12 ms·

Why should only rich people get to invest in companies? Anyone can go to Vegas and blow their entire life savings, but buying shares in Dropbox or Oculus at lau

• waterlesscloud 12y ago
  It's not like rich people are all that much better at investing in companies anyway. They're just better able to afford the consequences of their ignorance.
  • deleted 12y ago
    [deleted]
  • colinmegill 12y ago
    Which makes them much better at not losing their life savings, hence the regs.
    • briandear 12y ago
      So we should ban the lottery for poor people.
      • luch 12y ago
        Actually yes, I know an economist (working for the BCE) half-jokingly preaching it. According to him, lottery should be reserved to people who can afford to lose 10$.
      • notahacker 12y ago
        In fairness to the lottery, few people consider it to be a sensible place to stick 50% of their net worth. Bearing in mind that top startups - which generate nearly all the return to VCs - have a marked preference for "smart money" and the majority of startups ventures fail hard, most lotteries probably have a higher expected value than retail investors are likely to see from the average crowdfunding portfolio.
        • clarky07 12y ago
          luckily the new regs don't allow you to invest 50% of your net worth.
          • notahacker 12y ago
            If I understand correctly, the 10% of net worth restriction applies to investments in a single startup. That being the case you can guarantee there will be commission-earning intermediaries or platforms misrepresenting the concept of portfolio diversification to encourage people to invest in as many startups as they can afford...
      • ceejayoz 12y ago
        Frankly, yes. Government-run lotteries are a pretty abusive practice that should be ended.
        • deathhand 12y ago
          John Oliver has a great segment on this: https://www.youtube.com/watch?v=9PK-netuhHA https://www.youtube.com/watch?v=9PK-netuhHA
    • DennisP 12y ago
      The new regs put limits on how much money the non-accredited investors are allowed to invest.
    • clarky07 12y ago
      actually the new regs are such that you can't in fact lose your life savings. only 10%.
• spullara 12y ago
  Vegas is very highly regulated. Every "investment" has specific odds associated with it that are checked regularly. No one presents gambling as a sure thing.
  • aikah 12y ago
    unless you buy bonds issued by central banks , investment IS gambling.
    • blumkvist 12y ago
      With a lot lower odds of winning, which are in turn a lot harder to evaluate than the upcoming superball match, for example.
  • gojomo 12y ago
    I don't see any reminders in Las Vegas or casino advertisements that all the games are negative-expectation, and repeated play can result in the loss of any amount of money. In fact there's no paperwork or legal counsel required to play at all! Can equity crowdfunding be placed under this same "highly regulated" regime that Vegas is under, so that anyone can walk up and participate at any time?
    • whybroke 12y ago
      They did that with tulip-bulbs once. It did not work out well. The securities market isn't a place to have fun, it's a vital machine on which all our prosperity depends. Treating stocks as a blind gamble means money is not chasing the best investment but is being scattered randomly or by easily manipulated rumors. Anyone who buys stock as a blind gamble should be deterred. Not to protect them but the rest of us. The same way children shouldn't play with matches; I don't care about burning their little fingers off I care about burning the house down. So no, it's not like Las Vegas.
      • drjesusphd 12y ago
        > [the securities market is] a vital machine on which all our prosperity depends. I'd like to see evidence of this.
• hkmurakami 12y ago
  I think people are able to evaluate their odds of winning in Vegas better than the odds of their tech investments paying off.
  • briandear 12y ago
    You really think the people buying lottery tickets each day are thinking about the odds?
  • gojomo 12y ago
    Here's a cheatsheet: Vegas expectations = always negative, no matter how much time or thought you put into it Private investing expectations = usually negative, but sometimes positive (and more likely positive with experience and effort, or within domains of personal expertise) So why is the first a better deal to open to everyone without regard to wealth, whereas the second is so dangerous it must be encumbered with wealth-tests (not knowledge/skill/credential tests) and major legal barriers/overhead costs? Here's an idea: let anyone invest, on the same basis as a traditional "accredited investor", whatever amount of cash they could also obtain, via withdrawals or loans, at a casino cashier cage. If it's OK to hand someone $10-20K in chips for negative-expectation games, why not let them invest $10-20K in maybe-positive-expectation learning experiences, without prejudice?
    • alasdair_ 12y ago
      Poker in vegas has +EV in the right circumstances, as does card counting blackjack when coupled with player reward bonuses. Hell, roulette with a martingale system has a positive expectation if you have more money than the house and the bet size is unlimited.
      • notahacker 12y ago
        Roulette with a martingale system has exactly the same expectation as roulette without a martingale system, just a slightly different distribution of returns. Having more money than the house certainly isn't an advantage when you've lost 16 times in a row and they can't honour your next bet...
• whybroke 12y ago
  There are regulations that require thorough disclosure to investors. There is an exemption if all investors are "accredited". Rather than remove the exemption, the SEC has effectively removed the disclosure requirement. The rule did not protect naive investors from themselves, it protected them from fraud and the economy from bubbles. If anything, by creating a bubble environment the change will benefit the wealthy at the expense of naive later investors and can be pitched by populists as "wonderful" deregulation.
  • deleted 12y ago
    [deleted]
  • clavalle 12y ago
    The crowdfunding rules require plenty of disclosure and background. Just not the expensive disclosure required of a company when it goes public, which is what you're talking about.
    • whybroke 12y ago
      I was briefly answering a two sentence Las Vegas analogy. Please do expand on the many details my tweet sized comment omitted if you wish.
      • clavalle 12y ago
        My comment is meant as a correction, not an expansion. What you said was wrong. >Rather than remove the exemption, the SEC has effectively removed the disclosure requirement. The rule did not protect naive investors from themselves, it protected them from fraud and the economy from bubbles. That is just simply not true at all.
        • whybroke 12y ago
          No, what you said is just simply not true at all. Interesting how making completely vacuous denials devoid of any support utterly fails to advance a conversation. Perhaps you will explain what the point of wasting time typing them is. Or let me guess, the reason is "here's a down vote".
• makomk 12y ago
  There's another reason that no-one's mentioned yet: only rich people can afford to investigate and sue if they get scammed. For example, a few years back there was a Ponzi scheme in the US called PermaPave which took money from a bunch of small investors on the pretext it was being invested in environmentally-friendly stone paving slabs. They didn't make a single cent in profit from the slabs - all the payments out came from other investors' payments in. When the whole thing imploded none of the small investors could afford to do anything about it. Unfortunately for PermaPave, they'd also taken a much larger investment from a company actually interested in buying stuff from them, and when they breached their contract that company had the money to investigate them, figure out that it was a Ponzi, and sue everyone involved. Another problem is that companies don't want to deal with a load of small investors if they can raise money from a few rich investors instead: it's a lot more work and expense for them, the small investors don't have the same kinds of connections and expertise that the big VCs have, etc. The main reason to raise money from ordinary people is because you're a scammer and big investors have the expertise to spot you, the resources to investigate you, and the money to sue you if they do invest. (The less money you invest, the less you can rationally justify spending on due diligence.) Ordinary people are at a fundamental disadvantage to the rich here no matter whether they're legally allowed to invest or not.
  • dublinclontarf 12y ago
    That is simply a case of fraud and is something that the SEC exists to persue(and they do, frequently).
    • makomk 12y ago
      The SEC did eventually pursue PermaPave several years after the company that'd invested in them figured out it was a Ponzi scheme and sued, and some time after they'd stopped accepting new investments. They're slow, mostly because there are so many companies out there and they don't have all that much information on them until they investigate.
• samspot 12y ago
  I don't know about you, but I think blowing your entire life savings at Vegas is too reckless.
• iamwithnail 12y ago
  This, a thousand times this. Wealth is not a skills set.
• vasilipupkin 12y ago
  this is a valid argument, however, the opportunities available to non-rich people are very likely to be severely adversely selected ( skewed towards not so great companies )
• ChuckMcM 12y ago
  I realize you're trolling but you might have just as well asked "why should only people with good credit be able to buy houses?" That might make the fault in that reasoning a bit more clear. It isn't "rich people" who get to invest as it is "people who understand the risks and are prepared for them" get to invest in "untested companies". The "accredited investor" rules are an imperfect but functional selection mechanism to select for 'understand risks' and they also add the defense that once you lose enough money to fall below that standard you lose the opportunity to keep playing. Further, anyone, in the US at least, can become a "rich person" by investing in publicly traded companies (or real estate for that matter) prior to investing in non-public companies. Many thousands have. And finally, I grew up in Vegas and watched it kill people. Mostly people who managed their pennies and saved their savings. And took a vacation to Vegas and if they were very unlucky won a enough money to pay for their vacation on their first visit to a casino. Then went home broke, sometimes bankrupt. There were enough of those people that it left a mark on me. My buddy in high school who worked at a gas station which was on the the way to I-15 to head back to Los Angeles would have sales guys offering to trade him the demo units they had brought to a convention for a tank of gas to get back to the office. The trick was you had to actually get there, nobody from a casino called you up and started asking you to play games of chance. And all the games are generally playable at home with your own cards or your own dice. So people can get a feel for just how impossible it is to win long term at those games. No, this isn't about "rich people" and it isn't about "going somewhere to gamble." This is about enabling a class of unscrupulous people a nominally legal framework for stealing from people who can neither afford, nor effectively defend against it.
  • nickpinkston 12y ago
    "why should only people with good credit be able to buy houses?" Because typically banks won't give you loans without ability to pay them back. (sans moral hazards) This equity purchase is at least equivalent to gambling which is already legal, and yea the latter has bad effects - like alcohol, cigarettes, etc. Also see: nearly all product marketing that sells you shit you don't need, American culture in general that glorifies "livin' it up" instead of thrift, etc. If you have a problem with JOBS Act on these grounds - you have a much broader fight, and I hope you're as outspoken about those issues as this one.