The American Dream is a vision of prosperity fueled by opportunity. In America everyone is to have equal opportunity so that the dream is achievable by all. The dream is sweetest when someone is self-made as we love the rags-to-riches story. We look fondly at the self-made billionaires but look with disdain at those that seem to squander their opportunity or require extraordinary assistance. It is as though they were somehow less American because they have special needs. Having worked in startups and finance my whole professional career, I’m here to tell you that the self-made are also given extraordinary assistance. In fact those most fortunate are granted numerous forms of support and assistance far more valuable than the supports given to disadvantaged people. Injustice notwithstanding, I will outline a vision for appropriating this model, thus creating equal access to opportunity for those who need it most.
Being an entrepreneur in the land of startups
In the world of venture capital, a support system is not considered a handout as there is an expectation of a return on investment. What form do these supports take? They take the form of incubators, networks, mentors, and of course money. Suppose you have an idea for a business. What do you do? Well first you make a business plan or a prototype that can dazzle monied eyes. If you pass muster (i.e. attended an elite school, worked at an elite company, know an elite person) then you’ll find yourself accepted into an incubator or receive some seed funding from an angel or two. You now have access to numerous advisors and the beginnings of a powerful network effect that begets more and more valuable connections. These connections can help you with your business model, capital structure, marketing, branding, advertising, sales, organizational structure, hiring, etc. You’ll also likely get connected with lawyers and accountants that may offer discounted rates in expectation of greater revenue later.
All of these services are considered investments in people that the startup community believes have a high chance of success. These folks become the darlings of the industry and everyone wants to join in to get a piece of the money pie. You see it in the later rounds of financing where massive Series D equity raises blast valuations past a billion dollars in the attempt to reach an IPO. It’s easy to picture a wave of humans (and capital) creating a high tide lifting these folks to startup success. In essence all these hands are there so that founders can focus on execution as efficiently as possible.
How to start a hedge fund
You can be forgiven for thinking that the world of hedge funds is different from startups and venture capital. They are actually quite similar from the perspective that they are both alternative investments fueled by investors (usually) looking for outsized returns and the founders generally obtain star-like status in a winner-takes-all business model. Getting into the hedge fund business has similar (if not more stringent) hoops that requires a long track record of being at the top such as attending elite schools, holding elite degrees, working elite jobs, having elite friends, etc. (The system is not perfect as there are always outliers 😉 ) Once you are in your odds of success increase dramatically as you are surrounded by the crème de la crème. Hence the network effect works in your favor when you are ready to strike out on your own.
Like any business, starting a hedge fund is arguably a non-trivial endeavor. There are so many additional barriers to entry due to the rules and regulations designed to safeguard investors. Yet due to the scale of the industry, numerous companies exist to provide all the supporting services necessary to start and run a hedge fund. This includes portfolio management, reconciliation, SEC compliance, reporting, payroll, billing, accounting, and even marketing communication. It’s like ADP on steroids. This means as a successful trader leaving a bank or hedge fund, getting started is really about raising money to get the fund going and focusing on trading instead of worrying about the administrative and operational headaches. In other words, the hedge fund industry has created wraparound services to enable traders to focus on what they do best.
Wraparound services for all
Success is a wily creature and even with all these supports, few startups and hedge funds achieve write-home success. It’s not the end of the world as it’s generally recognized that this experience improves chances next time around. In fact it can often be easier to raise money the next time because of the belief that with failures behind you, there’s a higher chance of success this time (we’ll set aside the validity of such thinking).
The lessons here are many-fold and paves the way for helping disadvantaged communities. I am involved/exposed to both the autistic community as well as the community of youth in foster care. In both of these populations there is an unfortunate dichotomy between perception and reality. Many feel that these communities are somehow comprised of lesser people. In their minds expectations are so low that success seems to be defined merely as subsistence. Some see them as failures that are exempt from the American Dream. Success has been relegated to having a job and an apartment but says nothing about self-determination.
Yet what I’ve found are innumerable passionate and talented people looking for a chance to have their voice heard and given the opportunity to live their life how they see fit. One must ask why those most fortunate are given tremendous support and encouragement, while those most disadvantaged are given few supports and relieved of opportunity? Why shouldn’t these people be given the opportunity to follow their passions and do what they do best? It is hard enough starting a business, but imagine starting a business when you are artistically gifted but social interaction and the rules of negotiation is a dangerous game of treacherous anxiety. Imagine starting a business when you are exceptionally eloquent in writing but cannot speak. Imagine starting a business when you have the passion to change the system but struggle to secure housing.
Now imagine if these communities were given the same opportunities that those in startups and hedge funds are given. Imagine providing wraparound services so that talented autistics or foster youth aging out of care can focus on their passions. Imagine what is possible when the burden of accounting, negotiation, contracts, health insurance, etc are taken away. Self-determination and not subsistence must be the goal. Let’s start giving disadvantaged people an equal footing to make a mark for themselves in this world.
For those interested in this vision, I am collaborating with others in the autistic community to explore the viability of an organization that can provide the necessary wraparound services to help disadvantaged people achieve true independence through self-determination. Please get in touch (twitter: @cartesianfaith) and let me know how you would like to get involved.