Mannconomics: A Kick In The Pants

Kickstarter: teh new hawtness. Thanks to DoubleFine and others, practically anyone who's anyone has at least one Kickstarter or other crowd-funded project running right now. But where does this lead? How do the creators and backers view this arrangement differently? Kickstarter is not just handing money over for a product at Wal-Mart or through Steam; it is a payment for the promise of ... something. If that promise is just that you will help them continue with their project and here's a pat on the back, that's okay, but often Kickstarter is used as a pre-beta storefront: You pay me money, I will make you a game. This arrangement, no matter how hard everyone tries to deny it, is an investment. And investments carry risk.

Like ebony and ivory, mom and apple pie, risk and reward are constant companions in business. In order to grow, nearly every business needs capital, (e.g., money and resources). There are several ways to obtain capital investment, but the hoped-for result is always the same: The finished product earns more money than it cost to create — this is the reward. Investors always hope for success, but a great many projects fail, and the investment is lost — herein lies the risk.

Many small businesses are bootstrapped — that is, funded solely by their founder(s). Others require no real investment to speak of, like a home-based cupcake bakery. Still others require millions of dollars of funding, and require backing by external companies usually in the form of Venture Capitalists (VCs). Regardless of the way a business is funded, though, there is risk: Roughly 90% of businesses will fail within their first five years. Those who have invested the most money have the most on the line.

Risk and reward are directly proportional. A very low-risk investment like a money-market account, which is basically guaranteed to not go bust, also has a very low reward: currently a truly abysmal 0.2% annual return. Very high-risk investments like penny stocks and cutting-edge technology firms fail often, but when they pay off, they pay off 100x over. Anyone can make a low-risk investment, but for the high-risk investments … well, even doing your homework is no guarantee of success. VC firms still have close to a 90% failure rate with their investments, hoping that the one out of ten that does pan out will pay off at least 30x of the investment. (This link is a clean and concise primer on how risk and reward are spread out for both the business owner and the venture capitalist depending on the type of funding procured.)

Most modern video games cleanly fall into the VC category. The payoff is generally six months to four years away and requires multiple people working during that time, which means many mouths to feed, utility bills to pay, and so forth. Generally, developers' VCs are publishers. Sometimes each game is shopped around individually, sometimes they form a sort of “Sugar Daddy” partnership where a particular publisher has first refusal or even total control over a developer’s content by purchasing the developer. At any rate, the outcome is the same: Publishers finance a game, have “board of director” input, and stand to benefit financially (along with the developer) if the game succeeds.

Of course, this means a lot of ideas never get published at all. Many more get funded, but never recoup their initial expense. Precious few wind up selling 20 million units and keeping everyone in the black. At the very least, though, no VC or publisher is going to fund something without at least some potential for reward.

That would be silly … right?

A Brave New World

Kickstarter and other crowdfunding mechanisms have changed the top level of the game pretty considerably. The traditional idea of carrying around a pitch deck to various VC houses has been transformed into a pitch video and prodigious use of social media to cut above the noise floor of all your potential “backers”. Instead of hoping to land that one big fish, the goal is to land thousands and thousands of minnows. It all tastes the same anyway, so to speak.

Make no mistake, though: Despite its innocent appearance, crowdfunding is still a way to give resources for future and uncertain products, i.e. "investing." And like every other form of investment, it still carries very real risks. A recent study of Kickstarter showed that as many as 75% of projects deliver late, or still have yet to deliver, and it’s very possible that we will see some high-profile failures in the next few years. We've already seen it begin, actually, from mismanagement to mysteriously absent product to claiming that the sun itself is speaking to them in their dreams to delay/change the project and keep those changes a secret.

How many backers considered that risk before plunking down their money? Very few, I would wager. Kickstarter seems to encourage this line of thinking, trying to play it up almost as a storefront rather than a way to scattershot funding (and its associated risk). Its terms of use page, which functions as an EULA and you ostensibly agree to anytime you either post or fund a project, even says the following: "Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill." The use of the word "rewards" is … curious, to say the least.

Crowd-funding mechanisms and savvy projects try hard to hide the fact that there's risk involved, and they try really hard to hide the lack of reward, but those issues are there, nonetheless. You can no more get rid of risk in business investment than you can remove the oink from a pig. People do have a history of forgetting about risk, though: Every time the stock market tanks, there are people who are shocked, just SHOCKED that their investments have a potential for loss. The trick is to accurately assess what is an investment and stay far away unless the potential rewards are great enough to more than offset the risk.

However much they may try to hide it, the risk is still there. That EULA is most likely completely unenforceable and is almost entirely a CYA statement for Kickstarter itself. Kickstarter isn't going to try to go after someone who has misallocated $50,000; the legal fees alone would cost far more than that, and Kickstarter themselves don't have any skin in the game. Even a class-action by backers seems very unlikely. If money has been spent on salaries or utilities or whatnot, you can't just take it back. It's gone. In a severe case one may be able to confiscate property or assets, but this would leave no money for the backers after legal fees and would have the additional negative effect of running any sane businesses far away from Kickstarter — at least with a bank loan the terms are easier to deal with, if they're going to lose their shirts regardless.

Backers' reactions to the first whiff of funding failure, Code Hero, shows a lot of anger and a lot of lack of understanding of the fundamental principles of risk. It shows that they really are treating Kickstarter as a storefront, not a dicey investment proposition. Let's imagine that it was Amazon: It would be like for every ten items that you bought through Amazon, Jeff Bezos mailed you eight and decided to keep two. If that was consistently true, who would continue to shop there? It's bad enough if you only received eight $2 toothbrushes; now imagine that each item was a board game for which you pledged $150. It adds up fast.

In VC funding, the VC floats almost all the risk while the business owner holds very little risk. In return, the reward potential is very great. In Kickstarter, the risk can run from $30 to $30,000. Arguably this runs from throwaway money to a very serious investment, on par as a percentage of resources as a major VC investment. But here's the kicker (heh): There is no fungible reward in the Kickstarter world. A backer risks money in return for a product that, once it makes it to market, can be purchased with no risk whatsoever — sometimes even more cheaply than the lowest backing tier. Higher levels of funding obviously incur higher levels of risk, but typically the only things gained are tawdry baubles and that would likely be included in a Collector's Edition of the game or pure vanity rewards, like the backer's name or likeness in the game.

This is the dirty little secret of crowd-funding, the shell game of deception that has been played through the medium's infancy: There is no reward. There is no chance of tripling one's investment on Kickstarter. Crowd-funding is set up so that the risk is spread out over so many people that no individual will feel a failure too severely. But running any sort of non-zero risk for zero reward is a sucker's bet. TANSTAAFL, and all that.

Still, in economic terms, each individual investor has a very low marginal utility of the money invested, whereas a VC's marginal utility is enormous. If one pays $20 in a Kickstarter, that money has a pretty low opportunity cost for most people — there's not a lot else they could do with it that would have a huge impact on their lives. Maybe they could earn like three cents in interest. Yippee!

If you spread risk out over many thousands of people, each individual's risk approaches zero — but near zero is most decidedly not zero. Some Kickstarter heavy-users are beginning to realize this; many who backed 30-40 projects are still waiting for 15 of them to deliver, well past due date. If risk is not zero, but reward is, well: There's a sucker born every minute, right?

At the end of the day, crowd-funding is most likely here to stay; the US congress even passed a law making it easier for people to execute it. If it’s here to stay, potential investors need to be able to properly weigh the risks and rewards in order to best use their money. In order to do that, everyone needs to recognize that if it walks like an investment, and quacks like an investment … you get the drift.

Comments

If that promise is just that you will help them continue with their project and here's a pat on the back, that's okay,

This is really the only way I feel comfortable contributing, which is probably why I haven't donated as much in the past few months. I'm not Mr. Savvy Investor Man, I'm more trying to be Mr. Niceguy Backer Man.

Another cool article Minarchist. I never thought of Kickstarter as a 0-reward situation. I've only invested in one Kickstarter, and Sportsfriends barely cleared its goal. While I hope to enjoy JSJ and the like this fall on my PS3, I take an immediate satisfaction in the notion that I helped 4 talented developers pursue their dreams and give them a chance to put their projects into living-rooms across the goal. Maybe I'm just rationalizing.

Here's my takeaway.
Every time I see something on Kickstarter and think, 'Oooh. Shiny. Want!' I need to find the tier I would throw money at and reroute that money to an investment account and forget whatever cruel temptress I just denied myself. I know that strategy could turn McIrishJihad into the next Warren Buffet

With a few exceptions, I mostly see it as helping out some people whose work I want to see more of. With 2 exceptions, I've not given more than $25 to any given kickstarter campaign. Those two exceptions? I really want to see another game from the developers of Spacequest, so I gave them $75. I also thought the Pebble Watch was going to be a very nice idea, so I spent $115 on it. In the first case, I don't care that much if they don't get the product out as I've enjoyed their stuff in the past and figured they deserved another chance. In the latter case, I was pretty sure they'd deliver as this was their second smart watch product.

Of course, only one of the games I've backed has shipped anything thus far. A beta and a postcard. But the two webcomics and the book I've kickstarted have both given me everything they said they would.

Of course, two of the games have missed their date so far... The rest still have some time.

I've personally only backed the Sportsfriends Kickstarter, and that was because all four of these games are known to be playable and good based on touring the indie circuit. That's a pretty low risk investment, with some awesome rewards like being able to play JS Joust in alpha form on my wife's MacBook Pro right now (which is f*cking awesome BTW).

The other one I would have backed had I known about it when it was going on was David Sirlin's Puzzle Strike Third Edition Kickstarter. Again, this was very low risk. The game was already developed and even published in a previous edition. They just needed the funding for the manufacturing run, and Sirlin has already proven he can actually release games. This was just an updated edition and the new expansion pack, so it wasn't a totally new product that didn't exist yet. That kind of thing I think works really well on KS, particularly for board games.

Great article on a fascinating subject!

This is the dirty little secret of crowd-funding, the shell game of deception that has been played through the medium's infancy: There is no reward.

Although it comes down to perspective, I would disagree with the above statement. There is generally a reward provided, although not financial in nature. In most cases, not only do you receive a future copy of the game but, depending on your level of investment, you receive additional benefits that have value to the crowd-funder. These benefits could include developer updates, participation in alpha or beta stages, or physical items such as clothing or artwork. Without these additional incentives/rewards, most kickstarter projects would likely have limited appeal.

Clearly, Minarchist doesn't understand the value of emotional rewards.

Let's imagine that it was Amazon: It would be like for every ten items that you bought through Amazon, Jeff Bezos mailed you eight and decided to keep two. If that was consistently true, who would continue to shop there? It's bad enough if you only received eight $2 toothbrushes; now imagine that each item was a board game for which you pledged $150. It adds up fast.

I think the difference is that whether or not I "Kickstart" a toothbrush creator, there will be toothbrushes in the marketplace that will roughly fulfill my needs. If these board game creators don't get Kickstarted, those boardgames never get made: sure, there are other boardgames, but boardgames are much more distinct and niche products than toothbrushes.

The comparison to a VC is a good one to start from, except instead of the reward simply being X number of board games for Y number of dollars, it's specific board games getting made in return for that investment. The reason it differs from just going and buying the game when it comes out is a bootstrapping problem: you can't buy what never got made in the first place. The reward here isn't just any old board game. The reward here is the board game you really really want: you can't triple your investment of money into tangible wealth, but you can turn your investment of money into triple the happiness that spending that money on any other board game would have returned.

In a sense, I think of Kickstarter as a new version of how a lot of art got made throughout history: it's a form of micro-patronage. It walks that fine line between altruism and selfishness where you're making the world a better place, but better in a way that's specific to people like yourself.

He does say above the quoted bit that there are vanity rewards, but not fungible ones. All the kickstarters I've backed have been done with the mindset that they're more similar to donations than investments. Hopefully they end up as being more like pre-orders, but I knew how kickstarter worked before I signed up, so I tended to only back projects that were likely going to happen with or without my money or things that I liked the concept of enough to not care if I never get the finished product to play with.

Stengah wrote:

He does say above the quoted bit that there are vanity rewards, but not fungible ones. All the kickstarters I've backed have been done with the mindset that they're more similar to donations than investments.

This is a good attitude to have, and perhaps one that most GWJers hold, since we know everyone here is above average intelligence. However, I think the reaction to early failures like Code Hero and The Manse Macabre make it pretty clear that the public at large doesn't quite have the same reaction. What will truly be telling is when (not if, although I can't say when the other shoe will drop) something really major like Ouya fails or launches as something completely unlike what people expected and hoped for.

Cheeze, your response is probably the #1 answer I got to "What's the reward of Kickstarter?" This is okay if, and only if, the backers still realize they are risking their money to bring a product to market. Even so, it still feels a bit like playing hot potato. Stuff that gets funded and is successful will release anyway for general sale, often at cheaper rates than the Kickstarter. To stick with your boardgame example, I bought Mice & Mystics at retail only one month after the Kickstarter people got theirs. The Backer cost for the game was $50. I paid $47.98 with zero risk and the additional kicker of losing no interest, as there was no time delay between the time I ante'd up and the time I received my product.

This is where it really falls apart, with final goods like this. In the consumer's eye, it basically amounts to a pre-order: I pay now and they send me cool stuff later plus a pat on the back for believing in them. But with an actual pre-order, the funding comes from elsewhere and if a project folds (as it sometimes does) the consumer is refunded their pre-order money. Not so with Kickstarter, and this is where the shell game is revealed.

I expect some interesting responses to this article in part because people really don't like being told they made a bad investment (o hai Facebook IPO buyers!). They can get defensive in unusual ways. At any rate, no matter how you slice it, the majority of news-worthy Kickstarters nowadays are indeed investments with associated risk but no real associated reward. Ultimately I think pointing out this important fact is a net benefit.

Minarchist wrote:

Cheeze, your response is probably the #1 answer I got to "What's the reward of Kickstarter?" This is okay if, and only if, the backers still realize they are risking their money to bring a product to market. Even so, it still feels a bit like playing hot potato.

Or a kind of backwards auction? Where the people who want the game to come out are competing with each other to see who will take the risk and who won't?

This arrangement, no matter how hard everyone tries to deny it, is an investment. And investments carry risk.

It is not. It is patronage. You are supporting artists you love. You might get a game out of it, you might not. It is not an investment. It's buying box seats at the Curran Theater; you might like the play, you might not. The play might even close before you get to see it.

But you will never see any kind of 'return', ergo, it is not an investment, and using this kind of language is dangerous. You could get Kickstarter shut down forever if you convince enough people that this incorrect viewpoint has merit.

TANSTAAFL, and all that.

Just don't say it two more times..

Another well written and well researched article, Minarchist! I myself have always kind of seen Kickstarter as an investment with the chance of no product being released. Even in the first Double Fine promo video Tim Schafer says "What can happen? No one can say for sure...Either the game will be great, or it will be a spectacular failure." That's been pretty much my mindset going in to each project I've backed.

Minarchist wrote:

This is where it really falls apart, with final goods like this. In the consumer's eye, it basically amounts to a pre-order: I pay now and they send me cool stuff later plus a pat on the back for believing in them.

The difference is that without the "pre-orders", you won't be able to just go to your local store and buy whatever good was on the block, because it won't exist. The return on investment (though I agree with Malor that it's not really an investment at all) is the potential creation of a good. That's the reward; that's the payoff. Now something that you want exists, whereas if you hadn't put money towards, it might not.

Yoyoson wrote:
TANSTAAFL, and all that.

Just don't say it two more times..

You called?

Malor wrote:
This arrangement, no matter how hard everyone tries to deny it, is an investment. And investments carry risk.

It is not. It is patronage. You are supporting artists you love. You might get a game out of it, you might not. It is not an investment. It's buying box seats at the Curran Theater; you might like the play, you might not. The play might even close before you get to see it.

It's patronage that is being sold as an investment, and that is what's dangerous. Whether you see it as an investment or not is irrelevant because as we see with the reactions to Code Hero and The Manse Macabre the public which is supporting this model sees it as an investment.

Great article Min!

S0LIDARITY wrote:

Here's my takeaway.
Every time I see something on Kickstarter and think, 'Oooh. Shiny. Want!' I need to find the tier I would throw money at and reroute that money to an investment account and forget whatever cruel temptress I just denied myself. I know that strategy could turn McIrishJihad into the next Warren Buffet ;)

Ouch, right in the wallet/Kickstarter account S0LID

You made me scrape my Kickstarter backer history, and then throw it in a spreadsheet to see how much I've "invested" (using Min's terms) and "patronaged" (using Malor's terms). FWIW, I'm strongly in Malor's camp here - I see it as patronage, not an investment. I see backing a project as "yeah, that's cool, and I'd love to have that, I think it should exist, and I know that if I don't pledge my money now, it'll probably not happen".

Meanwhile, 2.8% of my gross pay is a good margin for "investing" in Kickstarter projects, right? Sure, I could be spending that money on other things, or investing for the future, but I enjoy being a part of the project - getting the updates, and the final product (even if only 2 of my 28 backed projects have shipped so far).

For my personal history, only 1 of my projects has completely failed. It was before the rules update at Kickstarter requiring a "risks" section of the project, but I had only put in at a "throw-away" level. He was planning to make really high quality chocolate polyhedral dice sets, out of high quality chocolate, and using them to springboard into a full fledged business to eventually lead into a gaming pub, and was pretty local. Unfortunately, this was his first time doing a project like this, and he didn't do a great job controlling his costs. He hit his funding goals, but spent too much time and money perfecting the product and process, and hadn't set aside enough to cover shipping costs and buying additional materials. It didn't help that he was also unemployed, so he had limited funds to throw in himself and had already tapped his personal network for seed money. In his last update, he came across as an emotional wreck

Like Min said in his article, many businesses fail. I still go into every project knowing it might not succeed.

In a sense it is a kind of investment to me, only the reward or return is the value i'll get of being able to play a PC Game that i really want to enjoy but will otherwise never get a chance to play because no big publisher would ever fund the project. It's too niche or too risky for a publisher to up front fund.

So when i put money in my 3 kickstarters, i decided i was putting down an investment in that company which return would be getting the game of my heart's desire and the risk of which was receiving nothing if the investment failed.

Castle Story: $30
Dead State: $35
Star Citizen: $255

If any of them fail i'll be surprised, though dead state would stand the highest chance of failure since start citizen has additional capital investment funding and castle story so excessively overfunded and is really coming along with a prototype already having been realeased and patched and good communication flowing. Dead state also has good comm flowing but promised lots of stretch goals and seems to be taking longer than i'd expected. I hope they have the funds to see it through. Their communication is still going on though as well as updates on their progress and it sounds exciting. Hopefully we'll get to play it by spring in beta.

So yea, you could see this is a donation, a ticket to a live theatre show, or an investment.

IMHO it's an investment with a non monetary return. Your return on investment is the hours of excellent entertainment you'll get from your investment. Your risk is not getting any entertainment for your money.

Minimize your risk by picking projects that show particularly good documentation up front with a good start already accomplished pre-kickstarter.

A good kickstarter is not a kickstarter with no in progress work to show. Only concept art = BAD INVESTMENT.

Of course, all this only applies to vid games.

Stuff that gets funded and is successful will release anyway for general sale, often at cheaper rates than the Kickstarter.

Yep.

While it would have been really cool to play FTL in beta, I got it for $6 instead, and still dumped 60 hours into it. A lot of fun, but for cheaper than any kickstarter people put in.

Fuzzballx wrote:

So yea, you could see this is a donation, a ticket to a live theatre show, or an investment.

Donation I will grant you. You aren't the first person here to compare it to a venue show, but I don't think that one holds up. If it gets cancelled at the last minute due to, I dunno, the whole cast getting a stomach flu, you're refunded your money. Your only risk is that the event may not be what you expect it to; and even then, unless you're going opening night, there are plenty of ways to verify that information beforehand.

IMHO it's an investment with a non monetary return. Your return on investment is the hours of excellent entertainment you'll get from your investment. Your risk is not getting any entertainment for your money.

Well...sort of. You can view it that way, but if the project is already funded it simply isn't true. All you have to do is wait until the product launches (if it launches) and receive the same amount of entertainment.

The ideal scenario, the one that would give your investment the maximum amount of "agency", so to speak, would be to be the deciding pledge that determines whether or not a project gets funded. In reality, of course, there can be only one of those people per pledge, and usually they go over enough to where a decent number of people could have been the deciding vote.

Minimize your risk by picking projects that show particularly good documentation up front with a good start already accomplished pre-kickstarter.

If people take anything away from this article, I hope this is it.

Minarchist wrote:
Stengah wrote:

He does say above the quoted bit that there are vanity rewards, but not fungible ones. All the kickstarters I've backed have been done with the mindset that they're more similar to donations than investments.

This is a good attitude to have, and perhaps one that most GWJers hold, since we know everyone here is above average intelligence. However, I think the reaction to early failures like Code Hero and The Manse Macabre make it pretty clear that the public at large doesn't quite have the same reaction. What will truly be telling is when (not if, although I can't say when the other shoe will drop) something really major like Ouya fails or launches as something completely unlike what people expected and hoped for.

I was kind of surprised by the Code Hero reaction. I'm saying this as someone who did donate to Code Hero. I wasn't expecting too much out of it to begin with, and figured it was something I'd probably never play even if they did finish it, but I thought it might be cool. Kind of like the old apple II game Rocky's Boots. I'm minorly disappointed that it won't come out anytime soon, but I'm not terribly surprised.

That was a good read. Interesting, informative and well-written.

My two cents regarding Kickstarter? I know of it. I have visited the website. I have yet to pledge my monetary support towards a project. The fact that Paypal is not an accepted form of payment is a stumbling block. I prefer to keep my card details as private as possible, especially in relation to online transactions. In addition, no project has inspired my interest.

If and when the day arrises where a project captures my imagination and commands my support, I would more so view my pledge as a donation as opposed to an investment. In other words, I'd view it as a sum of money that is never going to grant me a return other than a moral one. However, the greater the sum of a pledge the more lofty of expectations to receive something in return. The key word there is expectations. I may expect something in return, but entitled to it I am not. That sounds a lot like investment to me. It's all risk verses reward.

Chaotic Clown wrote:

The fact that Paypal is not an accepted form of payment is a stumbling block. I prefer to keep my card details as private as possible, especially in relation to online transactions.

I trust Amazon (the payment gateway used by Kickstarter) a lot more than I trust PayPal...just sayin'

McIrishJihad wrote:

I trust Amazon (the payment gateway used by Kickstarter) a lot more than I trust PayPal...just sayin'

I've only glimpsed at what is present on the Kickstarter website. I saw that it uses the Amazon checkout process for US projects. For UK projects it states that it will use the Kickstarter checkout process, whatever that is.

I've nothing against Amazon. I shop with them all the time!

double post

I'm confused, you call Kickstarter projects zero-reward-investments. There is no such thing by definition.

From the story linked to in the article

Right now, it’s illegal for a startup to solicit investors on platforms like Twitter or Kickstarter.

How so? I was not aware of this, what law prevents this exactly?
edit: I looked it up, "general solicitation" means you have to find "accredited investors", meaning corporations, brokers, and banks; or a person with more than $1 million to invest.
Is there some special definition of 'start up' that I am missing? If I were to start a business I can go to friends and family for money.


interesting article from same website as an article linked in the gwj article

edit: re: general solicitation: no wonder our economy is f'd up, I am now much more willing to hear out people who say we're not capitalist

RolandofGilead wrote:

I'm confused, you call Kickstarter projects zero-reward-investments. There is no such thing by definition.

By letter of the definition, you are correct; that's my point.

I was not aware of this, what law prevents this exactly?

This one.

edit: I looked it up, "general solicitation" means you have to find "accredited investors", meaning corporations, brokers, and banks; or a person with more than $1 million to invest.
Is there some special definition of 'start up' that I am missing? If I were to start a business I can go to friends and family for money.

IANAL, but there are a few important pieces to the 1933 SA, two of which you touched on. You can always legally go to your family for money, but general solicitation is often broadly defined as raising funds from people you didn't already know before you started raising funding. Sometimes the SEC will note that you didn't have a strong relationship with a person, but if it's just one or two angel investors they won't pursue any action. They usually only come down on people for actual public solicitation, like a newspaper (or today, internet) ad or something similar. Kickstarter would obviously be a public solicitation, so it is verboten.

The accredited piece was put in to protect people, but often has a frustrating unintended consequence. It's there to protect what the government considered to be vulnerable people with assets, like widows, from getting conned by shysters into "investing" into bum schemes. Unfortunately, it often means that a lot of very smart people are locked out of the investing process, and it perpetuates the haves-and-have-nots class warfare that's been in the news so much lately.

Well, that goes without saying.

Tl;dr Minarchist is a filthy bourgeois pig.

Minarchist wrote:

The accredited piece was put in to protect people, but often has a frustrating unintended consequence. It's there to protect what the government considered to be vulnerable people with assets, like widows, from getting conned by shysters into "investing" into bum schemes. Unfortunately, it often means that a lot of very smart people are locked out of the investing process, and it perpetuates the haves-and-have-nots class warfare that's been in the news so much lately.

Oh certainly, at the time "accredited" was put in there, we probably didn't have much of a middle class. Nowadays though, class warfare it is and I'm glad Congress was actually able to pass something useful.