[ksdale]

That's what the story about, but non-accredited investors aren't only prevented from investing in those particular companies. They're prevented from investing in the good ones, too. You say that the casino will pay your unlikely winnings, but the thing about casinos is that unless you actually have an edge, the more you gamble, the more you lose. The vast majority of games have odds that result in the house making a profit over time. And yet we're allowed to spend our money freely in casinos.

There are all sorts of penalties for bad behavior on behalf of companies. Of course, that doesn't guarantee they'll make money, but I think it's a very valid point that we're allowed to waste our money on all sorts of dumb bullshit, but not on something like investing in startups, which at least has a possibility, however remote, of resulting in some sort of return.

[jakelazaroff]

> They're prevented from investing in the good ones, too. You say that the casino will pay your unlikely winnings, but the thing about casinos is that unless you actually have an edge, the more you gamble, the more you lose. The vast majority of games have odds that result in the house making a profit over time.

What do you think is the expected return of investing in a private company? I don't have data to back this up, but I'd bet it's negative — especially if you hold common stock, or whatever non-preferred equity retail investors would get.

And if, on top of that, we relaxed the guard rails preventing people from being scammed? I think the odds would be much worse than you'd find in a casino.

[ksdale]

I personally find it less morally repugnant to let people make bad bets on companies than to let people lose their money at slot machines all day.

[jakelazaroff]

Sure, you're entitled to that. I find it less morally repugnant to do whatever keeps people from getting scammed.

[ksdale]

I'd also be fine with making casinos illegal, if that's what you're proposing.

[jakelazaroff]

Rereading my last comment, it sounds more combative than I meant it to. Sorry about that — didn’t mean to sound as though I was casting judgment on your opinion.

Anyway, I’m not proposing anything. I’m fine with the current status quo.

[ksdale]

I really appreciate you saying that, in this day and age of internet discourse, I admire making an effort toward civility.

[notahacker]

> we're allowed to waste our money on all sorts of dumb bullshit, but not on something like investing in startups, which at least has a possibility, however remote, of resulting in some sort of return

A lower possibility than the casinos or lotteries, if we're talking retail investment in early stage startup pitches you have no affiliation with. The reluctance of everybody to acknowledge this is the reason the law exist. Most people walk out of casinos having lost some of their money. Most retail investors in random business propositions will never see any of that money again.

[ksdale]

It really depends on what you're investing in, doesn't it? We let people spend hundreds of thousands or millions of dollars in casinos over the course of their lives. When you go to a casino, you're paying for the thrill of gambling, and I think random business propositions offer the same thrill at worst.

[notahacker]

Well yeah, depends which number you bet on roulette or whether you're the best poker player in the room too! Perhaps we could regulate startups like gambling and allow them to welcome anyone but only allow them to market the "thrill of gambling" like casinos instead of delivering very confident financial projections about how much they're going to make. But I'm not sure investment would be forthcoming then, because actually I think people want to put their savings into startups to get rich.

When gambling is restricted, gamblers generally don't argue it's a conspiracy to prevent them getting rich. The delusion that retail startup investment isn't the bigger gamble with worse odds (unless you're in the leagues where you can personally prod the founders on a daily basis) is why accredited investor rules exists. It'd be a lot easier to believe arguments relaxing them were sound if the people making them were arguing it was depriving them of fun rather than depriving them of the opportunity to get rich.

[robotresearcher]

I'm all for people's freedom of action.

Why do you think we have these rules, since a free-for-all is the default? Is this a barrier to entry that protects the rich, or a barrier to getting ripped off that protects the less rich? Or both?

Chesterton's fence and all that.

You are allowed to throw all your money away if you want.

These rules are (at least partly) protecting you from having someone take your money under false pretenses.

[ksdale]

I think they're absolutely there under the pretense of protecting people, and they do protect people from scams, at the cost of preventing average people from participating in one of the biggest wealth creation events in modern history. I think they're hypocritical, specifically because people are allowed to do all sorts of (in my opinion) far dumber things with their money. I think the world would be a much better place if gambling were illegal and all the people who currently waste their money at slot machines spent all that time thinking about how companies work.

You're correct that I'm allowed to throw my money away if I want, so why am I not allowed to do this?

[robotresearcher]

Because if you got scammed, you threw your money away but you didn't want to. An important difference, no?

[ksdale]

Do you think most of the people who go to casinos think they're going to lose money? I think an unfortunate percentage do not realize at all that the odds are stacked against them. Their misunderstanding of statistics means they are quite literally getting scammed. And for the remainder that are doing it for entertainment, that's quite literally what I'm proposing be the standard for investing in companies.

[HWR_14]

> Do you think most of the people who go to casinos think they're going to lose money?

Yes. Everyone I know going to a casino can be asked how much they plan on losing a day. Almost all will respond with reasonable (for their finances) answer. The others still have an answer that I may think is unreasonable, but that's just a greater percentage of disposable income going to gambling than I think makes sense.

I don't even think most gambling addicts think they are going to make money, any more than most smokers don't think they're immune to cancer. There are some areas (poker, sports betting) where a lot of people think they will make money, but that's because they're games of skill and some people can make money there. And people overestimage their own skill.

[User23]

I’m an entrepreneur, an accredited investor, and a recreational gambler and from my perspective everything you’ve said is completely true.

Casino gambling is only a financial strategy in the most unlikely scenarios, like the infamous MIT blackjack team.

By and large it’s a recreational activity. There’s the dopamine hit from the risk and another dopamine hit from your host paying for everything because you’re willing to spend 6-8 hours at the tables on your vacation. The slots are definitely a worse value proposition even with the higher comp rate.

The simple fact is that recreational gambling is less about strategy and edge and more about proper risk management. If your bankroll lets you Kelly bet at a level the marketing execs want to see then you will have a good time with predictable max losses.

I can’t imagine being entertained by slots, but if someone is and the house edge isn’t completely obscene, which sadly the gaming board permits, then even there there’s a reasonably priced vacation to be had with a Kelly betting strategy.

[User23]

> since a free-for-all is the default?

Only for the very first round. For every subsequent round it’s a game of consolidation. That’s a very ugly game.

[lmm]

> That's what the story about, but non-accredited investors aren't only prevented from investing in those particular companies. They're prevented from investing in the good ones, too. You say that the casino will pay your unlikely winnings, but the thing about casinos is that unless you actually have an edge, the more you gamble, the more you lose. The vast majority of games have odds that result in the house making a profit over time. And yet we're allowed to spend our money freely in casinos.

Casinos have to be licensed and follow particular requirements about e.g. payout rate. Companies can solicit investment from the public, they just have to register and follow particular reporting requirements; a company with $310M can certainly afford to be public (there was a time when IPOs were much smaller than that).

[mcherm]

> And yet we're allowed to spend our money freely in casinos.

That actually isn't true. In the US, almost all states have restrictions on gambling.[1] These are generally enforced by criminalizing or requiring government oversight of those offering gambling services.

[1] https://www.letsgambleusa.com/laws/