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Comment by ChuckMcM | Hacker News Reader

I think this is a mixed blessing. I agree that the ban has been a hindrance on people trying to find investors but lifting it may not be the best solution.

If you look at the way YC demo day works, its a pretty reasonable way for potential investors to find startups which are compatible with their investment goals. I think this addresses the challenge of the general solicitation rule (finding the startups) without the negative of creating a bunch of unvetted startups advertising for dollars. Basically, I believe lifting this ban increases the noise significantly without much boost to the signal.

The analog I thought about when I saw the SEC was thinking about going this way was the lift on advertising prescription drugs. That really hasn't been a 'win' for me, while I'm sure some folks have discovered there are drugs available their doctor didn't know about (signal), a whole lot more people are asking their doctors to give them drugs which aren't really appropriate to their symptoms (noise). It has made the national news shows practically infomercials for a variety of meds for 'old people problems'.

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> I think this addresses the challenge of the general solicitation rule (finding the startups) without the negative of creating a bunch of unvetted startups advertising for dollars.

Not really. We, here on HN, tend to frame things around tech startups, but there's a larger world out there that incubators don't (and often can't) address. Consider this (real life) example:

Recently a local pub came up for sale. The asking price was $200,000. The purchase would include all current equipment and supplies, existing vendor contracts (subject to state transferability rules on the alcohol contracts), and local liquor license (the state license isn't transferable). It also included the building which housed 3 occupied (at the time) apartments.

The question, of course, is how to raise the $200K. Standard business loans were out (not an established business). There's SBA, but the loan amount we were looking for was a bit high for SBA. Friends and family, of course, but we wouldn't even come close.

In the end, we had to pass (though funding was only a part of the decision to pass). Here's kicker: If we could have spread the net wider, we may have had a chance to raise the money (with less effort), and been able to go ahead with the purchase.

While this is one story, I see these kinds of things al the time. A few years back, a founder looking to start a paintball facility got nailed by this (he was advertising the investment opportunity). It ended up shutting down the project.

The point is, outside of the technology world, getting investment funding for small businesses is very hard. This rule change makes it much easier.

I don't see what the difference is. Bars and other small businesses are risky investments too.

Yes, but my point was, incubators serve as a fine information channel for technology companies, but there is an entire class of small business which are not suited to incubators, such as bars. The rule change gives these small businesses a channel to inform potential investors that they're out there. Investors that they would not, otherwise, be able to reach.

Starbucks did an experiment in "white label" (non-SBUX-branded) storefronts. It didn't continue, but one could imagine developing a national network of white-label restaurants to be run by locals.

>... getting investment funding for small businesses is very hard. This rule change makes it much easier.

That isn't necessarily true. Just because small businesses can freely solicit investment doesn't mean that actually raising it will be easier.

People seem to be making the assumption that there's this huge untapped market of rich people (read: accredited investors) who are not actively investing in businesses today simply because they haven't seen an ad or received an email inviting them to get in on the ground floor of a great opportunity.

I don't see much evidence that this is the case, and based on my experience, the reality, for better or worse, is that you're either tapped into funding channels (or can work your way into them) or you're not. This doesn't mean that no money will be raised in the fashion you describe, but the notion that there's going to be a flood of wealthy individuals writing checks to people and companies they just met is absurd.

As far as the specific situation you described, $200,000 is a modest amount. If you had a wealthy individual, or group of individuals, truly interested in owning a bar, it's far more likely that they'd purchase it themselves and hire an experienced person to run it. What incentive would they have to give any equity ownership and control to a group that couldn't "even come close" to putting up $200,000 themselves? "Accredited investor" doesn't necessarily mean "intelligent investor" but a lot of the comments around this general solicitation change assume that there's an abundance of accredited investors who are, for lack of a better description, utter fools.

This discussion around the lifting of the ban on general solicitation also seems to assume that this will most greatly affect startups/Silicon Valley and small business, when in fact this will almost certainly most greatly benefit Wall Street and the financial establishment.

While it's not _necessarily_ true, it is possibly true, and that's the bit that folks are latching on to. They're assuming that there's a "market" of investors who are both interested in and willing to diversify their investment portfolio by, in part, making smaller high risk investments. My experience with, admittedly smaller investment firms, is that this may be true. Organizations like IllinoisVENTURES (I know several of the folks there) aren't interested in big C-round investments. The bulk of their information comes from their proximity (physically and virtually) to Enterprise Works (a UIUC run incubator). I've heard partners declare, on several occasions, "I wish we knew about these guys while they were still looking for seed money." I guess in, at least one, anecdotal case, it does bear out to be true.

As for my bar, let me re-phrase, just for accuracy: We couldn't come close on our own without liquidating existing investments. It didn't make mathematical sense to do so (returns were higher on existing than expected returns on the bar). From our perspective, it was an expensive hobby, not a money making investment (for us).

On the other hand, if we could raise, let's say $50K from investment, $50K converted from other investments (our own money), and $25K from family, then cover the remaining $75K through bank loan collateralized by the building (the building is valued at $125k)... Yup, that would have been easier.

I wish somebody had alerted me when a few guys in a Harvard dorm needed capital to pay the hosting bills for their new social network!

My missed opportunity to take a huge equity stake in Facebook for $20,000 aside, what you're referring to is the quality of deal flow of an existing investment firm. There is no shortage of investors already actively involved in funding startups who wish they could have invested in a particular company.

That's not what we're talking about though. Your prior comment suggested that the lifting of the ban on general solicitation will make it easier for small businesses that cannot realistically raise capital today to do so.

There's a huge difference between a startup that is already working the angel and VC networks and a group of guys who want to buy a bar as a hobby and, perhaps not surprisingly, have no contacts eager to pony up even $50,000 so that the founders can keep most of their money in investments that are producing better returns than the bar would.

In other words, you're confirming one of my original observations: a lot of folks seem to believe that general solicitation will enable startups and small businesses that are less-than-compelling investments to raise money from stupid rich people.

Although I wouldn't be surprised if somebody somewhere has a list of accredited investors over the age of 80 who are likely to have Alzheimer's, that is not going to happen in significantly larger numbers as a result of this change.

There is an entire industry dedicated to this based out of New York. It gets hungry guys in early 20s to wake at 8am and begin cold calling high net-worth individuals offering them "investment opportunities". This industry flourished before the Internet and is depicted in movies like Boiler Room. The internet ate up a lot of their business because people no longer needed to be on walstreet to get data from walstreet. However, I can see these guys jump on this opportunity and begin shilling startups to the relatively high net-worth but naive retirees wanting to invest in the next facebook.

>what you're referring to is the quality of deal flow of an existing investment firm. There is no shortage of investors already actively involved in funding startups who wish they could have invested in a particular company.

Had they know about it. Yes, that's exactly what we're talking about. Sure there's a difference between a startup that is already working the angel and VC networks and a group of guys who want to buy a bar as a hobby, but there isn't much difference between the bar and a bakery who want to expand, or an established bar who wants to open a new location, or the two guys who want to turn recycled junk into interesting furniture. None of these are looking for large investments, and none have access to VC and angel networks. Though the risk is high, there may be investor who are willing to take the gamble.

Lifting the ban provides a channel, where one doesn't currently exist, for these organizations to reach potential investors. Likewise, it provides a channel for interested investors to find out about opportunities they would otherwise not know about.

I didn't imply that lifting the ban would make funding automatic. Nor, do I expect, does anyone actually believe that it would (though you seem to think that's what people are saying). What it does do is allow the two ends to connect when there's mutual interest.

What this does is open a channel of communication. It's a way for small businesses to reach investors. That doesn't imply that the small business is going to get funding (or even a conversation with an investor) any more that getting on Shark Tank implies that Mark Cuban is going to invest in your fancy new shoelace company. On the other hand, there may be an investor out there, somewhere, who just happens to have an aglet company in his portfolio that would make your shoelaces a billion dollar company.

You do realize that the lifting of the ban on general solicitation does not mean that startups and small businesses will simply be able to advertise at their leisure, right? These are still Reg D offerings, which require paperwork, and under the new rules, companies that are going to be advertising publicly will need to file their Form D with the SEC 15 days before the offering. Interested investors will also need to be vetted to ensure that they're qualified to participate.

You don't put together a Reg D offering without competent legal counsel, and competent legal counsel costs money. So before you and your buddies can even test the fundraising waters through general solicitation, you'll have to make an investment of your own and that could easily run into the five figures.

Is it a fact that only accredited investors can be solicited?

I remember reading when the Jobs Act was first floated that non-accredited investors could invest as well but were capped at how much they could invest in a given year based on their income.

Yes, there is a separate portion of the Jobs Act that deals with crowdfunding and non-accredited investors.

That is an entirely different can of worms, but there too, I think there is a general overestimation of how easy it will be for the average small business or startup to raise capital.

I'm just waiting for this to blow up like it did right before all these rules were added (i.e. the great depression). Startup investments are hugely speculative, the vast majority turn a lot of cash into nothing. The public is risk adverse; look at the last financial downturn, there is still a subset of people pushing legislated guaranteed stock market returns because they don't understand the risk/return relationship. As soon as a few people lose all their money, this whole scheme is going to violently implode.

Consider this, the 10-year early stage VC performance was 3.9% [1], with late stage and expansion focused funds at 9.3%. Average VC returns were 6.1%. By comparison, the DJIA returned 8.6%, the NASDAQ returned 10.3%, and the S&P 500 returned 8%. Private, non-qualified investors are going to get slaughtered. VCs are professional investors and their overall industry returns are awful. In addition, private investors have no connections. Those returns include VC's that now routinely liquidate failing companies to other portfolio companies and their LP's as "talent acquisitions", where they recover their investment through their liquidation preference; Joe six-pack won't be able to do that, he will just lose all his money.

The average mutual fund generates below market returns in the long run. If the average fund manager, a professional that spends 100% of their time trying to find strong opportunities for investment can't consistently generate excess returns, does anybody actually believe that the public will be able to? This is only compounded by the extreme risk and volatility of startup investing. Maybe you hand-wave this off, and say the average fund manager is stupid, and maybe they are, but I'd bet they are nowhere near as stupid as the average member of the general public, just go read some YouTube comments.

My bet is that late-stage and expansion deals still go to the VC crowd because they can bring mountains of cash, fast, with connections. The early-stage funding, with the 3.9% long-term returns will go to the public, with even lower than historic returns. As soon as the public figures out that they are hundreds of times more likely to get wiped out than become billionaires, this whole mess will get legislated away again.

[1]: http://www.avc.com/a_vc/2013/02/venture-capital-returns.html

Having lived through the first dot-com bubble, my belief was that it was facilitated in part by unsophisticated investors chasing outsized returns (the so called "retail" investors). The startup market largely escaped the 'bubble' fate by virtue of the fact that the bar for investing in startups was high enough that the people who qualified either understood the risks are were willing to lose everything in their bet (pure gamblers).

My fear is that opening up startup investing to a wider pool will not only fund a lot of startups that should not have been funded (just like the dot.com boom rewarded companies that should not have been rewarded) it will result in a catastrophic correction down the road where a lot of people will have lost everything and will be asking the government to use taxpayer money to make them whole again.

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Take a step back and look at the secondary market offerings like Twitter.

A company with a speculative run-up and no business model is very high risk. Also, the limiting reagent in secondary market trading is investor count. At 500, the company has to go public, so many companies contractually limit secondary sales to avoid the additional reporting requirements.

My instinct is to lash out against this move. General solicitation lowers the amount of social vetting a manager must go through before being able to raise funds. It also makes un-accredited investors more aware of the investment barriers around them, which could loosen resolve for maintaining those walls.

But 2013 isn't 1933. The average sophisticated investor is more versed in finance, more wary of solicitation if they are not, or closer to one of the former.

What this is, is a boost to non-conventional assets and managers. The ones too young or crazy to have made it through the traditional vetting process. There's already plenty of noise if some idiot broker put you on a mailing list...

> But 2013 isn't 1933. The average sophisticated investor is more versed in finance, more wary of solicitation if they are not, or closer to one of the former.

"This time, it's different."

http://www.reinhartandrogoff.com/

I think things are fundamentally different now than in the early 30's. Not pie in the sky 'well people are more sophisticated now' different.

There are a ton of tools that people can use to gather information on a potential investment and the people involved.

While it's easier to be smart about investing, it's also very easy to not be smart. I'm pretty sure most retail investors invest with zero or negative[1] information advantage, but don't lose a lot of money because the median expected value of investment opportunities open to the public is positive.

1. Due to cognitive biases.

>average sophisticated investor

I'm not sure what this means. Are you saying that the average investor is now more sophisticated, or that the average sophisticated investor now is more sophisticated than the average sophisticated investor then?

If the former, if the average invested amount drops to $1-2K and the number of investors booms, wouldn't that have an effect on the average sophistication?

IMO the average investor is only investing in the house that they live in, and judging by the last 10 years doesn't seem to have the math skills to defend against a charming salesman.

edit: just noticed that this doesn't open up investment to unaccredited investors, it's just about solicitation. "Average sophisticated" makes sense now:)

Tough call. As someone who doesn't quite meet the accredited investor thresholds, this is good for me, but I can see it being used to scam lots of people.

> I believe lifting this ban increases the noise significantly without much boost to the signal.

I think you are correct but only if you consider everything in aggregate.

There will be channels set up that will significantly boost the signal to noise ratio that could not exist under current rules. Channels like crowdfunding sites that /will/ collect information that the SEC might not require but will be useful for potential investors.

I, for one, will be seeking out these channels and vetting them for myself and will recommend the same to anyone who asks.

There is going to be turbulence while people find the balance but I still think this will be an overall win.

As with most things involving the 1st amendment right to free speech, you get a mixed blessing. Letting the KKK run around in their garb troweling their bigotry by the metric ton has generally not been a 'win' for me either. But being able to exchange ideas on the NSA matter on HN has been good.

We've gotten accustomed to freedom of speech when it comes to political matters, but we tolerate all sorts of restrictions in commerce. The SEC has basically said in the past that if you are raising money and want to talk about it, you're only allowed to talk to certain people at certain times and not others. Same with direct to consumer advertising of drugs. The FDA was essentially saying that pharmaceutical companies could only talk to doctors about what they have on offer, not patients.

More recently (and less of a hot-button issue) the FDA got smacked down by an appeals court for their restrictions on what pharma sales people could tell doctors about off-label use of drugs (that is, drugs used in a manner not approved by the FDA). The FDA has said in the past that it's illegal for sales reps to promote off-label uses of drugs to doctors. This is true even in cases where these off-label uses are written up in the medical literature. Note that it has never been against FDA regulations for anyone else to tell the doctors about off-label use of drugs (e.g. other doctors, the janitor, Hollywood celebrities, etc...). The courts have basically said that this is a first amendment violation because it places limits on specific individuals when society as a whole benefits from the free, unrestricted flow of truthful medical information.[1]

[1]http://www.reuters.com/article/2012/12/04/us-offlabel-convic...

I think you're right this will be a mixed blessing. There will be companies desperate to raise money, and when a "million bucks of funding" is at stake some companies will spend a lot of time and energy creating noise and spam. In fact you might find that the companies who are making great progress spend less time promoting themselves, because they're busy kicking ass. (We've already seen behaviors similar to that at Wefunder.)

My hope is that the noise most people hear will be like my experience with Kickstarter: I only hear about the projects that are up-and-coming and have merit.

> I agree that the ban has been a hindrance on people trying to find investors but lifting it may not be the best solution.

The best solution for what? What's the point of this regulation and how is it measured?

> That really hasn't been a 'win' for me

If I understand this correctly, the SEC should prevent entrepreneurs from soliciting investments so you don't have to watch informercials? I can't argue with that!

> If you look at the way YC demo day works, its a pretty reasonable way for potential investors to find startups which are compatible with their investment goals. I think it addresses the challenge of the general solicitation rule...

Sure, YC demo day addresses this problem, but there are many startups out there who will never attend YC. And because these startups still need validation and a network, this has fueled an accelerator bubble as more and more accelerators throw open their doors.

I don't believe having all these accelerators is a good thing. Many are run by folks who have very little experience, and in some cases they offer little value other than a demo day stage.

So although I'm also unsure whether this rule change is good public policy, I do hope it helps pop the accelerator bubble and forces the remaining accelerators to focus more on building value and less on playing matchmaker.

Perfect examples are local Founder Institutes.

And what do you think an "unvetted startup" is? Who decides what is vetted and isn't?

Its the same thing as an "unreviewed Android App", which is to say a completely unknown entity.

So in the YC process, folks compete to be selected and then they work to make sure they are ready on demo day. Investors know that Paul and his partners have spent many weeks with these people helping them achieve the maximum potential possible. That is a form of validating their authenticity or 'vetting'.

However, with the general ban lifted, startups will now appear "out of the blue" because they used some funding to 'reach out' to "you" a person they bought from a list (typically the HNWI list [1]). That is the noise part. If you're currently getting postal mail (or spam email) from folks who are congratulating you on your success and offering to help (personal wealth management, car dealers for high end cars, high end credit cards) then you are on that list (whether or not you think you should be :-)

Because of that, in my 'bad' scenario of how this could be a not good thing, I expect that we'll see lots of "next big thing" pitches showing up on the nightly news (it scores well in the HNWI demographic) and tucked in with those platinum card offers. What is worse, we'll see the rise of companies that prey on individuals who think they have a great idea but just can't get it off the ground. They will offer to "get them funded" by putting them in touch with hundreds of "angels." And they will just be high pressure sales guys who sell lots to unbuilt housing developments in Utah or time share condos in vacation spots. So the real opportunities get lost in all the noise.

However, I recognize I'm somewhat cynical here and this could be a really good thing. I'd like it to be a good thing because there are ideas that don't get funded today that should (or would do well if they were). But watching Shark Tank now and then you are reminded there are a lot of people who want to change the world and don't have the benefit of an incubator's advice or tutoring. Those folks are going to be victimized here.

[1] The High Net Worth Individuals or HNWI list is sold in various forms by meta-data collection agencies which identify such individuals through public records (vehicle registrations), web purchasing tracking, and other social "cues".

> Basically, I believe lifting this ban increases the noise significantly without much boost to the signal.

I do believe different investors look for different signals, sometimes their ability to pick the signal is so finely tuned that they simply need more inputs, rather than relying on regulated "noise" reduction which might squelch into their signal processing band.

lift on advertising prescription drugs. That really hasn't been a 'win' for me

I can't judge whether your analogy to startup funding is correct, but I agree that direct advertising of prescription drugs to the general public is a total disaster.

Heaven forbid that the peasants should get to decide what to do with their money.

The peasants still don't get to decide: if they're not accredited investors, they cannot invest. This to prevent exploitation of unsophisticated investors. During the Great Depression, many small time investors, including many blue collar workers, lost their entire investment portfolio due to the lack of security and oversight in the investment world.

Correct for now, but soon unaccredited investors will be able to invest as well....just waiting on the SEC rules on how it will work. There will be a limit per year based on income from what I understand.

"This to prevent exploitation of unsophisticated investors."

Sure it is.

Can you make an actual argument, please? I'm interested in hearing what you have to say if you've got something to say other than snarky one-liners.

Some accreddited investors, who by legal definition are rich, use "protecting the unsophisticated" as an excuse to maintain their monopoly on investing.

http://www.sec.gov/answers/accred.htm

He's insinuating that people should be allowed to do whatever they want with their money and that any protection via regulation must be bad.

However, if you are someone who isn't an arbitrager(investor isn't the right term) in their daily job, the pressure to join the tulip buyers is a lot heavier than the available knowledge. The root of this problem is lies, because the tulip sellers are always going to give false data to encourage people to buy, and the amount of money changing hands will always attract a lot of unethical people. The libertarian mantra is that things will balance out via crowd sourcing (is it a market investing in a company that doesn't sell products yet? I argue not), yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors.

And yet, these people are perfectly free to buy (goverment run) lottery tickets, or walk into a casino and put their entire life savings on the roulette wheel, both of which have a guaranteed negative expected value. At least with a startup investment, there is some small chance that they'll make money.

At the very least, regulations designed to protect the financially unsophisticated from themselves are massively hypocritical.

I think you can justify preventing people from gambling whilst thinking they're investing even whilst permitting regulated gambling marketed as gambling. Similarly, the government permits the sale of alcohol, but not marketed as medicine.

Vegas seduces with glamour rather than prospectuses filled with seductive, irrelevant statistics and passionate, sincere bullshit about how the team of MIT-educated croupiers, striking design and ambient temperature make the ball more likely to land on 27 than at any other venue.

I think only one of the below needs to be true to suggest investment restrictions might be advisable even in the presence of legal gambling.

(i) "unsophisticated" investors are significantly more likely to put their life savings into RandomStartupX than they are to put them on a roulette wheel (ii) RandomStartupX is more likely to return zero than a roulette wheel (even if market returns are positive there's a power law distribution and it's probability of returning zero that's more important to those without a well-constructed portfolio) (iii) Retail investors' realistic early stage "investment" options' expected value may well actually be lower than that of a spin of a roulette wheel assuming the top startups prefer the experience of top-tier investors, which doesn't seem unreasonable even when comparing between different tiers of VC funds

> At the very least, regulations designed to protect the financially unsophisticated from themselves are massively hypocritical.

But are they _really_ designed to protect the financially unsophisticated from themselves? These regulations were enacted in response to the great depression. The motivation was to protect SOCIETY from systemic problems rooted in the actions of unsophisticated investors, not to protect the investors from themselves.

I agree that rules designed to protect the stupid from their own stupidity are to be avoided at all costs, but I don't agree that this is an example of such a policy. And I certainly don't buy the idea that people should be able to do whatever the fuck they want, to hell with everyone else, so long as they are not directly causing physical harm or property loss to another person.

Both lotteries and casino gambling are heavily regulated in terms of their returns to consumers, and there are reasonable methods of recovering value if they fail to perform as promised, because the entities are generally still operating.

You can't do that with business investments -- there's no way to mandate a particular minimum return to investors, and no way to recover lost funds if the business fails to perform as promised. If I promise you safe 15% returns, and then I run the business in a high risk way and it goes under, there isn't any way for the state to really regulate that level of risk and return except in very highly regulated industries like insurance where money is being invested in rated securities (and even then, it's not great.)

The biggest problem with private investments is that there generally isn't any liquid market to provide a "real" price. It's just whatever the company can convince an investor to pay. Nobody can short or sell you their shares easily, and if you buy in it can be impossible to sell out.

Giving money to companies is fine by me. The only desire is that a company that provides false data must be held accountable. Also someone running a scam facade, prosecutable, imho.

I don't see the lottery as analogous to putting money into companies. Whether the lottery is good or not is a separate issue.

> yet you hear stories about the Maddoff's of the world running 30 year schemes which very much hit 'sophisticated' investors.

Proving that the scam artists will find a way no matter what the regulations say.

Regulations aren't binary. Some good, some bad, but not binary.

But thanks to the regulations Madoff only hit people who could afford to lose it, not those for whom who losing the money would force them onto the streets.

Thanks to the regulations, there were suckers who assumed that someone else was ensuring things were copacetic. Foxes hunt in the chicken coop if one is available, and wolves go for the sheep pen if they can find one.

First of all, it's none of anyone's business what some individual wants to invest their money in. It's a moral obscenity to forcibly prevent him from investing.

It's not only presumptuous to say "if someone's not rich, they must not be smart enough to invest", it's a self-fulfilling kind of thing, isn't it?

Nothing prevents people from gambling in Vegas. So clearly these laws are not about protecting fools from their own foolishness. No, the laws are about only one thing: making sure that the people who are in charge of the economic system, stay in charge. And it's not just these SEC laws, there are a wide variety of laws that secure the elite from competition by the peasants.

Whenever someone claims they're keeping you from doing something for your own good, who pretends to be your parent, they really are your master.

Corporations are afforded civil protections in return for civil responsibilities imposed on them by law. These responsibilities include restrictions on types of investment. Nobody's stopping an individual from starting a business, investing via entering a partnership, or investing by making some personal guarantee with another individuals. Corporations aren't people. When you make a deal with a corporation, you're actually making a deal with society, at least in part, so your deal will be upheld on paper. In order to reduce the risk of malfeasance and cost to itself in the form the consumption of legal resources, society imposes restrictions on corporations that include types of investment.

You can make the case that the regulations may or may not be the best for what society wants, but to say that they're somehow a moral obscenity seems silly to me.

I think it's strange to say that you're prevented from investing in a corporate structure because of legal limitations when the same legal limitations are what enable you to invest in the corporate structure in the first place. It's why I don't subscribe to this viewpoint on investing.

I agree with you on the gambling bit, to an extent. Government-backed lottery really preys on a certain class of people and I don't care for it so much. Private casino-style gambling is viewed by many as an entertainment outlet. Like drinking, for example. It's generally understood that you go to the casino to have a good time....and lose your money. Winning is understood to be an aberration. That doesn't stop people from blowing everything, though.

>Nothing prevents people from gambling in Vegas.

The only reason that people gamble in Vegas is because every other place created laws to protect fools from their own foolishness. Vegas, a city built by organized crime figures who normally had to operate illicitly, didn't.

> "every other place"

Vegas is not the only location of legal casino gambling. It is by far the largest but there is significant gambling activity elswhere in the US.

Wikipedia mentions these markets:

    1. Las Vegas Strip $5.550 billion
    2. Atlantic City $3.943 billion
    3. Chicago region $2.092 billion
    4. Connecticut $1.448 billion
    5. Detroit $1.36 billion
    6. St. Louis $1.050 billion
    7. Tunica Resorts, Mississippi $997.02 million
    8. Biloxi, Miss. $833.50 million
    9. Shreveport, La. $779.65 million
    10. Boulder Strip (Las Vegas) $774.33 million
    11. Reno, Nevada $715.23 million
    12. New Orleans, La. $653.05 million
    13. Downtown Las Vegas $523.82 million
    14. Laughlin, Nevada $492.51 million

source: https://en.wikipedia.org/wiki/Casino#By_region

There are also numerous casinos on Indian reservations across the country.

That's not what he meant, he meant Vegas as a stand-in for gambling in general.

To my knowledge, casino gambling has not actually crashed the entire economy. Multiple times.

I agree with you that the rules are not really about protecting ordinary people. At this point in history, it's about protecting one set of elites from another, with the side effect of (perhaps) protecting the entire economy from certain disasters.

We could use this argument to remove warning labels from all dangerous things.

If you want to drive your vehicle without a seatbelt, who am I to force you to? Your seatbelt choices have no impact on anyone else except you, right?!

That is exactly right. Also, if I want to ride my bicycle without a helmet, or go rock climbing, or cross the street without being wrapped in bubble wrap, that is my business too.

Although the seat-belt thing does have some legitimacy, in that it keeps the drive in front of the wheel during an accident, allowing him to potentially keep some control over the car.

If you suffer a serious accident, it imposes an external cost on society. You may get presented with a bill afterwards, but even at the point of having the accident it's highly disruptive. Consider a car accident where you're berely inured and shaken up, v. one where you are ejected through the windscreen into the road. Which one is going to disrupt traffic for longer?

keeps the drive in front of the wheel during an accident

So you think passengers should not wear them?

People without seatbelts often end up in emergency rooms at public expense. People with bad investments won't often end up on welfare from their decisions.

Can you show this to be the case, or should I just take your word for it that bad investments don't have any negative impact on society?

I don't know of any studies on the subject, I'm just reasoning that if you have enough money to do actual long-term investment you must have some form of income, so if it falls through you still have income. It's not like gambling where you can addictively throw away every dollar you have in a day. If you 'invest away' all your money, you can uninvest it the next day.

Also: It's not 'negative impact' as a binary check, but looking at the massive cost of medical bills. And seatbelts are enforced on public roads, not private land. Investment is fundamentally a private action, which should only be restricted in very serious circumstances.

> It's not like gambling where you can addictively throw away every dollar you have in a day.

It's not?

> If you 'invest away' all your money, you can uninvest it the next day.

Not if it's gone.

Actual investment (to be distinguished from day-trading) is not an addictive action. There is no feedback loop.

What crazy definition of investing are you using where you have any reasonable* chance of losing all your money in less than a day?

Compare that to the near-100% chance of losing your money if you spend a single hour betting all of it at casino games.

*let's say 1% or greater

I know for a fact that you do not have a near-100% chance of losing your money in a single hour at the casino, so the rest of your data, and your logic in general I find suspect.

Your argument would hold some weight if you could provide some source or documentation for your assertions (that investment has no feedback loop and is therefore not addictive, or that the speed at which you lose your money on an investment is something that matters for the sake of this conversation).

I didn't say walking through a casino for an hour, I said betting all your money for an hour. As in, find a game, bet all your money, rinse and repeat. If you can win dozens of times in a row please take me with you next trip.

Compare to buying and selling stocks repeatedly for an hour. Except for transaction fees you're probably not going to move more than a couple percent.

What do you want documentation for? Buying a stock for three months is about a million times slower of a feedback loop than a casino game, and that's an unarguable fact. When I search for anything about addiction to investing, all I find is articles talking about addiction to speculating, which is not the same thing.

And of course the speed matters, because the core of my argument was that you can't do something like blow your paycheck on investments. Bad investment might lessen your savings over the long term, but they're not going to turn a working adult into someone that costs society money the way a terrible car crash or gambling addiction can.

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