5 ms·

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

by epgui 3y ago

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.
- VirusNewbie 3y ago
  That is extremely different than a ponzi scheme. Plenty of people who buy and sell stock every day think the underlying investment sucks. Using imprecise wording should be discouraged and it reflects poorly on people who do so.
- nonameiguess 3y ago
  You described any business going south where the incumbent insiders know that and future investors do not. As long as the company sells some sort of real product and earns revenue, even if it's lying about how much or the quality of that product, it's not a Ponzi. What makes a Ponzi is money from investors is the only money at all. There is no actual investment being made, not even bad ones.
DesiLurker 3y ago
But the point here is that SPAC as an investment vehicle allows sidestepping a bunch of due diligence in the name of 'just avoiding wallstreet commissions'. that basically ends up becoming prime target for any non-IPO-worthy-but-shiny security to be offloaded to general public. then the next argument from same folks will be .. well price of anything is what somebody will pay for it, so buyer beware.
tiffanyg 3y ago
This is true. However, much like "crackers" are always looking for the next exploit ... chasing that dragon of the next n00b who doesn't sanitize strings passed to their DB, or, above that rather script kiddie level, oh, say, something like infecting all the computers in Iran related to running centrifuges to enrich uranium ... there are various kinds of economic fraudsters looking for that next way to extract piles of money into their own personal "Scrooge McDuck"-style "money bins". And, Silicon Valley has been ground-zero of this sort of activity* in recent years as well. But, IPOs became rather passé post-2010ish, for the truly depraved. Too much regulation, you see. SPACs are ever so much more exploitable. Though, IPOs continue to be successfully used to funnel money from the have-nots to the already-haves.** And so, here we are. Yes, there have been people legitimately trying to use SPACs to finance efforts they truly believed in. My sense, having traded SPACs myself during the height of the frenzy was: much less than 50% had much of any real legitimacy. And, solidly more than 10% or even 20% were scammy as hell ... particularly at that time when the money taps were wide open and fraud was absolutely rife across many vehicles etc. (helped along by ... survey says: the very "internet" Silicon Valley made such a massive economic force...). * On a much larger scale and with a much more "legitimate face" than some of the other "operators" better known in this area, generally ** See, for example: https://www.businessinsider.com/venture-capital-big-tech-antitrust-predatory-pricing-uber-wework-bird-2023-7 https://www.businessinsider.com/venture-capital-big-tech-ant... ... I'd provide more refs in general, but sadly, super pressed for time right now ... so, obviously, I would advise anyone to take what I've written without solid refs with the usual grain of salt. Plenty can be found with some searches (quite neutral searches ... i.e., no "leading the search engine" required).

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

by epgui 3y ago

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

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.
VirusNewbie 3y ago
That is extremely different than a ponzi scheme. Plenty of people who buy and sell stock every day think the underlying investment sucks. Using imprecise wording should be discouraged and it reflects poorly on people who do so.
nonameiguess 3y ago
You described any business going south where the incumbent insiders know that and future investors do not. As long as the company sells some sort of real product and earns revenue, even if it's lying about how much or the quality of that product, it's not a Ponzi. What makes a Ponzi is money from investors is the only money at all. There is no actual investment being made, not even bad ones.

DesiLurker 3y ago

But the point here is that SPAC as an investment vehicle allows sidestepping a bunch of due diligence in the name of 'just avoiding wallstreet commissions'. that basically ends up becoming prime target for any non-IPO-worthy-but-shiny security to be offloaded to general public. then the next argument from same folks will be .. well price of anything is what somebody will pay for it, so buyer beware.

tiffanyg 3y ago

This is true. However, much like "crackers" are always looking for the next exploit ... chasing that dragon of the next n00b who doesn't sanitize strings passed to their DB, or, above that rather script kiddie level, oh, say, something like infecting all the computers in Iran related to running centrifuges to enrich uranium ... there are various kinds of economic fraudsters looking for that next way to extract piles of money into their own personal "Scrooge McDuck"-style "money bins". And, Silicon Valley has been ground-zero of this sort of activity* in recent years as well. But, IPOs became rather passé post-2010ish, for the truly depraved. Too much regulation, you see. SPACs are ever so much more exploitable. Though, IPOs continue to be successfully used to funnel money from the have-nots to the already-haves.** And so, here we are. Yes, there have been people legitimately trying to use SPACs to finance efforts they truly believed in. My sense, having traded SPACs myself during the height of the frenzy was: much less than 50% had much of any real legitimacy. And, solidly more than 10% or even 20% were scammy as hell ... particularly at that time when the money taps were wide open and fraud was absolutely rife across many vehicles etc. (helped along by ... survey says: the very "internet" Silicon Valley made such a massive economic force...). * On a much larger scale and with a much more "legitimate face" than some of the other "operators" better known in this area, generally ** See, for example: https://www.businessinsider.com/venture-capital-big-tech-antitrust-predatory-pricing-uber-wework-bird-2023-7 https://www.businessinsider.com/venture-capital-big-tech-ant... ... I'd provide more refs in general, but sadly, super pressed for time right now ... so, obviously, I would advise anyone to take what I've written without solid refs with the usual grain of salt. Plenty can be found with some searches (quite neutral searches ... i.e., no "leading the search engine" required).