The Tyranny of the Long Generation

  • 20s: low income, net negative financial asset accumulation; net positive asset accumulation, but mostly in the form of intangibles (skills and social capital). It’s best for young people to optimize for social capital over financial capital, just because it’s the path of least resistance. You can “own” something in the business-process sense (“she owns that product launch deadline”) well before you own equity.
  • 30s: higher income, net flat to positive financial asset accumulation, slowing skill accumulation, accelerating social capital accumulation.
  • 40s-60s: here’s where people reach career cruising altitude, and transform their social capital (the people who trust them) into income and balance sheet capital. Sometimes this happens in a very direct way; the standard path for VC partnership seems to be a senior operating role at a startup, so even if you don’t end up with much equity when it exits, your next job has carry.

Post-1929: Finance’s Lopsided Demographic Pyramid

  1. Growth stocks are prone to bubbles.
  2. Economic prosperity also leads to bubbles.
  3. When things get bad, stocks can trade at well below any reasonable assessment of their intrinsic value; if a company trades at less than its net cash on hand, there is no cosmic law stating that, a month from now, it can’t be trading at half of net cash.

More Case Studies

The Test

  • Browse business books on Amazon, and look for stuff published ten years ago that’s priced at $0.01/copy plus shipping.
  • Look up companies in that industry on LinkedIn, and see if anyone working in the field finished college in the the last ten years.
  • Somehow figure out what parts of their business are automatable. Companies that have been through a bubble/bust cycle are risk-averse, but if you find a way to save them labor when they’re slowly losing headcount through retirement, you’re in a good position.

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I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/

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Byrne Hobart

Byrne Hobart

I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/

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