7 ms·

The interesting thing is a few years ago (before becoming the "SPAC King") he did a media tour where he criticized Venture Capital as being a "massive Ponzi sch

The interesting thing is a few years ago (before becoming the "SPAC King") he did a media tour where he criticized Venture Capital as being a "massive Ponzi scheme". [1] Then he went all-in on SPACs... Which ended up being the ultimate Ponzi. [1] https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-scheme-says-chamath-palihapitiya.html https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-...

bko 3y ago
How are SPACs a ponzi? My understanding is that its a pool of money that gets raised to essentially take a private organization public through a merger with (theoretically) less red tape and cost. You buy into the SPAC without knowing exactly what is being bought but at the time of purchase you have the option to redeem you investment. There are other clauses if the organizer can't find a suitable takeover target. You can criticize the fees or the fact that they are essentially trying to get around regulatory and reporting requirements. They did well a few years ago now they are doing poorly. But how is it a ponzi? Not everything that loses money is a ponzi
- majormajor 3y ago
  SPACs make it easier to get the next round of money for your Ponzi with less due diligence needed (where Ponzi is used in the loose sense of "there's no long term real business model, just sell it off to the suckers before it blows up"). So, sure, more accurate to say "SPACs make passing laughable-business-plan Ponzi schemes off as real businesses and cashing out to public investors" than "SPACs are ponzis directly" but... I'm not sure this hair needs splitting.
  - epgui 3y ago
    It's not hair-splitting, a SPAC is simply not a Ponzi scheme. That doesn't mean it's a good investment.
    - mlyle 3y ago
      SPACs may not always be ponzi schemes, but plenty are of dubious, unvetted businesses and for the principle purpose of paying returns to prior investors.
      - epgui 3y ago
        Yes, but that's only superficially similar to a Ponzi scheme. They're just not Ponzi schemes.
        deleted 3y ago
        [deleted]
        iancmceachern 3y ago
        How so? I'm genuinely curious, what are the specific distinctions? Many others consider it so: "Holmes duped just about everyone about the efficacy of Edison. For 12 years, she essentially ran a Ponzi scheme by attracting millions of dollars from primarily venture capitalists that saw it as a unique opportunity to cash in on the boom in Silicon Valley." https://www.ethicssage.com/2022/01/fake-it-until-you-make-it-the-story-of-elizabeth-holmes-and-theranos.html https://www.ethicssage.com/2022/01/fake-it-until-you-make-it...
        deleted 3y ago
        [deleted]
      - throwawaymaths 3y ago
        I lot of legitimate businesses fall into that category. Also illegitimate businesss. Theranos was definitely illegitimate (and had the characteristic of little fish investors trying to sell to bigger fish), but it would be a pretty severe category error to call it a ponzi scheme.
        iancmceachern 3y ago
        I dont agree, many others consider what she did no different than a ponzi scheme. It's not just me and the patent commenter: "Holmes duped just about everyone about the efficacy of Edison. For 12 years, she essentially ran a Ponzi scheme by attracting millions of dollars from primarily venture capitalists that saw it as a unique opportunity to cash in on the boom in Silicon Valley." https://www.ethicssage.com/2022/01/fake-it-until-you-make-it-the-story-of-elizabeth-holmes-and-theranos.html https://www.ethicssage.com/2022/01/fake-it-until-you-make-it... I would appreciate, for my own edification, what specific things you believe are different between what Ms Holmes did and what Maydoff or Ponzi did. I'm genuinely curious.
- sdwr 3y ago
  Book smarts vs street smarts You're paying attention to the technical definition. "It's just an investment vehicle!" He's paying attention to the real-world outcome. Insiders made money by offloading bad investments onto retail suckers.
  - deleted 3y ago
    [deleted]
  - gravitronic 3y ago
    We call those scams
- Ozzie_osman 3y ago
  I mean... How is VC a Ponzi? Obviously I'm using a very loose definition, not a technical one, but I'm using the same one Chamath used.
  - danielmarkbruce 3y ago
    The argument is that VC A's returns a propped up by VC B making an investment at a higher valuation, thereby making VC A's marks look great. They can go raise more money. This can continue for quite some time. While it's not a completely ridiculous analogy to a true ponzi, it's probably better to just call it a bubble. It's closer to a credit bubble, housing bubble etc.
- Lazare 3y ago
  When people say something is a ponzi, they generally mean that they think it's deceptive, fraudulent, or otherwise unsavoury. They don't mean that it's literally the sort of scheme made infamous by Charles Ponzi. I think there's value in using precise language, so I reget this usage, but it's common whether I like it or not.
  - comex 3y ago
    Most of the time I’ve seen something called a Ponzi scheme, there is at least some purported element where earlier investors in an asset make money off of later investors in the same asset, without the asset’s true worth actually increasing. That definition isn’t hard to satisfy – it could be something as simple as a stock price becoming overinflated due to hype – and it may even apply to SPACs, but it’s still a more specific requirement than just being fraudulent or unsavory. YMMV.
    - daveguy 3y ago
      Earlier investors = VCs funding a bunk company. Later investors = SPAC pawns putting up money for a bad investment that doesn't require the normal regulatory scrutiny that an IPO requires. If not Ponzi, seems very Ponzi-like.
  - thefounder 3y ago
    Then people should just use the correct term: Rug pull
- newshackr 3y ago
  SPACs aren't a ponzi scheme but they are set up for the creator to win. Typically they get 20% of the business at lower than market rate and sometimes have clauses for them to still win if it can't find a business to acquire.
- daveguy 3y ago
  This is the key point: > essentially trying to get around regulatory and reporting requirements. It's just a great tool for a ponzi scheme. A ponzi tool rather than a ponzi scheme. When it gets so tightly coupled to the schemes it enables specifically to get around regulatory and reporting requirements... Tomato, Tomahto.
- Fatnino 3y ago
  So theres some small startup that seems maybe interesting, you're looking forward to investing when they go public. Suddenly you hear they are going public through a SPAC. Why? Why aren't they going through the usual channels, crossing their eyes and dotting their tees? Laying everything out on the table so everyone can feel confident? The very fact they are going for this SPAC backdoor is a HUGE red flag.
epgui 3y ago
Not everything that is a bad investment is a Ponzi scheme.
- hn_throwaway_99 3y ago
  For some reason calling out "it's not achshually a Ponzi scheme!" is the new "correlation is not causation!!" Yes, I agree with you, it doesn't have the features of the Wikipedia definition of a Ponzi scheme. But language changes over time. I think the salient point that people now think about when calling things a Ponzi scheme is "Early investors are aware that, at its root, the investment sucks. So their goal is to entice new investors to buy into the original investment, which has the effect of transferring wealth from new to old investors, with the hope that the old investors can get out before the gig is up, thus leaving the newer investors as bag holders." That description applies both to the original definition of a Ponzi scheme, and to newer uses that don't include other features of the original Ponzi scheme.
  - 0xf8 3y ago
    This response to should have all but conclusively ended the silly debate in outlining the semantic drift of the term “Ponzi scheme” to encapsulate the relevant spectrum of linguistic variations, and yet…
  - jhanschoo 3y ago
    And language change results in miscommunication and confusion where a community meets another that doesn't have the same changes in theirs... as has happened here. The use of the more general term fraud would have been more appropriate. That's why we typically aim to use a sanitized, more standard and formal register when communicating broadly rather than to friends and family.
    - deleted 3y ago
      [deleted]
    - qwytw 3y ago
      What the comment above described is not fraud, though. It's much closer to a Ponzi scheme.
duped 3y ago
More of a pump and dump than a Ponzi scheme

bko 3y ago

How are SPACs a ponzi? My understanding is that its a pool of money that gets raised to essentially take a private organization public through a merger with (theoretically) less red tape and cost. You buy into the SPAC without knowing exactly what is being bought but at the time of purchase you have the option to redeem you investment. There are other clauses if the organizer can't find a suitable takeover target. You can criticize the fees or the fact that they are essentially trying to get around regulatory and reporting requirements. They did well a few years ago now they are doing poorly. But how is it a ponzi? Not everything that loses money is a ponzi

majormajor 3y ago
SPACs make it easier to get the next round of money for your Ponzi with less due diligence needed (where Ponzi is used in the loose sense of "there's no long term real business model, just sell it off to the suckers before it blows up"). So, sure, more accurate to say "SPACs make passing laughable-business-plan Ponzi schemes off as real businesses and cashing out to public investors" than "SPACs are ponzis directly" but... I'm not sure this hair needs splitting.
- epgui 3y ago
  It's not hair-splitting, a SPAC is simply not a Ponzi scheme. That doesn't mean it's a good investment.
  - mlyle 3y ago
    SPACs may not always be ponzi schemes, but plenty are of dubious, unvetted businesses and for the principle purpose of paying returns to prior investors.
    - epgui 3y ago
      Yes, but that's only superficially similar to a Ponzi scheme. They're just not Ponzi schemes.
      - deleted 3y ago
        [deleted]
      - iancmceachern 3y ago
        How so? I'm genuinely curious, what are the specific distinctions? Many others consider it so: "Holmes duped just about everyone about the efficacy of Edison. For 12 years, she essentially ran a Ponzi scheme by attracting millions of dollars from primarily venture capitalists that saw it as a unique opportunity to cash in on the boom in Silicon Valley." https://www.ethicssage.com/2022/01/fake-it-until-you-make-it-the-story-of-elizabeth-holmes-and-theranos.html https://www.ethicssage.com/2022/01/fake-it-until-you-make-it...
        deleted 3y ago
        [deleted]
    - throwawaymaths 3y ago
      I lot of legitimate businesses fall into that category. Also illegitimate businesss. Theranos was definitely illegitimate (and had the characteristic of little fish investors trying to sell to bigger fish), but it would be a pretty severe category error to call it a ponzi scheme.
      - iancmceachern 3y ago
        I dont agree, many others consider what she did no different than a ponzi scheme. It's not just me and the patent commenter: "Holmes duped just about everyone about the efficacy of Edison. For 12 years, she essentially ran a Ponzi scheme by attracting millions of dollars from primarily venture capitalists that saw it as a unique opportunity to cash in on the boom in Silicon Valley." https://www.ethicssage.com/2022/01/fake-it-until-you-make-it-the-story-of-elizabeth-holmes-and-theranos.html https://www.ethicssage.com/2022/01/fake-it-until-you-make-it... I would appreciate, for my own edification, what specific things you believe are different between what Ms Holmes did and what Maydoff or Ponzi did. I'm genuinely curious.
sdwr 3y ago
Book smarts vs street smarts You're paying attention to the technical definition. "It's just an investment vehicle!" He's paying attention to the real-world outcome. Insiders made money by offloading bad investments onto retail suckers.
- deleted 3y ago
  [deleted]
- gravitronic 3y ago
  We call those scams
Ozzie_osman 3y ago
I mean... How is VC a Ponzi? Obviously I'm using a very loose definition, not a technical one, but I'm using the same one Chamath used.
- danielmarkbruce 3y ago
  The argument is that VC A's returns a propped up by VC B making an investment at a higher valuation, thereby making VC A's marks look great. They can go raise more money. This can continue for quite some time. While it's not a completely ridiculous analogy to a true ponzi, it's probably better to just call it a bubble. It's closer to a credit bubble, housing bubble etc.
Lazare 3y ago
When people say something is a ponzi, they generally mean that they think it's deceptive, fraudulent, or otherwise unsavoury. They don't mean that it's literally the sort of scheme made infamous by Charles Ponzi. I think there's value in using precise language, so I reget this usage, but it's common whether I like it or not.
- comex 3y ago
  Most of the time I’ve seen something called a Ponzi scheme, there is at least some purported element where earlier investors in an asset make money off of later investors in the same asset, without the asset’s true worth actually increasing. That definition isn’t hard to satisfy – it could be something as simple as a stock price becoming overinflated due to hype – and it may even apply to SPACs, but it’s still a more specific requirement than just being fraudulent or unsavory. YMMV.
  - daveguy 3y ago
    Earlier investors = VCs funding a bunk company. Later investors = SPAC pawns putting up money for a bad investment that doesn't require the normal regulatory scrutiny that an IPO requires. If not Ponzi, seems very Ponzi-like.
- thefounder 3y ago
  Then people should just use the correct term: Rug pull
newshackr 3y ago
SPACs aren't a ponzi scheme but they are set up for the creator to win. Typically they get 20% of the business at lower than market rate and sometimes have clauses for them to still win if it can't find a business to acquire.
daveguy 3y ago
This is the key point: > essentially trying to get around regulatory and reporting requirements. It's just a great tool for a ponzi scheme. A ponzi tool rather than a ponzi scheme. When it gets so tightly coupled to the schemes it enables specifically to get around regulatory and reporting requirements... Tomato, Tomahto.
Fatnino 3y ago
So theres some small startup that seems maybe interesting, you're looking forward to investing when they go public. Suddenly you hear they are going public through a SPAC. Why? Why aren't they going through the usual channels, crossing their eyes and dotting their tees? Laying everything out on the table so everyone can feel confident? The very fact they are going for this SPAC backdoor is a HUGE red flag.

epgui 3y ago

Not everything that is a bad investment is a Ponzi scheme.

hn_throwaway_99 3y ago
For some reason calling out "it's not achshually a Ponzi scheme!" is the new "correlation is not causation!!" Yes, I agree with you, it doesn't have the features of the Wikipedia definition of a Ponzi scheme. But language changes over time. I think the salient point that people now think about when calling things a Ponzi scheme is "Early investors are aware that, at its root, the investment sucks. So their goal is to entice new investors to buy into the original investment, which has the effect of transferring wealth from new to old investors, with the hope that the old investors can get out before the gig is up, thus leaving the newer investors as bag holders." That description applies both to the original definition of a Ponzi scheme, and to newer uses that don't include other features of the original Ponzi scheme.
- 0xf8 3y ago
  This response to should have all but conclusively ended the silly debate in outlining the semantic drift of the term “Ponzi scheme” to encapsulate the relevant spectrum of linguistic variations, and yet…
- jhanschoo 3y ago
  And language change results in miscommunication and confusion where a community meets another that doesn't have the same changes in theirs... as has happened here. The use of the more general term fraud would have been more appropriate. That's why we typically aim to use a sanitized, more standard and formal register when communicating broadly rather than to friends and family.
  - deleted 3y ago
    [deleted]
  - qwytw 3y ago
    What the comment above described is not fraud, though. It's much closer to a Ponzi scheme.

duped 3y ago

More of a pump and dump than a Ponzi scheme