

Some Thoughts On Public and Private Markets - cwan
http://www.avc.com/a_vc/2011/02/some-thoughts-on-public-and-private-markets.html

======
dmor
a new NASDAQ... could that even be done today, or is the regulatory barrier to
creating a new public trading so great that no one would undertake it? phrased
another way: if this opportunity is there and no one is taking it, why?

------
DanielBMarkham
I've always found it very strange that the average Joe can mortgage his home,
sell all his family's belongings, and go to Vegas and lose every penny. People
will talk about what a bad person he is.

But that same average Joe, if one of us were to ask him to participate in our
startup? Suddenly everybody and their brother is all concerned about Joe being
taken to the cleaners.

I'm not saying we need the Wild West out there, simply that, as the author
says, the way things are right now are seriously out of whack. This is not
especially good or bad for Joe: people with poor spending habits have a nasty
tendency to lose all of their money. But it's really bad for startups who need
a little cash, some of which could succeed and do all sorts of cool things.

~~~
watchandwait
As a class, the rich do not want Joe Average investing in startups. It creates
more competition and dilutes the power of their capital. So the rich conspire
with Congress to create laws that block Joe Average from these markets.

Most "progressive" regulations treat adult citizens as children and are really
designed to lock-in the status quo.

~~~
iamelgringo
_As a class, the rich do not want Joe Average investing in startups._

I've known a ton of reach people in my life, and I have never, ever heard any
of them mention that they don't want Joe Average investing in startups.

In fact, I've been talking to dozens of rich people in the past two weeks,
about how to make working on <http://hackersandfounders.com> financially
sustatinable so I can work on it full time and help thousands of founders and
hundreds of companies succeed. Every single "rich" person that I've talked to
has been exceedingly helpful and encouraging.

Why? Because the thought of helping hundreds of founders build successful
companies and get rich in the procees is really exciting to them.

 _It creates more competition and dilutes the power of their capital._

Your understanding of capital and markets is severely flawed.

If a rich person owns 10 shares of a startup's stock, and they are by law only
able to sell that to a maximum of 500 other rich people, then there is a very
limited market for that stock, and the value will remain low.

If however regulations were to change, allowing the public to have easier
access to those shares, then the value of those 10 shares increases because
there is greater demand, and more buyers.

So, if the public can purchase those shares, with the hopes that they will get
richer by holding those shares. And, the rich person gets richer because he
sold the shares at a higher price than what he would have normally.

Your comment "dilutes the power of their capital" is quite simply wrong.

* So the rich conspire with Congress to create laws that block Joe Average from these markets.*

It was actually the Enron scandal which brought about the Sarbanes-Oxley act,
which profoundly changed the accounting regulations that corporations have to
adhere to if they are going to go public.

As an unintended consequence of that legislation, it made it a lot harder for
startups to IPO because of the increased cost and accounting burden required
of a corporations before they go public.

<meta>

I'm finding it harder and harder to participate in HN discussions when
comments like the above get 10 points instead of buried.

~~~
tptacek
I found the relative scores on these two comments irritating too. You're
clearly right. I pitched in and modded, but: wouldn't a better solution here
be to just _stop showing the scores on the comments please Paul Graham_? Just
show us our own scores. There is no reason for us to waste energy fretting
about the kind of person who would value this comment lower than its parent.

