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Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. For example between Feb 2009 to Sept 2012 the pr

Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. For example between Feb 2009 to Sept 2012 the price of Apple stock went from $100 to $700. Did the profits of Apple go to 7 times in this time? Not really. But if you were to only see Apple's stock in this timeframe, AND don't understand Apple's business model, but merely heard that Apple's stock is rising and you should invest in it, then it would appear that older investors are being paid off at the expense of the newer investors. Noriel Roubini could also very specifically perceive the question about bitcoin as "I heard a lot of my friends are getting rich through bitcoin, should I invest in bitcoin to profit from it?", and then he gives the answer that he gave.

andrewla 13y ago
> Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. I know you're not disagreeing with the grandparent post here, fundamentally, but this really irks me. A Ponzi scheme is a particular type of scam that is pretty well defined. > ... it would appear that older investors are being paid off at the expense of the newer investors I guess this is the core of it; the definition uses the passive voice and thus is open to this interpretation. I think it's clear, both historically and looking at examples, that the definition would be more clear as: A Ponzi scheme is a fraudulent investment operation, where the operator pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the operator. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Here I've modified the language slightly (and I've edited the wikipedia page as well, but we'll see if that holds up). In the Apple example, there is no operator, so there's really no chance that it is a Ponzi scheme. Similarly for the Bitcoin case. You can make the argument that Bitcoin (or Apple stock) is a scam of some sort; a "pump and dump" seems the most apt analogue. Calling it a Ponzi scheme seems an invitation to this exact kind of semantic tomfoolery that I'm posting here.

andrewla 13y ago

> Any rising investment, if seen in a proper timeframe(with proper rationale) could appear to be a Ponzi scheme. I know you're not disagreeing with the grandparent post here, fundamentally, but this really irks me. A Ponzi scheme is a particular type of scam that is pretty well defined. > ... it would appear that older investors are being paid off at the expense of the newer investors I guess this is the core of it; the definition uses the passive voice and thus is open to this interpretation. I think it's clear, both historically and looking at examples, that the definition would be more clear as: A Ponzi scheme is a fraudulent investment operation, where the operator pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the operator. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Here I've modified the language slightly (and I've edited the wikipedia page as well, but we'll see if that holds up). In the Apple example, there is no operator, so there's really no chance that it is a Ponzi scheme. Similarly for the Bitcoin case. You can make the argument that Bitcoin (or Apple stock) is a scam of some sort; a "pump and dump" seems the most apt analogue. Calling it a Ponzi scheme seems an invitation to this exact kind of semantic tomfoolery that I'm posting here.