Hitchhiker’s Guide to Financial Regulation

There’s no point in acting surprised about it. All the planning charts and demolition orders have been on display at your local planning department in Alpha Centauri for 50 of your Earth years, so you’ve had plenty of time to lodge any formal complaint and it’s far too late to start making a fuss about it now. What do you mean you’ve never been to Alpha Centauri? Oh, for heavens sake mankind, it’s only four light years away, you know. I’m sorry, but if you can’t be bothered to take an interest in local affairs that’s your own lookout. Energise the demolition beams.
    – Douglas Adams, in "Hitchhiker’s Guide to the Galaxy"

prosserdentbulldozer This week’s hou-ha about how Chris Dodd’s proposed financial regulations would mess up the angel/venture capital market is a teachable moment. You see, even though this anti-angel provision won’t pass — trust me, it won’t — this shouldn’t have been a surprise. Venture investors, angel investors, hedge fund investors, private equity investors, sovereign debt investors, credit default swap investors, hedge fund investors, and, yes, idiot retail investors are, to a Washington politician’s first approximation, the same damn thing(s): investors.

The first time you heard that Washington was going to start changing regulation for investors you should — meaning you, Mr and Ms angel/VC investor — have gone into it thinking, "I bet those closeted nitwits are going to do something that hurts my business".

Because the odds were virtually 100% that they would.  In part because they don’t really know what you do, in part because you call yourself an "investor" (and those people need protecting from … something), and in part because the banking lobby pays politicians so well that they don’t really have time to focus on picayune issues, like squashing prospects for bottom-up economic growth in a largely screwed-up economy that is over-dependent on flipping paper, and under-dependent on building useful things that other people want.

Going forward, assume financial regulatory changes will cause you grief. Lying down at the last minute in front of the regulatory bulldozer — which is sort of what’s happening this time around — only works when you surprise people with your Arthur Dent-ian willingness to do deranged things.

Related posts:

  1. Tuesday Night Guide to Financial Criminality
  2. The Complete Idiots Guide to Financial Idiocy
  3. Derivatives Self-Regulation? No Thanks
  4. The Myth of the Angel Investor
  5. Forbes Midas List: Touched by Angels