4 ms·
He's insinuating that people should be allowed to do whatever they want with their money and that any protection via regulation must be bad. However, if you ar
by qdog 13y ago
He's insinuating that people should be allowed to do whatever they want with their money and that any protection via regulation must be bad.
However, if you are someone who isn't an arbitrager(investor isn't the right term) in their daily job, the pressure to join the tulip buyers is a lot heavier than the available knowledge. The root of this problem is lies, because the tulip sellers are always going to give false data to encourage people to buy, and the amount of money changing hands will always attract a lot of unethical people. The libertarian mantra is that things will balance out via crowd sourcing (is it a market investing in a company that doesn't sell products yet? I argue not), yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors.
- pjlegato 13y agoAnd yet, these people are perfectly free to buy (goverment run) lottery tickets, or walk into a casino and put their entire life savings on the roulette wheel, both of which have a guaranteed negative expected value. At least with a startup investment, there is some small chance that they'll make money. At the very least, regulations designed to protect the financially unsophisticated from themselves are massively hypocritical.
- tomkarlo 13y agoBoth lotteries and casino gambling are heavily regulated in terms of their returns to consumers, and there are reasonable methods of recovering value if they fail to perform as promised, because the entities are generally still operating. You can't do that with business investments -- there's no way to mandate a particular minimum return to investors, and no way to recover lost funds if the business fails to perform as promised. If I promise you safe 15% returns, and then I run the business in a high risk way and it goes under, there isn't any way for the state to really regulate that level of risk and return except in very highly regulated industries like insurance where money is being invested in rated securities (and even then, it's not great.) The biggest problem with private investments is that there generally isn't any liquid market to provide a "real" price. It's just whatever the company can convince an investor to pay. Nobody can short or sell you their shares easily, and if you buy in it can be impossible to sell out.
- qdog 13y agoGiving money to companies is fine by me. The only desire is that a company that provides false data must be held accountable. Also someone running a scam facade, prosecutable, imho. I don't see the lottery as analogous to putting money into companies. Whether the lottery is good or not is a separate issue.
- notahacker 13y agoI think you can justify preventing people from gambling whilst thinking they're investing even whilst permitting regulated gambling marketed as gambling. Similarly, the government permits the sale of alcohol, but not marketed as medicine. Vegas seduces with glamour rather than prospectuses filled with seductive, irrelevant statistics and passionate, sincere bullshit about how the team of MIT-educated croupiers, striking design and ambient temperature make the ball more likely to land on 27 than at any other venue. I think only one of the below needs to be true to suggest investment restrictions might be advisable even in the presence of legal gambling. (i) "unsophisticated" investors are significantly more likely to put their life savings into RandomStartupX than they are to put them on a roulette wheel (ii) RandomStartupX is more likely to return zero than a roulette wheel (even if market returns are positive there's a power law distribution and it's probability of returning zero that's more important to those without a well-constructed portfolio) (iii) Retail investors' realistic early stage "investment" options' expected value may well actually be lower than that of a spin of a roulette wheel assuming the top startups prefer the experience of top-tier investors, which doesn't seem unreasonable even when comparing between different tiers of VC funds
- myke_cameron 13y ago> At the very least, regulations designed to protect the financially unsophisticated from themselves are massively hypocritical. But are they _really_ designed to protect the financially unsophisticated from themselves? These regulations were enacted in response to the great depression. The motivation was to protect SOCIETY from systemic problems rooted in the actions of unsophisticated investors, not to protect the investors from themselves. I agree that rules designed to protect the stupid from their own stupidity are to be avoided at all costs, but I don't agree that this is an example of such a policy. And I certainly don't buy the idea that people should be able to do whatever the fuck they want, to hell with everyone else, so long as they are not directly causing physical harm or property loss to another person.
- sageikosa 13y ago> yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors. Proving that the scam artists will find a way no matter what the regulations say.
- qdog 13y agoRegulations aren't binary. Some good, some bad, but not binary.
- lmm 13y agoBut thanks to the regulations Madoff only hit people who could afford to lose it, not those for whom who losing the money would force them onto the streets.
- sageikosa 13y agoThanks to the regulations, there were suckers who assumed that someone else was ensuring things were copacetic. Foxes hunt in the chicken coop if one is available, and wolves go for the sheep pen if they can find one.