3c hapter - Index of

24 Locavesting
put up a sign at a farmers market). And those are the simplest
exemptions. Regulation A exempts public offerings of less than
$5 million from registration, but it is so little understood that it
is hardly ever used. There have been a grand total of 36 Reg A
offerings since 2005, according to the SEC. 7 The commission has
also given a pass to offerings that are contained to one state—like
Ben & Jerry’s fi rst stock offering in the mid-1980s in Vermont—
leaving them to state regulators. 9 But they are equally rare.
Finally, the people closest to an entrepreneur—the proverbial
friends and family—are free to invest in his or her venture, due
to their preexisting relationships. But this, too, easily spills into
a gray area—especially in the Facebook age, when people have
hundreds of “friends.”
To revisit Shuman’s Prohibition analogy, it’s more like regulating
the saloon so that it can serve ordinary customers only after it
obtains an expensive license and provides detailed audited reports
on the dangers of each libation. Meanwhile, the martinis fl ow
freely in the VIP room.
The practical effect has been to shut small investors out of
a large part of the market where their money could be put to
productive and profi table use. 10 Rather than keeping money
local—or “Kansas money in Kansas,” as the original Blue Sky law
proposed—some of these well- intentioned rules have hampered
local investment. Thus, when he needed capital, Dante Hesse
could not simply turn to his customers for help, and they in turn
were unable to invest even a small sum to ensure a continued supply
of his Cereal Milk for the Gods.
Modern- Day Blue Sky Merchants
For most of the postwar era, that arrangement has worked out
just fi ne for investors. As America became a global economic
powerhouse, the stock markets both fueled that growth and were
themselves propelled by it. The Dow Jones Industrial Average
rose steadily from around 200 in 1950 to 1,000 in the mid-
1980s, before spiking to nearly 11,000 by the turn of the century.
And investors big and small came along for the ride. There were