You misconstrue my concern. I am happy to allow anyone who is willing to risk losing everything, give their money to some entrepreneur in the hopes of a big payday. It is exactly like going to Vegas with your funds and throwing it away.
My concern is that the exact argument was used with 'sub prime' mortgages as well, which was that plenty of people who couldn't qualify with the existing rules were perfectly capable of paying a mortgage. And they did. There are thousands, if not tens of thousands, of people who did not qualify under the 'old' rules but could get in under the 'new' looser rules. More money was unlocked for mortgages, more mortgages were written, unscrupulous people exploited than and herded that money into a giant pool of risk and when the balloon went up, blam! We took a big hit which we are collectively paying off through a stagnant economy.
That exact mechanism (to my way of thinking, happy to find someone who can show me why I shouldn't worry) is going to be enabled by the combination of the JOBS Act and stuff like this. Unscrupulous people will convince folks to invest in startups. There will be LOTs of money chasing few startups, valuations will skyrocket as the money tries to find a place to land which will on paper present illusory massive returns (on paper).
This is exactly analogous that the sub-prime rule changes allowed more people to buy houses, but the supply of houses didn't suddenly go up so the price per house when up instead. That raised house valuations which allowed for 'flipping' and some quick gains which people exploited which drove a bubble in real estate.
There aren't that many more startups, and startups that can't get funded today suddenly have access to funds that lets them get funded. So now you, with your 100K$ of 'mad money' to invest get less equity for your investment and your risk is increased because there are more places out there which are bad investments, getting funded anyway and creating noise in the system.
We showed quite clearly in the 90's that when 'retail investors' aka people with money they really can't afford to lose but seeking returns that aren't defensible by economic reasoning, get involved, the sharks come out and fleece them. After the fact a few of the more egregious offenders get prosecuted but the cost is huge.
We should know better. We should find a way to let you invest where you have to make some sort of binding personal responsibility oath which says "I will never ever ask anyone else to cover my losses by this activity even if those losses are the direct result of being swindled by a smooth talking tool of a salesguy."
If you're willing to sign such an affadavit, then more power to you.
My concern is that the exact argument was used with 'sub prime' mortgages as well, which was that plenty of people who couldn't qualify with the existing rules were perfectly capable of paying a mortgage. And they did. There are thousands, if not tens of thousands, of people who did not qualify under the 'old' rules but could get in under the 'new' looser rules. More money was unlocked for mortgages, more mortgages were written, unscrupulous people exploited than and herded that money into a giant pool of risk and when the balloon went up, blam! We took a big hit which we are collectively paying off through a stagnant economy.
That exact mechanism (to my way of thinking, happy to find someone who can show me why I shouldn't worry) is going to be enabled by the combination of the JOBS Act and stuff like this. Unscrupulous people will convince folks to invest in startups. There will be LOTs of money chasing few startups, valuations will skyrocket as the money tries to find a place to land which will on paper present illusory massive returns (on paper).
This is exactly analogous that the sub-prime rule changes allowed more people to buy houses, but the supply of houses didn't suddenly go up so the price per house when up instead. That raised house valuations which allowed for 'flipping' and some quick gains which people exploited which drove a bubble in real estate.
There aren't that many more startups, and startups that can't get funded today suddenly have access to funds that lets them get funded. So now you, with your 100K$ of 'mad money' to invest get less equity for your investment and your risk is increased because there are more places out there which are bad investments, getting funded anyway and creating noise in the system.
We showed quite clearly in the 90's that when 'retail investors' aka people with money they really can't afford to lose but seeking returns that aren't defensible by economic reasoning, get involved, the sharks come out and fleece them. After the fact a few of the more egregious offenders get prosecuted but the cost is huge.
We should know better. We should find a way to let you invest where you have to make some sort of binding personal responsibility oath which says "I will never ever ask anyone else to cover my losses by this activity even if those losses are the direct result of being swindled by a smooth talking tool of a salesguy."
If you're willing to sign such an affadavit, then more power to you.