“Crowdfunding” Is a Real Disruptive Innovation—for Better or for Worse

Disruptive InnovationThe (absurdly named) JOBS (aka Jumpstart Our Business Startups) Act hasn’t really been phased in yet, but when it is it’s going to become a lot easier for vendors of exotic financial products to market themselves loudly and publicly. In principle, for example, you might see a hedge fund buying ads on Fox News to try to get money from the people who are currently targeted by all these “buy gold” ads. But Mariah Summers writes that there’s little evidence hedge funds actually want to do this. So does that mean the JOBS Act is going to be a big bust that changes nothing?

The hedge funds that exist today have a perfectly good business model. Despite (or perhaps because of) the fact that the returns to hedge fund investors aren’t very good, the people who run hedge funds are making plenty of money. And they make it in part through the allure of privacy, prestige, and exclusivity. Mass marketing would be somewhat costly, not very useful, and arguably counterproductive. These are investment tools for the in-crowd, not for the chumps buying gold coins off cable.

Read more at Slate

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