Over the last three weeks, we have discussed the various factors that drive the 25% IRR return potential of the startup and emerging company investing class.
We then reviewed the various approaches to gain exposure to this return potential: Investing directly in operating companies, doing so through a Venture Capital Fund, or “Doing as Warren Does" and utilizing “The Berkshire Approach” of investing in an operating company that in turn invests in other operating companies.
Unfortunately, all of these approaches rely on something in exceedingly short supply in today’s financial marketplace.
Now, wouldn’t it be great if investing actually worked like all of those lovely ads that mutual funds, brokerage firms, and insurance company say it does?
As in, Trust Us and we will take care of it for you.
If this were really so, it would free up so much valuable time and energy.
For family, hobbies, volunteer work, and more…knowing that one’s financial future was in someone else’s safe and capable hands.
But it just doesn’t.
A big part of the problem is that "Us" is for the most part large Wall Street banks and brokerage firms.
And if the last few years have taught us anything, it is that banks and brokerage firms are NOT places where smaller investors (and today small is anyone with less than $100 Million) should be expecting anything approaching extraordinary and high trust treatment.
Now, let me be clear: I am not a conspiracy theorist nor do I see Wall Street as at the heart of our Country's ills.
But I am someone that has looked at stock market return records of the past 15 years and sees too many people on Wall Street making a lot of money while delivering extremely average returns.
The word that best describes a state of affairs like this is institutional.
Self-preserving, bureaucratic, slow, dull.
And what it creates is a just a lot of…Blah.
Tired, mediocre ideas.
Blah Results and Blah returns.
Think of it this way: How much of a fish out of water would an innovator and a wealth creator like Steve Jobs have been on today’s Wall Street?
Yet, for the very most part, it is to this world that most of us turn to manage our money.
So when results come back that are barely average, we should not be surprised.
Now, there are alternatives.
Let us not forget that the most famous and lauded investor of them all hails from Omaha.
And more to the point, the great entrepreneurs, the builders of businesses, those that actually create wealth…
…have always percolated at the edges and NOT in financial centers.
In The Silicon Valleys and The Silicon Beaches and The Salt Lakes and The Seattles and The Austins of the World.
The challenge is to see and act upon this reality.
To not be swayed nor frightened by the financial industry’s omnipresent marketing machine.
Because just like the greatest investor of them all became famous and fabulously wealthy far from Wall Street…
…We too can earn portfolio - transforming returns by doing something not any more complicated than thinking and acting for ourselves.
And when we do, a world of opportunities open up that are anything but institutional.
To Your Success,