Comments on: kickstarterism

By: Tom

Tom — Mon, 10 Sep 2012 15:21:01 +0000

That’s mostly fair, Tim, but we’ve got a lot of helpful norms and transparency requirements surrounding gambling. I don’t think you can say the same about this class of investing.

By: Tim

Tim — Sun, 09 Sep 2012 00:15:37 +0000

I’d be a lot more sympathetic to the bilking seniors point if we had a federal ban on casinos and lotteries. If I wanted to, I could take $10k out of my IRA and blow it on a day of poker in Atlantic City. But the SEC is helpfully protected me from the risk of chipping in $10k to help my brother get his startup off the ground.

By: Tom

Tom — Sat, 08 Sep 2012 23:55:20 +0000

I think you’re reading sarcasm into that last paragraph when really there’s just a bit of snark and an acknowledgement of universal human frailty. I really do think that kickstarterism is a new version of arts patronage, and I really do think that’s an admirable thing, though it is very much about people’s hearts rather than their heads (perhaps that’s how art ought to be funded!). And I really do like this new phenomenon — though, yes, I think people should probably be gently reminded that in many cases they’re overpaying for entertainments with comparable, cheaper substitutes.

I am much, much less sanguine about what’s going to happen when we turn this into a way to properly invest, rather than a way to crowdsource grants with disposable income. “Don’t make fine-grained investment choices if you’re not an expert” is pretty much investing 101 — this is a recipe for a lot of people losing money. That’s fine if they can afford it — but the ones who can afford it already have investment vehicles. My sense is that the successes of crowdfunding are going to take on a much more tragic cast when the stakes are raised in the way that the JOBS Act proposes.

By: Eric Mill

Eric Mill — Sat, 08 Sep 2012 22:04:29 +0000

It’s not fair to describe Kickstarterism as wholly romantic. The way Kickstarter likes to describe itself is a fair one: by cutting out the middle men, ideas that would not otherwise have attained a critical mass of funding can obtain it. It’s not just about Double Fine getting wildly overfunded by rabid fans (and do bear in mind selection bias here – that’s at the edge of the bell curve, you just don’t hear much about the giant middle of project success).

I’ve funded 28 projects on Kickstarter:
http://www.kickstarter.com/profile/konklone

Of those, only 3 are the sort of mega-successes you’re talking about. Several are small projects by personal friends that I’m supporting. Most of them are interesting small- or medium-dollar projects that I honestly believe would likely not have been funded in a Kickstarter-less world. (Though also: the mega-successes like OUYA and Double Fine I also think may not have hit their original goals in such a world.)

Your point about equity being a very very different motivator than simple philanthropy is sound, and I don’t know what kind of projects will emerge from a successful Kickstarter-plus-stock platform. I think they’ll be very different. All of the wild over-fundings I can think of, with the exception of Diaspora, essentially functioned as pre-orders, and of course the value of your funding doesn’t depend on how many others participate.

However, we should be interested in finding out what those are, while remaining vigilant about how the expanded rules can empower scams. I know that the Change Crowdfunding Law campaign (http://crowdfundinglaw.posterous.com/), which was involved in the crafting of the bill, wanted lower caps on how much non-accredited investors could invest. Since Scott Brown ended up being the principal Republican negotiator on the bill, it was probably unavoidable that the end result would end up skewing towards the deregulatory side.

If it turned out to be too broad, we can work on it. Angry scammed seniors can actually cause Republicans to agree to tighter regulations. Hopefully that’s not necessary.

To put words in your mouth: the image I get from this post is that “kickstarterism” is a sort of cognitive weakness that we learned from and created regulations to manage, and that we’re just forgetting history and allowing yuppies with loose impulses to drive policy changes whose damaging side effects we’re glossing over or ignoring – and that we were lucky to get it into a vacuous bill at a time when both parties found deregulation electorally appealing.

That’s what comes across anyway, and I think that is a tempting but very narrow view of what Kickstarter is, why the JOBS Act passed, and what will emerge as a result.