7 ms·

It always seemed a bit nonsensical to me that you can't invest in companies (in the USA) when you can spend your money freely in nearly every other respect. You

by pg_bot 5y ago

It always seemed a bit nonsensical to me that you can't invest in companies (in the USA) when you can spend your money freely in nearly every other respect. You can waste thousands on gambling, food, clothing, elective surgery, penny stocks, and all sorts of other activities without anyone batting an eyelid. If the goal is to stop idiots from pissing their money away, regulators have seriously underestimated the creativity of fools.

robotresearcher 5y ago
You can't enter the gambling, surgery and stock markets with naught but a Keynote deck.
- pg_bot 5y ago
  I wasn't talking about starting a casino or surgery center. I was talking about playing roulette or turning yourself into a human cat hybrid.
  - robotresearcher 5y ago
    I understand. But there are strong feedback mechanisms in place so that a casino will actually pay your (unlikely) winnings and a surgeon will actually cat your face, which have to do with scrutiny, penalties for bad behavior, and the cost of entering a highly regulated market requiring lots of customers to recoup. They provide the service they claim. The story is about companies whose business model is simply to take investment money. They do not try to provide the service they claim.
    - ksdale 5y ago
      That's what the story about, but non-accredited investors aren't only prevented from investing in those particular companies. They're prevented from investing in the good ones, too. You say that the casino will pay your unlikely winnings, but the thing about casinos is that unless you actually have an edge, the more you gamble, the more you lose. The vast majority of games have odds that result in the house making a profit over time. And yet we're allowed to spend our money freely in casinos. There are all sorts of penalties for bad behavior on behalf of companies. Of course, that doesn't guarantee they'll make money, but I think it's a very valid point that we're allowed to waste our money on all sorts of dumb bullshit, but not on something like investing in startups, which at least has a possibility, however remote, of resulting in some sort of return.
      - robotresearcher 5y ago
        I'm all for people's freedom of action. Why do you think we have these rules, since a free-for-all is the default? Is this a barrier to entry that protects the rich, or a barrier to getting ripped off that protects the less rich? Or both? Chesterton's fence and all that. You are allowed to throw all your money away if you want. These rules are (at least partly) protecting you from having someone take your money under false pretenses.
        ksdale 5y ago
        I think they're absolutely there under the pretense of protecting people, and they do protect people from scams, at the cost of preventing average people from participating in one of the biggest wealth creation events in modern history. I think they're hypocritical, specifically because people are allowed to do all sorts of (in my opinion) far dumber things with their money. I think the world would be a much better place if gambling were illegal and all the people who currently waste their money at slot machines spent all that time thinking about how companies work. You're correct that I'm allowed to throw my money away if I want, so why am I not allowed to do this?
        robotresearcher 5y ago
        Because if you got scammed, you threw your money away but you didn't want to. An important difference, no?
        ksdale 5y ago
        Do you think most of the people who go to casinos think they're going to lose money? I think an unfortunate percentage do not realize at all that the odds are stacked against them. Their misunderstanding of statistics means they are quite literally getting scammed. And for the remainder that are doing it for entertainment, that's quite literally what I'm proposing be the standard for investing in companies.
        5y ago
colechristensen 5y ago
It also protects against the opposite effect: in an environment full of scams, you get run out of business for being honest because you have a hard time competing with the scammers.
- Datenstrom 5y ago
  > in an environment full of scams, you get run out of business for being honest because you have a hard time competing with the scammers. This effect was really well illustrated for me Golden Sun (Red Rising saga book #2) by Pierce Brown. The protagonist is telling an older general about how he isn't worried about a scheming snake oil politician type and is corrected about why they are dangerous. Because "Liars make the best promises." > “Pliny is a leech,” I say. “A liar as much as you’re an honest man.” “And that makes him dangerous. Liars make the best promises.”
- baybal2 5y ago
  My experience in China is a mirror opposite of that, when people know that 90% of business is, at least, shaddy, it gives extreme incentives to keep ones reputation superclean. Gold supplier/Audited supplier badges on Alibaba were sold for 6 digit sums, and bribes to get out of blacklist were going even higher.
sudosteph 5y ago
Interestingly enough, as of 2016ish you technically can invest - but only in companies with active Reg CF (https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfu...) offerings. Think sites like StartEngine and Wefunder. Of course, Reg CF has a host of its own challenges for founders (which I can attest to firsthand..). Also most accredited investors aren't necessarily onboard with it (they prefer private financing where they get more say in the terms). Still, it's a step in the right direction because it gives normal people the opportunity to invest, while also requiring companies to provide actual due diligence documents and comply with SEC laws before accepting money.
- JamesBarney 5y ago
  Most of the companies I've seen on crowd funding sites were not good investments. Their valuations seemed high, they made crazy promises and and then investors were pretty upset. Companies with 100k in revenue, 800k in debt raising at a 9 mil valuation cap.
  - sudosteph 5y ago
    Yeah, it varies pretty wildly. Most early startups that have good options for VC or angels don't really benefit from Reg CF, since they don't necessarily have a "crowd" to invest from in the first place. So you end up seeing struggling companies with at least some fan base doing it as a last ditch attempt, which doesn't always work out. However, I do know some of the platforms are lot more selective than others for exactly that reason. But all said, at least the opportunity is there and the financials are legally vetted.
iav 5y ago
Those other economic activities generally have a regulator standing by, a gambling commission, the FDA, SEC, and FTC. Most of them aren’t anywhere near funded or have necessary powers or maybe susceptible to regulatory capture. But at least there is someone. In the world of private angel investing, there is truly no one but you and your legal team to go after crooks.
fouc 5y ago
Well I suppose that's the upside of cryptocurrency.. allows fools to piss their money away on pie in the sky "investments"

by pg_bot 5y ago

robotresearcher 5y ago

You can't enter the gambling, surgery and stock markets with naught but a Keynote deck.

pg_bot 5y ago
I wasn't talking about starting a casino or surgery center. I was talking about playing roulette or turning yourself into a human cat hybrid.
- robotresearcher 5y ago
  I understand. But there are strong feedback mechanisms in place so that a casino will actually pay your (unlikely) winnings and a surgeon will actually cat your face, which have to do with scrutiny, penalties for bad behavior, and the cost of entering a highly regulated market requiring lots of customers to recoup. They provide the service they claim. The story is about companies whose business model is simply to take investment money. They do not try to provide the service they claim.
  - ksdale 5y ago
    That's what the story about, but non-accredited investors aren't only prevented from investing in those particular companies. They're prevented from investing in the good ones, too. You say that the casino will pay your unlikely winnings, but the thing about casinos is that unless you actually have an edge, the more you gamble, the more you lose. The vast majority of games have odds that result in the house making a profit over time. And yet we're allowed to spend our money freely in casinos. There are all sorts of penalties for bad behavior on behalf of companies. Of course, that doesn't guarantee they'll make money, but I think it's a very valid point that we're allowed to waste our money on all sorts of dumb bullshit, but not on something like investing in startups, which at least has a possibility, however remote, of resulting in some sort of return.
    - robotresearcher 5y ago
      I'm all for people's freedom of action. Why do you think we have these rules, since a free-for-all is the default? Is this a barrier to entry that protects the rich, or a barrier to getting ripped off that protects the less rich? Or both? Chesterton's fence and all that. You are allowed to throw all your money away if you want. These rules are (at least partly) protecting you from having someone take your money under false pretenses.
      - ksdale 5y ago
        I think they're absolutely there under the pretense of protecting people, and they do protect people from scams, at the cost of preventing average people from participating in one of the biggest wealth creation events in modern history. I think they're hypocritical, specifically because people are allowed to do all sorts of (in my opinion) far dumber things with their money. I think the world would be a much better place if gambling were illegal and all the people who currently waste their money at slot machines spent all that time thinking about how companies work. You're correct that I'm allowed to throw my money away if I want, so why am I not allowed to do this?
        robotresearcher 5y ago
        Because if you got scammed, you threw your money away but you didn't want to. An important difference, no?
        ksdale 5y ago
        Do you think most of the people who go to casinos think they're going to lose money? I think an unfortunate percentage do not realize at all that the odds are stacked against them. Their misunderstanding of statistics means they are quite literally getting scammed. And for the remainder that are doing it for entertainment, that's quite literally what I'm proposing be the standard for investing in companies.
        5y ago

colechristensen 5y ago

It also protects against the opposite effect: in an environment full of scams, you get run out of business for being honest because you have a hard time competing with the scammers.

Datenstrom 5y ago
> in an environment full of scams, you get run out of business for being honest because you have a hard time competing with the scammers. This effect was really well illustrated for me Golden Sun (Red Rising saga book #2) by Pierce Brown. The protagonist is telling an older general about how he isn't worried about a scheming snake oil politician type and is corrected about why they are dangerous. Because "Liars make the best promises." > “Pliny is a leech,” I say. “A liar as much as you’re an honest man.” “And that makes him dangerous. Liars make the best promises.”
baybal2 5y ago
My experience in China is a mirror opposite of that, when people know that 90% of business is, at least, shaddy, it gives extreme incentives to keep ones reputation superclean. Gold supplier/Audited supplier badges on Alibaba were sold for 6 digit sums, and bribes to get out of blacklist were going even higher.

sudosteph 5y ago

Interestingly enough, as of 2016ish you technically can invest - but only in companies with active Reg CF (https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfu...) offerings. Think sites like StartEngine and Wefunder. Of course, Reg CF has a host of its own challenges for founders (which I can attest to firsthand..). Also most accredited investors aren't necessarily onboard with it (they prefer private financing where they get more say in the terms). Still, it's a step in the right direction because it gives normal people the opportunity to invest, while also requiring companies to provide actual due diligence documents and comply with SEC laws before accepting money.

JamesBarney 5y ago
Most of the companies I've seen on crowd funding sites were not good investments. Their valuations seemed high, they made crazy promises and and then investors were pretty upset. Companies with 100k in revenue, 800k in debt raising at a 9 mil valuation cap.
- sudosteph 5y ago
  Yeah, it varies pretty wildly. Most early startups that have good options for VC or angels don't really benefit from Reg CF, since they don't necessarily have a "crowd" to invest from in the first place. So you end up seeing struggling companies with at least some fan base doing it as a last ditch attempt, which doesn't always work out. However, I do know some of the platforms are lot more selective than others for exactly that reason. But all said, at least the opportunity is there and the financials are legally vetted.

iav 5y ago

Those other economic activities generally have a regulator standing by, a gambling commission, the FDA, SEC, and FTC. Most of them aren’t anywhere near funded or have necessary powers or maybe susceptible to regulatory capture. But at least there is someone. In the world of private angel investing, there is truly no one but you and your legal team to go after crooks.

fouc 5y ago

Well I suppose that's the upside of cryptocurrency.. allows fools to piss their money away on pie in the sky "investments"