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Has Anyone Told You Just How Evil Kickstarter Is? — Fredosphere
Barry Ritholtz of Bloomberg View wants you to know Kickstarter is evil—at least when corporations get into the act. Oculus, the virtual reality company recently bought by Facebook for a couple billion, received an infusion of $2.4 million early in its history thanks to a Kickstarter campaign. This kind of corporate funding became legal thanks to the JOBS Act of 2012.
Ritholtz does not like the JOBS Act:
Regardless of strenuous objections, the JOBS Act became law, making it all-too-easy for companies to raise money. It was more of the same radical deregulation that helped cause the financial crisis. This was not about making markets work more smoothly, but rather, an extreme form of “smash & grab” capitalism.
Let’s ignore the evidence that deregulation did not cause the financial crisis. Let’s ignore the lurid phrasing of “smash & grab”. Let’s cut to Ritholtz’s thesis:
[I]t’s not a fraud, it’s a scam. You see, fraud involves something where there is a violation of the law; no rules appear to have been broken here. This is how the JOBS Act is supposed to work: Let people make dumb decisions on their own, without any protection.
[…] These funders, who backed the company three months after the JOBS Act passed, did not. As the Journal noted, they were promised “a sincere thank you from the Oculus team.” And, for $25, a T-shirt. For $300, the dangle of “an early developer kit” including a prototype headset.
Okay, so here Ritholtz admits the fundamental fact: the Kickstarter funders got exactly what they were promised. For whatever reasons—dumb decisions, yes; or, just maybe, the thrill of advancing technology or simple altruism or maybe even flat boredom—the funders gave money expecting essentially nothing in return.
Yes, eventually, the company cashed in big. So what? It’s possible, quite likely in fact, that a good number of Oculus’ funders have no regrets. (That would be my reaction.)
So why is Ritholtz so sputteringly vexed over this outcome? Is this the green-eyed monster rearing its head again? Does every left-wing impulse spring from envy?
Not just envy, apparently, but also contempt:
My regulatory philosophy is simple: You humans need protection from yourselves, especially when money is involved (and the SEC agrees). Sure, you can operate heavy machinery and do complex verb conjugations, but when it comes to understanding anything involving capital, you are often no better than a 2-year-old. And that is before the red fog of greed begins to cloud your minds.
Good thing the green fog of envy cannot cloud Ritholtz’s mind. I do wonder, though, how these infantile investors will ever grow up if the wise nannies of the world forever save them from themselves.
Published in General
Indeed.
Do check out the comments below the article; they’re ripping him a new one.
At least he seems to admit that he isn’t a human.
I’m reminded of something Bastiat wrote (which I can’t locate at the moment) about how socialists consider themselves as far above the rest of humanity as the farmer is to his chickens. It’s surprising to see someone admit it in writing, though.
Also:
“If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind?” – Frédéric Bastiat
Wait, so kickstarter was would have been illegal 2 years ago?
Why?
Side note: some fund raisers don’t like the terms kickstarter dictates, which is one reason there are competitors now.
http://fundanything.com/en/campaigns/patenttroll
http://www.indiegogo.com/projects/syria-coverage
http://www.crowdfundinsider.com/2013/05/15851-soylent-meal-replacement-crowdfunding-crowdhoster-crowdtilt/
Whoa yeah he is not backing down in the comments.
> commenter: Kickstarter is patronage, not investment. Was someone confused about that?
http://www.bloombergview.com/articles/2014-03-26/attention-suckers-please-send-us-your-money?alcmpid=view#comment-1303663729
> article author: Patronage ! THAT IS ADORABLE!
http://www.bloombergview.com/articles/2014-03-26/attention-suckers-please-send-us-your-money?alcmpid=view#comment-1303722881
Letting people make their own dumb decisions without protection is usually the best course of action.
What is even worse about liberals is that they believe only other people make dumb decisions. They believe they are the angels.
I think Kickstarter is one of the greatest inventions ever. I have a theory that some variation of it could be used for public goods in place of the government.
Yes. Dumb decisions by individuals may cost society as a whole, but dumb decisions by regulators certainly cost society. And even when regulators make wise decisions (which almost never happens) society is still out the cost of operating the regulatory agency.
I was confused about that too. I think the point must have been that Kickstarter was illegal as a means for a corporation to raise capital.
Reading this post and some of the comments over on the linked article a bit, it seems like the JOBS act allowed for a more decentralized IPO or something. However, apparently Kickstarter isn’t doing that. Funding the Oculus doesn’t make you a shareholder.
I may still not be reading it closely enough, but that’s my skim-take.
Kickstarter is not a start up investment. It is cash for a product. If they get money this way, let them. Where are the grannies losing their retirement fund because that is who is to be protected. pre ordering and paying upfront is not illegal, nor is it angel investing. Clients need no knowledge or certain level of wealth to participate.
There is obviously no need to have the government regulating away kickstarter.
However it should be noted that this entire episode will damage kickstarter’s credibility going forward. No one is going to donate to a project that they fear is going to be turned around and sold before it is even delivered.
For those confused why the facebook acquisition is so offensive to gamers, it deals with the wretched state of the industry at the moment. Fewer and fewer original ideas are making it to the shelves, and bean counters at EA refuse to make almost anything that isn’t a shooter or a sports game.
That’s why games like Star Citizen have made 30 Million in crowd funding, despite publisher claims that no one wants to play a space sim any more.
Kickstarter allows games to get made that otherwise wouldn’t. and removes publisher interference with the creative process. I love corporations, but large publishers have proven awful at producing good games. Small companies seem to do the job better.
Gamers are afraid facebook is going to ruin oculus rift the way EA ruins everything. I’m inclined to agree with them.
Kickstarter (and its competitors) are brilliant workarounds to arcane 1930’s restrictions on capital and investing. What worries me, though, is that like Uber, these services compete with existing protected cartels. Should they attempt to compete directly with government services, expect an all-out war from the government.
This game is in its early stages, and innovators so far are not faring well on some fronts. Witness the ordeals of Tesla in New Jersey and Ohio. You can bet that Uber will be on the ropes by the end of the year – probably snared on some tax-collection technicality, or by a ride-gone-wrong. The cartels are just starting to wake up to the threat, but they have money and connections, and they will fight dirty.
Incidently – I didn’t receive much support for my own Kickstarter idea. Didn’t anyone want to try fresh-grilled giraffe?
If you get kosher supervision, I’m in.
Didn’t know giraffe could be kosher. Let’s see: cloven hoof, but is a ruminant (ie chews cud), so I guess we’ll call it a “extended cow”. Now to find a butcher…
As long as the kickstarter funders still get the agreed upon rewards, whether or not the company was sold, I don’t see a problem. I can understand them being disappointed by the sale to FB, but their was no contractual obligation from the company, as far as I know, to not be sold until their products were out.
Ritholtz is an arrogant, ignorant ass. His statements that you quote show him to be emblematic of everything that is wrong with the nanny/regulatory state and those who would be our “protectors”.
*Garsh darn it, if we stupit people didn’t have the wise all-knowing experts looking out for our interests, who knows what kind o’ trouble we’d get ourselves inta.*
Rare is the large organization that is good at anything creative. Creativity comes from risk-taking and everything in a large organization mitigates against risk-taking. The smart ones recognize this fact and out-source their creativity, buying something promising after it’s been developed. Thus it has always been and always will be.
This article reminds me that I need to figure out how to monetize my hobbies. I need me some of that sweet, sweet, Kickstarter money.
So the Mark Schultz Carbon art book I pledged to on Kickstarter, which retailed at $24, and which I received 3 signed prints, and video detailing Mr. Schultz’s inking techniqes, for $20 was a shill?
Oculus was a different scenario then most kickstarter projects. For Games, books or movies, you generally get a copy, plus other goodies as part of your “donation”.
It generally makes it worth it as you tend to get more for your money with no publisher involved.
Oculus was more of a straight up donation with no tangible gain except that this device would eventually be available for purchase. What gamers love about kickstarter is that it keeps large, uncreative corporations from meddling with the process.
Many gamers now fear that instead of a standalone product that anyone can develop games for, Oculus will end up having the content made for it closely controlled by Facebook, with only approved applications being compatible with it.
That’s not what they signed up for on kickstarter, and they are rightfully angry about it. They have no means of redress except not buying the thing when it comes out. Expect some other VR headset to be the most successful one when they come to market.
If the Kickstarter campaign was presented as a straight up donation, and people gave their money willingly, I fail to see where there is a problem.
Wasn’t the Veronica Mars movie funded on Kickstarter? What did people get for that, other than the opportunity to go to a cinema and pay for a ticket?
Facebook does seem to have a reverse-midas touch for tech investments. That will be the ultimate payback.
I wouldn’t worry about it, friends. They’ll regulate Kickstarter out of existence soon enough just like they did with Intrade and 23andme. Just like they’ll do in the future to Bitcoin, Uber and probably Grindr (once everyone finds out what it is). Freedom is scary and if some people use freedom the wrong way, they might hurt themselves.
It has been a boon for the tabletop RPG industry. There have been a lot of projects which wouldn’t have happened without it. I have backed 18 projects and have been very happy with the results.
that’s Fred, always looking at the world through rose colored glasses!