Are we in a Ponzi scheme?

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From: Dan Kohn (
Date: Sun Mar 12 2000 - 21:46:52 PST

Imagine, just hypothetically, that a new set of technologies -- technologies
that are really, truly, deeply fabulous -- has just emerged. And suppose
also that a number of companies have been created to exploit these new
technologies, in the entirely honest -- but very hard to assess -- belief
that they will eventually be able to earn huge profits. For the time being
they earn little if any money; even if they make an accounting profit, they
must continually raise more cash to pay for equipment, acquisitions and so
on. Still, as the evidence for a true technological revolution mounts, the
prices of their stocks keep rising, producing huge capital gains for early
investors. And this attracts ever more investors, pushing the prices still

If the process goes on long enough -- and there is no reason it cannot go on
for years -- the doubters will start to look like fools, and the bears will
go into hibernation. Everyone (well, almost everyone) may be completely
sincere; nonetheless, in effect you get a Ponzi scheme without a Ponzi, a
scam with no scammer.

                - dan

P.S. Don't miss his punchline.

Daniel Kohn <>
tel:+1-425-602-6222  fax:+1-425-602-6223 

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