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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 coul

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).
- dwohnitmok 5y ago
  > 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. The crucial point from the original proposal is the following: > 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. The implication (the WSJ is just a stand-in) being that if lawyers representing you even talk about this investment, let alone try to bring a court case, you go to jail. No law like this exists at the moment and I'm saying such a law would quickly become toothless because it would be nigh impossible for the government to enforce. > 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). Yes and that's precisely why there's still a lot of people who buy lottery tickets. My point is telling people upfront that something is a losing proposition and then taking away the ability to complain if they do it and lose anyway isn't enough of a disincentive to prevent people from doing something if they are convinced that they're the lucky ones or that "this is the real deal," a slap in the face at your local SEO office be damned.

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).

dwohnitmok 5y ago
> 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. The crucial point from the original proposal is the following: > 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. The implication (the WSJ is just a stand-in) being that if lawyers representing you even talk about this investment, let alone try to bring a court case, you go to jail. No law like this exists at the moment and I'm saying such a law would quickly become toothless because it would be nigh impossible for the government to enforce. > 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). Yes and that's precisely why there's still a lot of people who buy lottery tickets. My point is telling people upfront that something is a losing proposition and then taking away the ability to complain if they do it and lose anyway isn't enough of a disincentive to prevent people from doing something if they are convinced that they're the lucky ones or that "this is the real deal," a slap in the face at your local SEO office be damned.