How to Run a Ponzi Scheme for Tech People
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It also makes things harder for those of us that don't want to run Ponzi schemes: How does one break out when everyone's taking glamorous selfies in Thailand but I'm working in a dingy apartment trying to build the next big app?
It's a tough situation on all sides with no obvious solutions.
That's a bad example. By many measures retail investors have outperformed institutional investors since March. The simple reason is that options have a built in exit strategy, the thing that's missing when most people lose in scams - including Ponzi schemes!
On the flip side, why then do they outperform? High risk, high reward. Opportunities where you lose your entire principle, like out of the money options, turned out to be wildly underpriced, simply because institutions never buy them.
Anyway, I get it, those people are stupid. But they made money.
I don't think it's a bad example, because if you spend some time on that subreddit, you'll quickly realize people are literally gambling with their life savings. In no small part due to disillusionment and cynicism with the current economic realities -- we can no longer work at a stable company, marry a pretty wife, have a couple of kids, retire 40 years later, and live off of a plump 401k.
Gambling, yes. But the stock market is not a ponzi scheme.
That depends on who you ask. https://www.hughescapital.com/the-stock-market-is-a-ponzi-sc...
> In 2010, its stock price was $20 and by 2017 had risen to $380 a share, yet Tesla reported a loss of $4.3 billion. How is this possible? The only way to explain this bizarre scenario is to recognize that the market is not efficient
I will pass on buying/reading that book based on this excerpt alone.
I am far away from a tesla fan (I actively encourage my friends/family to not buy teslas, or invest in tesla, etc), but saying "the only way to explain this" is pretty unbelievable.
I don't believe Tesla would be valued so highly or fluctuate so violently if the market was actually efficient.
Just to put some simple numbers on things, a commonly held expectation is that Tesla will grow revenue at ~50% a year until 2030 while maintaining high margins. At that point Tesla's revenue would be approximately 1T with perhaps 100B in net income. A fair valuation would then be around 3T, assuming there is still some future growth left.
This largely explains today's 500B valuation - if there is a 30% chance of this scenario playing out (and Tesla goes bankrupt in the other 70%) then this is a reasonable bet compared to buying other stocks.
As for the volatility, imagine if the average market participant changes their mind and believes that Tesla is only likely to achieve a 40% growth rate over the next decade. This would drop 2030 revenue and profits by more than 40% compared to the previous scenario, and today's stock price would fall significantly as well.
I am not expert enough to know, but just off hand declaring that something is "the only way" with literally no justification or reasoning puts a really bad taste in my mouhth
[1] https://www.cnbc.com/2020/06/18/young-trader-dies-by-suicide...
Just sensible market behavior.
Most Americans have been so fully shut out of capital that they're practically begging for asset values to get rocked. They'll encourage it, even. (What do you think this lockdown backlash is, unconsciously?)
All of Disney's revenue streams shut down for 3 months and its stock went up. The market needs to be reflective of conditions and not simply the desperation to never see a bubble corrected, or people are going to start calling the bluff.
This is what nearly everyone in tech who isn't spending their free time shitposting about their side projects and the nuances of programming languages is doing. Sure you can't work your whole career at one company anymore but that's just a reflection of macroeconomic conditions, the stability is still there for the people who's skills are in demand. Pretty much no competent programmer, or electrician for that matter, is unwillingly unemployed for long enough to matter.
Saying this after 2008 is just empirically false. You do realize that people lost their entire 401(k)s, right? My dad worked at IBM for over a decade and was laid off. More recently, my buddy (late 20s) was laid off by IBM after working there for the past 7 years; I know people in their 40s and 50s (at big companies and startups alike) that were laid off at the drop of a hat once the pandemic hit.
I live in West LA and make a "comfortable" engineer's salary. Guess what, I'll never be able to afford a house here (unless one of my startups takes off or some other equally-unlikely miracle happens). I don't care if you blame this on "macroeconomic conditions," it just happens to be the reality of my generation. To touch on the loneliness/isolation angle, while doing the whole startup thing, particularly in my 20s, I was putting off dating; although I've recently said screw it: even if I die poor†, I'd rather be with someone.
I'm very much a libertarian "pull-yourself-up-by-the-bootstraps" entrepreneur's entrepreneur but let's be real: it's not surprising there's so much cynicism.
† Relatively, of course. I grew up in post-Communist Eastern Europe in actual poverty, so my life is much better than it used to be.
I find it hard to imagine someone making an engineer’s salary can not afford a house, even in LA.
The solution here is to move to Austin (which a ton of people have been doing recently) or just travel the world because, thankfully, I can do my job remotely (but many people cannot). This was actually my plan, but the pandemic kind of killed that -- maybe next year.
Professional, educated, well-off young people can't afford to buy houses in California (I've had this conversation with dozens of friends). Market forces or not, even as a part-time libertarian, it's clear to me that this isn't tenable and people are frustrated.
Not sure if your "should" is in the sense that logically it doesn't make sense to be, or that morally or ethically it had no right to be. For the first meaning, neighborhoods rise and fall in popularity based on trends, often driven by the tastes of young people, and is a natural cycle just like clothing fashion. Thus logically it should not be surprising that certain locations rise in housing costs as it increases in popularity. If you intend the second meaning, I'd be interested in your reasons.
> Your argument also doesn't work because most LA tech jobs are in Santa Monica.
I'd be interested in seeing the numbers, but there are a large amount of tech jobs in the South Bay area as well, along the 405 going south around Gardena and such.
> The idea that it should be status quo to commute to your job because you can't afford to live around where you work is nonsensical.
The problem is that traffic around Santa Monica is horrendous, making the housing more expensive. My previous commute from Torrance to Culver City was 40 min in the morning and 20 at night, but going from Culver City to Santa Monica was an extra half an hour. If you pick some of the worst traffic areas in LA, I don't think you should be surprised or incensed that people will pay to cut that traffic time down. It's an infrastructure problem, really.
> Professional, educated, well-off young people can't afford to buy houses in California
There are still lots of cities with affordable house prices, unless they insist on competing to live in the worst traffic areas of California.
Been wondering lately, why is a position in a stable company also generally considered stable?
I mean, it’s a scalable system designed to survive, running on cash flow. Say load reduces, or flow reduces, wouldn’t it be only sane to immediately cut down on worker nodes? Why keep, except as strategic reserves?
I suppose because strategic planning up top used to be harder in the past so reserves tended to be large?
People don't understand how money comes from value created, in the long run. People think they can game the system. Everyone feels they are not a part of the average.
Not true, companies can create value, that value is reflected in the stock price. The economy is not zero sum. Did all the people that got rich off of apple, google, microsoft, nvidia, etc get rich because someone else lost money?
https://www.investopedia.com/ask/answers/12/difference-inves...
Not that there is anything wrong with that. Just pointing out how I think your logic is flawed.
Many of the calls that have hit recently only capped out people’s gains - so yes there was an opportunity cost to that lost, but people didn’t literally lose invested capital. Not as much money as you think has gone into the red this year - even on the way down.
OR
The point of liquidity is to get people doing things, but the status quo today seems more like giant firms trading above our heads to manage the risk of rent-seeking on an increasingly precariously-positioned consumer class.)
Neither of his points seem based on Economic dogma shoved down your throat during undergrad.
was flagged, as it was neither inflammatory nor uncouth, but I agree with it. You seem to have an entirely elementary conception of the market and an inability to understand the ways those assumptions have fallen apart in the face of market and regulatory conditions.
They are absolutely not stupid. Everything they're doing is entirely rational. It doesn't seem that way, because clearly you're not in the same circumstances as they are. Neither am I.
However, I completely understand it. If you're 22-25, not married, and have far more liabilities than asset, you have no reason not to trade on high margin with an options play and try to turn $50,000 into $2 million or more.
If you lose the $50,000, you can recover. If you end up horribly in debt, you file for bankruptcy and move on.
Given the current state of affairs, its completely understandable.
Source please?
The average retail investor might have outperformed institutional investors, but it's a leap to suggest that wsb outperformed institutional investors. Foe one, the average retail investor isn't buying otm options like wsb users are.
> The simple reason is that options have a built in exit strategy, the thing that's missing when most people lose in scams - including Ponzi schemes!
Not really? Options can have their value go to zero if they remain unexercised, just like if a ponzi scheme goes bust.
true. but as a person who plays with options, I should point out that when you buy an option contract, you don't want it to expire worthless.
However if you are an options seller, that is the best possible outcome.
I think the trick is to realize those glamorous selfies are mostly a mirage. If you were having the best day of your life on the beach, maybe, just maybe, you wouldn't be on your phone trying to get the perfect selfie.
Well said, but the optics are still there. The selfie is bound to get more hits on social media, more coverage, etc.
Isn't the idea of building the "next big app" itself based on the same kind of get-rich-quick mindset those schemes are exploiting?
Only except for the "nomad lifestyle" or "selling courses", etc, it's supposed to happen by coding in a dingy apartment. But it's equally unlikely, and too starry-eyed, the tech nerd version of the kind of dream the stereotypical bus-arriving Midwestern teenagers had of "becoming famous in Los Angeles".
How about merely building a business? Think small indie developer or Basecamp at best, vs Facebook and Amazon.
More people need to be told this.
The combination of work ethic, of risk tolerance, and of perseverance against ridiculous odds that is required to build a Tesla, or an Apple, or a Whatever, is extraordinarily rare
Generous subsidies for electrics in the US and other countries helped with that.
Like generous government money funnelled through NASA contracts helped Space X repeat what NASA did in the late 60s/early 70s, slightly improved, 40 years later...
And NASA hasn't used "5% GDP" for 40 years. It has been less than 1% since 1973. Actually scratch that, it has been less than 1% the federal budget, which is much much less than the GDP.
Of course all that 50-years of IP got handed to the "private visionaries" of SpaceX for free, or rather, along with money paid to them...
Standard Fed'Gov contract hustle -- provide a service for less than what they're currently playing and leach off that gob'mnt teat.
Can't turn around without bumping into an electric car / reusable rocket company these days.
>Yeah, just look at all the other profitable companies in the space which did it too!
Did those other companies in the space (of space) got NASA contracts and subsidies?
Butthurt emotions is not the same as lower quality of life (e.g. less access to food, entertainment, travel, housing, health, studies, taking care of kids/relatives, etc).
Are there other people who could do it but were not in the right place in the right time or didn't have the right leverage (money, connections, etc.)? Lots. If you took away those parameters, if Elon was just an engineer working for Boeing with just enough money to go on vacation every year, then he probably wouldn't have founded Tesla. He'd be some middle manager somewhere like lots of other smart/capable people.
> In Ashlee Vance's biography of Elon Musk, it is claimed that the Musks' father, Errol Musk, provided them with US$28,000 during this time,[4]:Ch.4 but Elon Musk later denied this.[6] He later clarified that his dad provided around 10% of US$200,000 as part of a later funding round.[7]
I feel like someone who is able to get 90% of their funding round could either convince an existing investor in the round or convince someone else to join the round. This doesn't sound like money to "start Zip2" as you claim.
Also, note that Elon had to shower at a YMCA while starting up Zip2 (https://www.cnbc.com/2018/06/19/how-elon-musk-founded-zip2-w...). Does that really sound like a "trust fund baby" to you? I feel like a lot of the myths trying to tear down Elon Musk's successes are all sourced from Ashlee Vance's book, which in turn are based on, as I understand it, interviews of Errol Musk himself (the father).
Agreed. For every tech millionaire there are a thousand guys who are just as smart and worked just as hard and it didn’t work out for whatever reason. Maybe their timing was off by a mere 6 months for example. There’s a lot of survivorship bias in what is in large part a lottery.
First job I had (1995) was "Classified Ads on the Internet" - back then it was expensive to host a website and hugely expensive to add CGI (I think Demon wanted maybe £300 a month for that?) and the money ran out after a year. If they'd been able to keep it funded for, say, another 2-3 years, until home internet was more accessible, I think they'd have been in a pretty good position to own UK classifieds on the web (at least for a while.)
I recently had a recruiter from color.com reach out to me...
It's a genuine question. Who's the poorest YC founder? Least family wealth, least angel/seed investment. Who genuinely managed to get YC funding without putting in any money of their own?
A lot of VC capital is democratized: an elected official appointed a pension fund manager who decided to allocate some funds to a particular VC firm.
If you aren’t well connected or hyper credentialed (or if you’re a minority founder), raising capital is very hard. It’s easier than it’s ever been, but it’s not « easy »
I think I could have made roughly as good of a living being a plumber, an electrician, or a welder! A good electrician around here makes 150k a year. I think the best career advice I heard was pick something you can stand doing and work as hard as you can at it, try and be as good as you can, not measured against someone else but for your self. If you pick a career where expertise matters and it has demand and you work harder and smarter than other people you will do fine.
Different strokes, different folks.
These days, money isn't impressive. What you actually do in your life is. For some of it, some amount of money is important, and if you have plenty its easier to achieve. But that's about it. I live in place swarming with rich folks, both old rich and new rich, while being neither. Most of them live such boring lives it would be sad if I cared for them. Never once met one of them that I would want to swap my adventurous life with. Had to go through a bit of hardship to get where I am obviously but not that much.
What I want to say - striving to get rich from the start is a stupid strategy of a clueless person. Be good at something you do, and more importantly be good at living a great life, being a good kind person. Being rich becomes just a gimmick, whether it happens or not.
I was half-expecting the next sentence to be "Sign up for my webinar and I'll teach you how to make your life as fun as mine!"
Seriously though, what do you mean by "adventurous life"?
It doesn't have to be that many (which is hard to manage with 100% employment), even 1 would suffice if done properly. I have a kid now, second possibly on the way, so even without covid some of this is/will be massively scaled down. But I still want to pick up new ones - right now its precision target shooting and archery.
Its more about mindset - if you feel you have a great life, money is just a tool to keep it. For that you don't need terribly much, heck some full time climbers live in camper vans for the whole time. On the other hand if you don't enjoy your life, money won't make it magically better, sometimes the opposite.
And no I don't sell some stupid coaching :) Those are just my own experiences
If the post you were replying to wasn’t composed while skydiving above shark-infested waters with a supermodel by their side, I’m going to be terribly disappointed.
Or this talk from the Bandcamp guy about financial sustainability: https://www.youtube.com/watch?v=MaUkS-lr-ZM
Perhaps, depending on the app, a ponzi scheme is based on wanting to get rich by taking advantage of people's gullibility and non-understanding of how ponzi schemes work.
I suppose some apps could have that kind of disregard for how users of the app are harmed, but I think in most cases people building apps also think they are helping their users in some way. Ponzi schemers know they're only helping themselves.
But that's the thing right? You aim to make the next big app, and fail into the comfortable existence of "merely" building a business, or aquihired. Certainly better than aiming for moviestar and ending up a waitress.
I think you're getting hung up on my qualifier of "big" -- really, I'd be very happy to make 250k yearly off of a project (a far cry from Basecamp's $25MM yearly revenue), but even ramen profitability is hard, let alone getting to quarter-of-a-million.
WSB members have come to realize that so-called "financial professionals" by and large have no scrying crystal into the market. WSB got there because of the democratization of knowledge that the Internet has caused.
And before you cite some unicorn like Renaissance, that's generating 40% YOY for 20+ years, keep in mind that unicorns, while rare, do exist. Microsoft, Uber, Google, Apple, etc., so forth. How many "investment professionals" would have recommended you dump all your money into these companies when they were but fledging entities? Or even when they went through tough times?
No, I think WSB is doing a service to humanity. They're exposing the smoke and mirrors behind Wall Street.
Good on them.
WSB has been duped.
While we're at it, quant firms occupy a family of trading strategies which are a superset of HFT; not all quants are market making, trading intraday or pursuing low latency strategies.
With all due respect, please stop perpetuating popular finance misconceptions of the Flash Boys variety. If this is something you'd like to learn more about, I suggest you read the following:
- https://blog.headlandstech.com/2017/08/03/quantitative-tradi...
- Flash Boys: Not So Fast
You can quibble with the academic arguments on whether or not this facilitates liquidity and price discovery (and therefore helps retail investors). Or you can just place a limit order and move on. Either way, nothing illegal or nefarious is happening. Just because they're purchasing order flow and executing your trade doesn't mean the national best bid and offer (NBBO) is being violated.
Just like if market makers say the only thing they do is flow, doesn’t really mean it’s the only thing they do.
The Hollywood-inspired folk concept of Wall Street is that they trade stocks. That’s what everybody in those big buildings in Manhattan does all day. They yell buy/sell orders into red phones and drink Scotch.
Except they don’t. Wall Street firms like Goldman Sachs make money by providing services such as mergers and acquisitions, IPOs, market making, etc. That is, they make money by selling shovels in a gold rush, not by speculating on where gold will be found. Other firms are in the business of buying and selling illiquid assets such as private companies and commercial real estate (with illiquid assets, there is far lower price efficiency, and thus it is possible to generate excess returns). Still others are in the business of managing people’s money for them—an industry which is mostly about managing volatility, not about generating excess returns (a pension fund usually cannot afford to have its portfolio go down by 50%, even if it’s temporary, so they’re not going to put it all in the S&P 500).
Proprietary trading (where firms use their own money to buy and sell public securities) has been in decline for decades at the big banks, precisely because they don’t have a scrying crystal, and they know it. Public stock trading on Wall Street is mostly the domain of companies in niches like high-frequency trading (such as Jane Street). HFT firms gain an edge through arbitraging different prices faster than anyone else (for example, sell Exxon in New York a few microseconds after oil futures drop in Chicago). In other words, the only people on Wall Street who do what Hollywood-Wall-Street does are the few who do have a scrying crystal.
WSB is not “exposing” anything except the fact that most people (understandably) have no idea what the financial industry does.
I am not super plugged into the financial industry so I can't say for certain, but I think while people may not understand the difference between traders shouting on phones, "wall street", and wealth management, people think about wealth management the most in the context of "wall street", because that's what they're personally most familiar with. They think that even though wealth management seems to me to be very decentralized and not really something physically centered around Wall St.
I think wallstreetbets is mostly a pretty unsophisticated subreddit (which somehow declined in quality even more as it grew) but I think the parent was valid in pointing out that they willingly eschew the old-school strategy of diversification + "value investing" done by a third party on your behalf and the new-school (boglehead) strategy of putting literally everything in the S&P 500 or a bond index with the allocation mix dependent on retirement date/age.
There has undoubtedly always been a group of people micromanaging their personal portfolios with less risk-averse strategies like this, and WSB mostly takes things way too far, but at least for me it exposed me to the idea that maybe I could personally do better picking stocks on my own than just blindly throwing everything into VOO (and for people not plugged into the online-personal-finance-geek community, it could be the first time they even realize they don't need to have a third party manage their investments for them).
If anyone wants to know that other reason, I used to be a mod there (low bar, but keep reading)
WSB existed in a void surrounded by personal finance forums full of the dumbest financially illiterate crowd being spoonfed Robert Kiyosaki and Suzi Orman all obviously sponsored by Vanguard. In fact, it still exists in that void. If you wanted to talk about trading volatility derivatives without being in some 1990s-layout investment banking forum, there was no place to go. WSB was the light, its forum rules specifically saying its the place where trading the VIX is normal.
That is its utility. A place for people with a risk tolerance slightly above an undocumented wage slave. Okay, that was hyperbole, I don't like personal finance forums and Wall Street Bets is the opposite of them. Not everyone is born sucking at basic money topics and not everyone is too risk averse to consider financial products outside of the mold. Actually, let's take it one step further, not everyone was raised around a stigma of money and maybe isn't completely ignorant as a product? Obviously that isn't the prevailing culture, and there aren't many communities that catered to it.
Anyway, outside of WSB the only other communities at the time were in trading guru chatrooms, the ones you subscribe to get into. Now everyone might be joking around but they are worshiping the guru. Its pathetic.
WSB was made for options traders to make jokes and wild trades that had a week to pay off. It then got co-opted by penny stock traders pretending like it was the new Yahoo finance board, and now it got co-opted again by the most denegerate options traders in history and it is marvelous! Its even better than what it originally was and the financial meme niche is new and hysterical.
Hopeless 20 year olds fueling the flame? Sure, that is pretty much what happened. I'm glad they made the venue, it is wildly popular now, and the options market is wildly liquid in ways I could have only dreamed of.
Sprinkled with some truly fascinating folks who genuinely discovered some new and interesting way of making this work for them.
When I was still selling naughty bikinis online, I did a few promotions with Instagram yoga teachers and I was always surprised by how low their asking prices were.
I guess most of them valued having any success to show for it much higher than being paid a livable wage.
It gets old pretty fast, has tons of hidden costs, and looks quaint and romantic to people who've never had to do it. Fun for a year, but I probably would have paid almost as much just booking into hostels or AirBnB's and renting a car on occasion.
I was able to go and see some cool places -- but breaking down in remote South Australia was scary and frustrating. And you get really, really tired of the lack of space.
What made it tolerable was being able to get out of the van and chill in places like the library or a coffee shop-- likely all no-gos in the COVID era
It’s strange ‘cuz I’ve been working in digital nomad hotspots for years and have met very very few people like that. Lots of translators, programmers, and then a complete mishmash of other people, but very few people selling courses, and the ones who _were_ selling courses generally nothing to do with being a digital nomad
I’ve been nomading for ten years. I haven’t met a single person who was not legit doing something of value. The closest I came to one was an online poker player in Chiang Mai back in 2010.
Maybe we just hang out in the “right” circles?
It’s probably just like in real life. I have never met anyone offering me a generic (non nomad) Ponzi scheme. But I sure had several legit investment opportunities thru my circles.
The most i've ever been able to do was half a year. How can you choose to be without a real home that long?
Depends what you mean by "real home" I guess. I have a tiny apartment in Bangkok, where we would normally spend ~ 8 weeks a year in total a year, and then we rent ad-hoc or stay with family the rest
Not really sure what that means, but most places we go we have friends we’ve known for many years, and those are often other nomadish types.
> Is your wife your anchor to a local community?
No, she’s from even further away than me
I personally never felt more than a temporary resident in most places i've been.
My email is in my profile. I'd be really interested to jump on a chat with you for a few minutes and hear about your experience if you are open to it. Get in touch if you are open to talking.
But yeah, you won't find the budget backpackers trying to scrape a couple hundred bucks a month monetising their awesome travel blog about their amazing life in Hubud. It's too expensive (relatively speaking). Find a cafe close to a cheap hostel, that'll let you spend the whole morning abusing their decent wifi for the cost of a single americano. You'll be able to tell them because of the number of inappropriately-dressed white folks somehow covering an entire 4-seat table to use their 13" MacBook.
When I was working remotely from Asia, I sometimes went to cafes in the backpacker areas and there would be lots of people working online and posting selfies about their dream life, but their entire monthly budget was like $300. Even in Asia, that's not enough to rent a good office, let alone for apartment +office +food.
Also, maybe you just didn't dig deep enough. I myself was once feeling quite impressed about someone getting rich from making iOS children's games. But when I had issues with my own apps and asked him for advice, it turned out that he was actually making a living from selling an Udemy course on how to get rich by selling apps... And as usual, the revenue from Udemy was presented as if it had come from the apps.
Especially when you realize that
>buy and sell services from each other in a circle
isn't true at all.
I don't know anything dropshipping - the name certain implies something scammy, but our economy is full of things like that.
It's a weird aspect of society - which lies are we all going to agree to accept - and since each person answers those questions differently, it leads to a lot of tension.
None of these people are solving any of the core needs of any of these other people (food, clothes, transportation, housing, any physical goods at all) and very little new money is entering this system at all, maybe some on the drop shipping side but that can also be a net loss in some cases. So yes this represents an economy but the denizens of that economy would be impoverished and miserable, constantly waiting for some outsider to come solve their problems. This is seen in the fact that most people do this as long as their pre existing savings can sustain it because they are doing it at a loss and then they give up when they have eaten through their existing wealth.
So yeah, i don't think it's much of a profound insight to point out the similarities to other economies just because of the existence of people engaging in trade with each other. The quality of the trade is the issue, not its existence.
The outsider in this case is the government bailing out industries like when these digital nomads(businesses) failed, they'd go back to their parents (government). When their parents(gov) run out of money, they'd put it on the credit card (print more money by the Fed) and the cycle continues...
It's funny how this sounds exactly like how our economy works LOL
1) Try to start an online business. It doesn't really matter what you're doing or if it succeeds as long as it's marketable to people aspiring to create an online business
2) Make a big fuss about the launch on all social platforms (Twitter, HN, PH, IH, your blog, etc) and hope someone with a big audience signal boosts you or you get lucky
3a) If you start making money, awesome! Constantly post revenue numbers, things about Building in Public (TM) and "you can do it too!". Your audience (And therefore revenue) will compound exponentially
3b) If you 'fail', make a blog post retrospective called "Lessons Learned" and blast that out everywhere as well
4) Repeat steps 1-3 until you hit 3a. Throw in a few "6 Months of Building in Public" type posts if you're really having trouble
In reality, I strongly believe that very few people end up making it through this type of process and success mostly comes down to luck or connections (Anyone who already has an audience can easily pull you up).
It's not a ponzi scheme in the literal sense, but these businesses are built off the back of other people who believe they can do what you're doing supporting you (In the article this is by paying for your course).
Some of them will go on to create their own successful businesses (And perpetuate the cycle), but most will most likely fail.
There was a post on Indie Hackers not long ago about a guy who said he lost thousands of dollars trying to build a business. I'm sure there are many more people who got into similar situations.
Tech people don't fall into these Ponzi schemes. They fall into a different variety where a serial entrepreneur who has repeatedly received funding is assumed to be more capable than a guy new to the game.
The VC dream is for an entirely different segment of tech people than those wanting to be indie hackers.
This should gets it's own article. So many products and services totally unremarkable but survive simply because they've managed to peddle a brand image whereby it is fashionable to talk them up and unfashionable to say "I blew a bunch of money on them and the results were crap".
It's part of the game that you need to convince investors that you still have a chance in being the unicorn.
1. The book you linked is just technical content. It teaches you how to use AWS, not how to sell books about using AWS.
2. Unlike the tongue-in-cheek examples of the original post based on minimal success, this book is written based on years of professional experience as a developer building AWS.
3. His content pops up pretty often because people like it.
Of course, if the book was part of a ponzi scheme, then part of that scheme would be having people like me defend it on HN :)
If you check the testimonials of those who have achieved success, it’s exactly as the article describes. Someone going from 100 to 150 followers going “OMG ITS WORKING!”
[0]: https://mobile.twitter.com/dvassallo/status/1263160316277350...
I’ll address one thing - the Twitter audience course. There is no secret/hidden Twitter audience strategy. Post good stuff, engage with others with insights that provide value, don’t post BS. That’s it. That’s the strategy. Anything beyond that is made up stuff. People on Twitter follow those that provide meaningful content that is useful. Short of that, any other automation schemes, follow/unfollow tactics, are just for inflating low quality numbers.
I'm pretty sure Daniel has good intentions, though he has most definitely benefitted from this type of 'scheme' given that a lot of his brand revolves around the lifestyle he has managed to create for himself due to the success of his info products.
IMO he’s legit, not a scheme
Even if person X is successful and writes down every step, it will be very hard for anyone to repeat it.
If you want to see how I make it all work, check out my interview on Indie Hackers: https://www.indiehackers.com/podcast/177-daniel-vassallo
Imagine, for example, that you had stumbled across a Magic Formula to create a niche Software as a Service business that brings in $5,000/month while only taking up 10 hours of your time each week. Why would you give that formula away when you could just use it yourself over and over and become a zillionaire?
Well, let's think about it. Assuming you do have that Magic Formula and have used it once, what are your options?
1. Go live on the beach in Thailand. Forever.
2. Build another business that brings in $5,000/month for 10hrs/week effort.
Notice that each spin of the Magic Formula cuts another 10 hours/week out of your schedule of growing your hair and hanging out with that blonde girl from the article. Spin it 4 times and you're back to having a full time job like the rest of the world.
So you don't do that. You hang out on the beach, wondering why more people don't do what you're doing. And you from time to time try to nudge a few more people into doing so themselves.
At least that's my take on it, having spun that formula twice.
Work remote contracts to fund yourself while building a saas business targetting real problems that companies will spend money on. Repeat as necessary until you hit a niche that works.
My first success was on try number six or so. The second was half a dozen tries later.
Good luck!
All in, I spend maybe an hour a week on support, across my 2 paying products. Nearly all of that is for the cheapest accounts. Companies with money have people who know what they're doing, who can quickly figure out what the product does and how to set it up, and who then go use it as intended without needing any hand holding.
I picked 10 hours a week in my example because that's where it was when I was building those things "full time". Now that they are feature complete, it's a lot closer to zero. I haven't opened the IDE for either of my rent paying products since the summer.
I looked the guy up, he's just a college dropout whose parents owned a very successful real estate agency to which he was placed in. He then got absurd amounts of capital from the commissions only people like his parents could get.
My roommate believed this guy knew the ticket to wealth but all I saw was basically the xkcd comic of "but lottery tickets! It works!"
Sucker being the operative word.
(also, its satire, the real denouement is his last guidance: "make things of value, don't seek money, seek problems of high value to solve")
"How to double your money gambling everything on a coin toss"
Sure, you can win a coin toss, but unless you can reproduce that experiment consistently it's not a viable advice.
And that pretty much to everything... if a process is not better than random chance then it's worthless.
Nice distillation of what many might dismiss as common sense.
Now, when I asked where did that money come from, the guy on Twitch told me "it's like a bank, the money comes from you". The difference here is, of course, this gives you much, much higher returns than a bank while a bank can actually invest your money, and this "entity" cannot. Also the interface of some of these "investment" agencies look like a game, I guess to be more attractive [1].
In the end, the idea is always the same: crypto will only go up. So far that's been the case, though.
I do admire the hustle and ingenuity, but what is ambition but a form of love and hope? The entire article had a meticulously cynical view on business and his customers. I think the idea of responsibility is shocking to the author, who obviously has never experienced something meaningful. He's a fraud and he knows it.
Humans find meaning by helping other humans. The article is perverse and I really wish the author go back to wherever trash hole he came from. The western world does not need this kind of parasitic thinking.
That said, don't all the cool kids call it "Mastermind" these days?
Step 1. Invent Bitcoin.
When you got your profits you often sent it back to the scheme. It was a classic chicken race where you wanted to pull out just before it crashed.
Cool article though.
But Bitcoin is nothing.
It now has value because a lot of people - having a stake in it - artificially created demand with bullshit stories.
Because the cryptocurrency ecosystem does not do investment -- likely in very large part because no one can buy anything legal with cryptocurrency -- returns for coiners who cash out must, by definition, come from later investments.
Paying earlier investors with the investments of those who follow is the definition of a ponzi scheme.
They make lots of money, they must be smart right? So when a friend disagrees the person doesn't consider it.
And unlike their Engineering counterparts they won't search for proof. If you need to see real world examples, look at who buys brand name. It's telling.
But that's drastically different than Engineering where calculations are done methodically.
If you're defining "dumb" as "below average for a programmer" then yeah that's... about half of us, turns out.
Programming isn't physics, but it is a profession that starts around +1 SD. Below that you're gonna wash out.
Death to the halo effect https://en.wikipedia.org/wiki/Halo_effect
I understand that this is not a very high bar to set in comparison to other working professionals, but nearly everyone in the tech industry, and most other people who have a desk in a company's head office, are working at a level above the average person. Many of the posters on HN are biased by their personal and professional contacts and have an incorrect impression of what an IQ of 100 looks like, or how smart the average person is.
Going back to what I said originally, being smart is not the same as being infallible. Smart people can get themselves into all sorts of trouble that everyone else would have the humility and common sense to avoid.
Coding might imply a capacity to do other complex jobs, but not to become an expert in said field. There's only one way to do that, with time and effort.
My main problem with the original comment was that it implied tech people aren't actually smart, when they are usually well above average. The problem is confusing general intelligence with knowledge in specific areas, not that they're secretly stupid. I think this is close to what you're saying as well.
That's why Elon Musk got asked about COVID and Kayne about foreign policy. We need to stop doing that. Musk is great at building companies, knows nothing about virology. Kayne is a good at music, end of list.