Why can’t those households pool their money. Almost everyone I know in that position has money in special investment funds that approximate venture capital funds.
Exactly. If there weren’t incredibly wealthy families and there were profitable ideas worth financing. Then the merely very very rich people put some of their money into venture capital firms that were willing to take the bigger risks for bigger payoffs. You’d end up with Amazon, but it would be owned by 100 or 1000 people to start off.
That’s how the market would solve it. Isn’t that what we’re always told by the rich, let the market solve the problems?
They do pool money. That market already exists. But like it or not, there is a market for opportunities that individual investors invest in today that is not served by pooled investors.
Also,
is not an argument.
History has shown us that the poor do not need the rich, and when the rich hoard too much wealth and power, and step on the throats of the poor, then the poor rise up and kill the rich (methods vary, but some popular choices are firing squad, hanging, and of course, the guillotine). It happens in cycles because the rich get complacent about their position, and become increasingly detached from the poor. To my eyes, such a revolt has not happened in some time, and the pressures to create it are mounting. The rich are increasingly complacent about the poor and have an unquestionable imbalance on wealth. It takes a spark to light the fuse. For example, the spark in Arab spring was food shortages. COVID-19 and the resulting (probable) economic depression could be the spark in Western democracies. I think there’s a real increasing sense that the economy is broken in favor of the rich, and people are now scared, which may turn to anger.
You are missing a key word there: “sometimes“. Because what history really tells us it that it mostly doesn’t happen. There are also a large number of countries where it never, ever happened.
Yes total strangers. In the case of the regulatory company the guy bank rolling it was a client of mine who I’ve never been in the same room with or seen his face.
In the second case the lead rich guy was another client of mine and while I’ve worked with him for about 4 years now we’re not related by any thing.
I’m currently running my second company and working on my next three. I’ve found venture capital funds are generally worthless starting a business and they only become interested either in buying it from you or as you transition from start up to growth phase. By far my success at raising funds has come through net working and working in the space I’m interested it starting a business in and people with money generally appear looking to invest in a particular play they believe will grow.
Sure they can but then you’re back to a board making conservative decisions with their clients money. I used to work with a Coors kid and he started a business fabricating aluminium spirits bottles just the equipment was $10mm and then he had a staff of people. I asked him about the funding sources and it was all personal capital because even with his connections there was no interest in something as boring as manufacturing.
I’ve reached out to the venture firms in Colorado’s and unless you are working in the Green space, come from a hardship background, or are doing healthcare even getting an initial meeting to pitch is difficult. If I wanted to start an electric car company I could probably get funding but no venture firm care about a manufacturing business that will top out at 30mm per year in profit.
I realize that. I was arguing that if we didn’t have the super-rich to serve that demand, then interemediaries would presumably be created to serve it as there would be high profit opportunities. That is how the free market is supposed to work. So I’m not going to let an extreme free-market proponent (and not saying you are on) argue that we need the super-rich.
I’m also not saying take the money away from the super-rich. The OP asked a what-if question.
If it’s in your post, it has everything to do with your post. If it had nothing to do with it, you wouldn’t have included it.
If you had put ‘widgets’ we would have known what you meant but you didn’t write ‘widgets’, you wrote something in code and I don’t understand why you would write a post that you are not interested in your readers understanding. Write so that you may be understood. That’s just common sense and manners.
For example, JTY, PIJJ, and of course, FJEEN. What do you think about that?
I think the content of your post is you don’t like unknown acronyms and your acronyms didn’t hurt my understanding of your post at all. So you are obviously wrong.
Internet of Things and Software As (A) Service
Most of the people in the super rich are there because of unrealized capital gains and not because of high salaries. People making more than 7 million per year would tend to be more athletes and entertainers with few CEOs. You are probably asking more about the wealthiest .01% and not the highest incomes.
Walmart can be run just fine without the input of the Walton heirs but it could not exist without Sam Walton. The Dallas Mavericks have had 16 winning seasons and 1 championship since Mark Cuban bought the team 20 years ago. In the previous 20 years they had 7 winning seasons and 0 championships. Obviously the team would exist without Cuban but he seems to have made a big difference.
On the broader question about how important owners are to a business, this studyfound that the death of an owner operator caused profits to fall by an average of 82%.
So then the question is whether the marginal benefit of having obscenely wealthy individual (instead of merely ultra wealthy individuals) is worth the marginal social costs to society of that sort of economic inequality.
Capitalism largely lost its need for those dynastic accumulations of wealth when we invented the stock corporation.
The ability to concentrated capital through partial ownernship of an enterprise through liquid transferable interests made concentrations of wealth in indivudals much less important.
When you present something as necessary because of a particular issue then of course offering an alternative avenue of addressing that issue is a valid argument.
If I said we need medicare for all because in order to provide universal health coverage, you can certainly offer a public option as an alternative path to achieving that goal and you can start that argument with “why can’t”
I don’t know every nook and cranny of private finance. I mostly deal with real estate funds, and venture capital funds (of the type you describe). I am having trouble with the notion that there aren’t private funds out there that are looking for lower risk/reward profiles. Or does all that money go to real estate?
Honestly, I don’t know. I certainly can’t say I’ve surveyed every venture capital firm out there. I’ve mostly looked in Colorado because I have either run into a high net worth individual that would fund me or let the idea drop before I bothered to expand my search beyond the state. I can say that in Colorado I’ve pitched at things like the Angel Capital Summit and I was directed to change my pitch to reflect exponential growth in order for there to be any interest in a manufacturing business, RTDs (Ready to drink beverages, hi, I Love Me, Vol.) I at that point in time.
I think you may be right that capital intensive safe investments go to real estate rather than to manufacturing but I know that getting capital for this hand sanitizer business right now has been a challenge despite having the 0.1% leading the investment and relying on banks for the rest and hand sanitizer sales are about the safest business to be in right now.
Other people being rich doesn’t harm me.
I certainly can, if my aim is to JAQ and announce to the world that I’m incapable of making my own argument by instead choosing to ask others to make it for me. Or I could point to flaws in yours. Or explain why an other option is better. You know, actually debate.
The manufacturing companies I deal with who have secured funding recently have largely benefited from entities who are trying to boost the local economy, who are interested in green/energy technology for more than making money reasons, or who might want to acquire the technology or company. Pick two.
I say entities because sometimes it’s home offices. And a few company strategic investments. Zero traditional VCs, although they’ve sniffed occasionally.
Ya, I’m building a large brewery incubator on the East coast (or was pre COVID) that is paid for by economic revitalization non-profit fund. Next we’re building a distillery incubator. They have picked up investment from a large philanthropic fund due to some energy saving techniques I added to the brewery specifically to attract their investment.
Not that any additional evidence was needed, but the rich have tipped their hand in a major way during this crisis. When they talk about keeping the economy going, what do they really mean? They mean not taking a hit to their stock portfolios, to their businesses being able to run and making them money. If all it will take is the blood of a few million workers, then that’s a perfectly acceptable price to pay (you can always get more workers). They’ll be fine in their mansions, yachts, secluded islands and bunkers, and they know it. They’re trying to put a good cover to it by calling it terms like “the economy”, “the American worker”, and “won’t somebody please think of the small businesses?” but the bottom line is we do not matter to them. Our value is the money we produce for them. Ultimately though, we don’t need them, they need us.