A lot of people talk about how much Wall Street has changed over the years. Back in the 1970s, traders screamed at each other in the pit, and guys in the back office had a chance to work their way up to the big time.
Now, not so much. At least here in New York, investors tend come from the same schools and have the same backgrounds, and for outsiders, there’s little opportunity to get in.
Yale professor Robert Shiller thinks that a new innovation in social media, given a boost by the recently passed JOBS Act (Jump-start Our Business Start-ups Act), could help to change that.
…crowdfunding, is embedded in the jobs bill signed into law by President Obama on Thursday. The idea involves Web sites that help many investors contribute small amounts of capital to projects that they read about online, and that might otherwise be starved for money.
Though the concept is being tried, in different ways, on sites like Kickstarter.com and Kiva.org, it is still very much an experiment, and its real-world benefits for small investors are still uncertain.
The way Shiller thinks about this, it’s all about risk — finance, after all, is all about mitigating risk. The more people who can invest in companies (especially start-ups) the more risk is spread around.
Not only that, but it means more people will have a vested interest in getting to understand Wall Street — “The faults in institutions that contributed to the recent financial crisis can be corrected,” said Shiller, “but only by those who are willing to get inside the mechanism and get to know it. “