatever dumb shit they've been convinced of regardless.
- fragmede 5y ago
  Have you ever been party to a class action lawsuit and gotten some amount of recompense for your troubles? And had that not been part of the mainstream news so no one you already knew was part of it? Because they happen all the time, and the government doesn't go after them - damages are civil not criminal, so the lawyers are the ones getting richer. As far as "the big problem", people win the lottery every day. It's still not a sound investment strategy (unless you have some sort of edge).
SilasX 5y ago
Related: Robin Hanson's idea of "would have banned" stores (that sell things that would normally be banned, with some kind of filter that you understand why they were banned): https://www.overcomingbias.com/2007/03/paternalism_is_.html https://www.overcomingbias.com/2007/03/paternalism_is_.html https://www.lesswrong.com/posts/PeSzc9JTBxhaYRp9b/policy-debates-should-not-appear-one-sided https://www.lesswrong.com/posts/PeSzc9JTBxhaYRp9b/policy-deb...

by agency 5y ago

cm2012 5y ago

This is the funniest thing I've read this year

loeg 5y ago
Subscribe to Money Stuff! It's free and full of similar gems. https://twitter.com/matt_levine/status/994296126055608320 https://twitter.com/matt_levine/status/994296126055608320

dwohnitmok 5y ago

I enjoy Matt Levine's pieces and I understand this is meant to be humorous and far from serious, but it's also instructive to think about how such a scheme could go wrong, because it illustrates how hard incentive problems are. I think the big problem would be if the "Certificate of Dumb Investment" by happenstance didn't seem so dumb anymore (a couple of lucky, high-profile investments really take off and are in the news for weeks) and then say a million people (< 1% of the U.S. adult population!) pile in to the next dumb investment and get all their money stolen. No matter what they've signed, that's still a million people who've gotten their money stolen and they'll be out for blood, communicating on forums, in-person, etc. Beyond the brute fact that a million people have had money stolen, which is bad, there's the secondary problem that if just another 1% of that million still complains to newspapers, there's no way that the government could arrest 10,000 people at once without major public backlash, especially if those people play their cards well and can spin a media story of "victims of financial fraud further being punished by the government." If you've got 10,000 examples to choose from, there are bound to be sympathetic stories which capture the public attention. And then at that point, if the government chooses not to prosecute those cases, the floodgates are loose and the "Certificate of Dumb Investment" has lost most of its power and purpose.

DangitBobby 5y ago
Yeah, it's funny as a joke but not really a sound principle. We have all sorts of people screaming "that's a stupid investment!" for stupid investments. The problem is not that the nay-sayers aren't heard. It's that the buyers are convinced everyone else is a h8er or sheeple, and will buy whatever dumb shit they've been convinced of regardless.
fragmede 5y ago
Have you ever been party to a class action lawsuit and gotten some amount of recompense for your troubles? And had that not been part of the mainstream news so no one you already knew was part of it? Because they happen all the time, and the government doesn't go after them - damages are civil not criminal, so the lawyers are the ones getting richer. As far as "the big problem", people win the lottery every day. It's still not a sound investment strategy (unless you have some sort of edge).

SilasX 5y ago

Related: Robin Hanson's idea of "would have banned" stores (that sell things that would normally be banned, with some kind of filter that you understand why they were banned): https://www.overcomingbias.com/2007/03/paternalism_is_.html https://www.overcomingbias.com/2007/03/paternalism_is_.html https://www.lesswrong.com/posts/PeSzc9JTBxhaYRp9b/policy-debates-should-not-appear-one-sided https://www.lesswrong.com/posts/PeSzc9JTBxhaYRp9b/policy-deb...