Freddie finds that “we should start to think of crowdfunding as another failed example of turning activities that previously required expertise over to the broader public, and with awful consequences”:
After all, crowdfunding is a type of crowdsourcing; what’s being crowdsourced is the gatekeeping functions that investors and organizations used to perform. The essential work isn’t just sorting through various projects and determining which are cool or desirable, but determining if they’re responsible and plausible — capable of being successfully pulled off by the people proposing them, within the time frames and budgets stipulated.
It turns out that most people are not good at that. But then, why would they be? Why would the average person be good at fulfilling that function? Where does that faith come from? There are so many places where we’ve turned over functions once performed by experts to amateurs, and we’re consistently surprised that it doesn’t work out.
401(k)s aren’t crowdsourced, exactly, but they exist thanks to a choice to turn over control of retirement funds to individuals away from managers, in the pursuit of fees, of course. The results have been brutal. But why wouldn’t they be brutal? Why would you expect every random person on the street to have a head for investment in that sense?