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Comment by sigil | Hacker News Reader

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Will VCs make better investments, on average, than retail crowdfunders? Probably. That's their job after all.

Does that mean the law should protect crowdfunders from themselves? That I'm not so sure about.

I can think of no more "Rich Get Richer" law than the accredited investor law [1]. It literally says: if you aren't already rich, you don't have access to this entire set of opportunities that could make you rich.

This was less of an issue when we had a healthier IPO market. With more companies staying private now, and more of the actual IPOs coming later when there's less growth left, how can we continue to deny retail investors (read: the not-rich) access to the best opportunities?

Many of us on HN can start tech companies to gain access. Maybe the person down the street can't do that, but once in a while they might have valuable insights into an industry or the people in it, insights that others (yes even VCs perhaps) lack. Saying "sorry, you can't play this game" seems immoral to me. How can we give regular folks -- non-rich, non-tech people -- access to the same opportunities? If not the current crowdfunding laws, then what?

[1] https://en.wikipedia.org/wiki/Accredited_investor#United_Sta...

> I can think of no more "Rich Get Richer" law than the accredited investor law [1]. It literally says: if you aren't already rich, you don't have access to this entire set of opportunities that could make you rich.

Or alternatively "If you aren't already rich, you don't get marketed at by people offering opportunities so bad they've been passed on by high-risk investors who underperform the returns the non-rich get on less risky asset classes despite working full time on managing their investments whilst having significant power to induce exits in their favour." Or rather, the general public actually does have the opportunity to invest in startups if introduced by genuine friends and family but random mountebanks don't have the right to run slick campaigns to dupe non-rich people into believing that Startup X is a good place to put life savings despite offering lower expected returns than a roulette wheel and zero liquidity. I mean, it'd be nice if the law was as restrictive on more blatant attempts to scam like penny stock pump and dumps and MLM, but it's difficult to argue the general public would be better off for having comparatively sincere people beguile them with Powerpoints involving hockey stick curves.

It's not a "Rich Get Richer" provision when it's obvious that on average the poor will get poorer from random startups being able to present themselves as investment opportunities to them.

That makes sense and all, but the definition of accredited investor is tied to net worth and not knowledge. Which means that maybe you can't scam poor people, but there are plenty of gullible rich people with net worth over the $2 million in liquid assets or whatever it is these days.

Maybe treat being an accredited investor like a driver license and not tie it to your net worth?

The difference is that when a millionaire loses $100k, they're not going to feel it the way someone who's taken out a second mortgage would.

Much easier to develop a roughly accurate heuristic for assessing people's ability to afford to misjudge risk or liquidity than to develop a roughly accurate heuristic for assessing their ability not to make such misjudgements.

How about a terms-based knowledge test, like getting a driver's license? The US loves standardized testing!

Driver testing is run at the state level. The US hates federal organization.

I don't know what other financial services the Accredited Investor Rule deprives ordinary consumers of, but to the extent that it deprives them of access to VC investments: it's increasing their wealth. Most VC firms fail. A significant chunk of assets under VC management are there as part of a hedging strategy for a much larger portfolio; it's not parked there with the expectation that any one person's retirement can depend on it.

> I don't know what other financial services the Accredited Investor Rule deprives ordinary consumers of, but to the extent that it deprives them of access to VC investments: it's increasing their wealth.

By that same logic, we should deprive engineers of the ability to start companies, and push them instead towards AmaGooBookSoft. We would undoubtedly be increasing their wealth.

>By the same logic...

It's a very fair point.

I just wanted to note something about this that is part of a broader pattern of something I notice about HN posters. They will generally argue in favour of personal liberties, and even go so far to do it based on principle, but only when it comes to a case where liberties they personally care about are taken away. There is a contrast between this argument for liberty based on principle--which is by definition libertarian ideology (but note: not necessarily US Libertarian Party followers)--and the pattern of anti-libertarian rhetoric seen around here sometimes in threads where it comes up.

It seems perhaps there is a disconnect: people appear to generally care a lot about their liberties when suddenly it comes the ones they care about being taken away, and they will be argued for them based on principle. However When others generally want liberties they care about, then, that's apparently a different story.

Sometimes it is different person being attracted to different topic. E.g. libertarians like to argue when it is easy for them to defend their opinions and are silent when it is harder.

Moreover, most people opinions are not systematically based on ideology - they are based on their own observations about what worked well in their opinion.

I think you've confused positive with normative arguments: you're rebutting a normative argument I did not make. I'm simply describing a fact: the Accredited Investor Rule is not excluding average people from processes that, like the rich, would make them richer.

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