An interesting thing happened yesterday at work, as an announcement was made that the venture capital was being recapitalized. Essentially, this means that the original VC ownership was sold to other VC owners, giving the exit. For the original VC, it was a very large exit. However, the company has offered opportunities for employees to invest over the years also, and many did. Because of the way the agreement works it is drag along sale, so all minority investors are also forced to sell, whether they have options or shares. Suffice to say, once finalized, there might be some additional luxury cars in the garage.
While this barely affects me due to my very low holdings, the interesting thing isn't all the newly wealthy, it is what happens after. Depending on the amount of assets held, there are a few concerns for people. For those like me, it is a little bit of extra cash at some point, but far from life changing. For others, it is significant, and for some, financially life-changing. Quite a few people wouldn't sell all if they didn't have to (I wouldn't) because of the potential in the future for larger gains, but it is forced.
And it is the "forced" sale that is likely upsetting some people, because it wasn't their choice. Even if they get the gains from it, they had the feeling that what they held and bought was theirs, even though it really wasn't. Their ownership was conditional, and those are conditions dictated and triggered by majority shareholders, the venture capitalists. And they of course have an exit strategy and criteria, and once it reaches that point, they are out.
And I think this is what the bigger issue becomes, because the main change that everyone in the company is going to have, is that regardless of their stake size, they had some percentage ownership. Now, they are working for salary alone. This means they are less connected to the company, feel less obligation, less loyalty. And the higher the stake, the more opportunity there is to search for other options. This worries the people who will stay, because it is possible that those who are now the most "free" to go, are likely old-timers in key positions.
Structural change.
Ownership is incredibly important in my opinion, and likely for anyone who really gives a crap about society. Because without ownership, people are unbounded, but this doesn't mean they are free - quite the opposite. Non-owners can do as they please without long-term obligation, but they are renters, which makes them dependent on the owners to provide for them. Without the owners, the renters are unable to provide for themselves. But, there will always be a subset of owners, willing to provide for a fee, and that fee will keep climbing to maximize the gains, because that is the way the economic incentives are aligned, even if it is to the detriment of society itself.
We all work in our own best interest.
At least, we think we do. More often than not though, we are looking to maximize ourselves in one or two ways, like financially, without recognizing that there are many other factors that are important to us that we might be working against, like social wellbeing. And, while we maximize ourselves to the detriment of others, the more resources cluster to a decreasing group, and the more volatility is seen in the other areas. Effectively, a few become extremely wealthy, while society crumbles for all.
If we imagine two identical suburbs that have been pre-constructed with everything the same. One is sold to entirely to owner-occupiers, the other to owner-investors and entirely rented out. What do you expect to happen over the space of a decade or two?
I would assume that the owner-occupier suburb would be better maintained, where owners would develop and care for their gardens, replace broken pieces, and upgrade when necessary, because they live there. However, while the renters live in the other suburb, there is no incentive to maintain the garden, or replace broken pieces, or upgrade - because the onus falls on the owner. But, because the owner doesn't live there, they are going to look to maximize their rental gains, only replacing what they have to replace. The garden doesn't bring much additional rent value, so it can be simplified or neglected altogether.
Which would you rather live in?
While this is a very simplified thought experiment, what it illustrates for me is how ownership affects our behaviors. When we own, we take responsibility and when we don't own, we neglect.
Drive it like it is rented.
Yet increasingly, the economic activity is creating more renters, not owners. Personal debt is going up and more and more is being spent on consumer goods and services, rather than being rolled into generative or even store of value assets, like housing. This means that while corporations will make increasingly large profits and concentrate wealth to the investor population, the majority will become economic slaves, living at the mercy of the owners.
"How can you kick me out of my house?"
You mean, my house.
Distribution of resources is incredibly important for society to function well, but that distribution can't just be handed out without activity to earn it. While for from perfect, I think that Hive is a good illustration of how ownership engages and retains users, whereas those who rely on the earnings from content creation alone, will never last long-term, because those earnings aren't guaranteed, they are at the mercy of those with stake.
Stake matters.
For another thought experiment using the rental suburb from above, what do you think would happen if part of the rent went to buying the house, so the longer a person was in the house renting, the more of the house they would own? What if they could later buy outright once they had enough capital or could secure a loan, or they would be paid a percentage of future rent on the property, even though they no longer lived there?
Would the suburb look and behave differently?
If governments really gave a crap about their countries and citizens, they wouldn't be encouraging renting, or corporate profits to improve GDP. What they would be doing is creating as many ways as possible to lower the bar and incentivize ownership, whether it be of a house, a business, a community or a local park. They would be trying to get people to buy into society and the culture, and take responsibility for the way it functions and its maintenance.
Governments aren't incentivized to benefit society though. This means it is up to the citizens to create an environment where society can grow and thrive, and this is done through taking responsibility. But, human nature being what it is, taking the responsibility required to extend actions past just the self, means not only building ownership of assets, but also recognizing that the value of assets extend beyond their sell value. The value of a business or house isn't what it can be sold for, it is also the stability it creates in the community it operates within.
Yet, I get the sense that across the globe, ownership is being eroded away and as such, disenfranchisement is setting in. People are less engaged in the community, less social, and far more individualistic in their behaviors, and this is creating costs to themselves, as well as the local communities and society as a whole. It doesn't really matter how much money is made, if it isn't being generated or used in ways that improve our wellbeing.
A lot is at stake.
Where are you staked in your life?
Taraz
[ Gen1: Hive ]
That's the same as asking "to what are you accountable?" A tough question to answer.
I'm reading The Creature From Jekyll Island. Very interesting book! Money is an illusion, at least in the US it is, and, I extrapolate, in any western country. Our central banks just make the stuff out of thin air, and give it to themselves and their friends. The rest of us pay them to do this via taxation. It's bizarre! I thought of this right at the start of your post today, because I'm wondering if VC isn't more of the same.
It is bizarre! And it is more of the same for VC in some ways, but it is a little more "free market" than the governments and it can be used to support good ideas and people who have them - but not always.
This makes me think of the health insurance that my wife and I used to have. We were more than happy with it but because the union at work decided they wanted to go with a different (cheaper) plan, we all had to switch. The fact that we didn't even get a say in it is what made me the most upset.
Eventually, they ended up switching again to a plan that I think everyone is happy with, but I really don't like the idea of having zero control over things that impact us so directly.
Having zero control is not my thing. Those that like to have no control over their decisions, are into some extreme kink in my opinion!
With this one, the people who invested knew (or should have known) this was a possibility, but many assumed that it would IPO instead. For most, they are happy with a bit of a bonus this year in their pay packet, but are worried about what happens next.
I think with the economy the way it is right now you should take the wins where you can get them and just move on!
I know that according to research, if you strip all the money from a person who made a million dollar worth company, he will find a way to make the money back, if you give millions to normal people (aka Lottery winnings, just to say one), they will lose everything in few years.
Of course, there are exceptions. The mindset makes all the difference.
This is why forced redistribution doesn't work. The rich (for the most part) got rich for a reason. Unless the incentives change, the same would happen again starting from scratch.
Renters wouldn't care about where they live as they think they are temporary living there.
Exactly. They are a more transient population, so are less sensitive to where they live, and care less for places they are going to move on from.
I am sad because I don't have money to go to Finland to see my wise brother @tarazkp!😂
I don't have the ability to meet you in person and have a conversation in English.
I assumed you supported the socialist system in Finland!
I thought you were a socialist!
A socialist? Why would you think that?
There is a difference between wanting to build and live in a healthy community and society, and socialism.
Dear my bro @tarazkp !
East Asian men like me understand Australia and Finland as socialist countries!
Don't you feel that European socialism is better than American capitalism?
The government does not really care and that’s because they get some taxes or let me say some money from the rent people pay
They benefit from all those things and that’s why they will never incentivize ownership
The governments are made up of very flawed people.
Ownership makes people more responsible and increases efficiency. When one considers one's wealth one does not neglect it. Well said.
Optimize value, rather than free time.
I read your title as, impaled on a stake… and I’m not sure what that says about me. 🤔
I like my stake medium-rare.
Lol.
Your example of the house being rented or owned is a good one. Sadly I am afraid that is going to happen in our little neighborhood. The older people are dying off and houses are being sold and flipped for rentals. Jusst afraid many of the nice little places I see here will turn into pits in the next year or two. A couple already have started.
I have learned that apart from our own bodies, there are a lot we don't have full control over. Even things that we already own are still controlled by others in some way. Our house and cars need to be registered. We can't even drive our cars if we don't have a license. The money one earned from working needs to be taxed. The freedom that everyone enjoys is aligned to guidelines set by others. But even so, I one wants as much freedom as possible, they need to have ownership.
I can see how ownership plays a role in my own life, even if it’s on a smaller scale, like taking care of personal items. It’s interesting to think about how owning something makes you more invested in it. I feel the same with things like my schoolwork or hobbies, when I truly feel like it's 'mine,' I’m more committed. It makes me wonder how the future will look, especially for younger generations, as more of us might be growing up without that same sense of ownership or connection to our communities