Two brothers selling shares in themselves

Would a person selling shares of themselves owe a fiduciary duty to the shareholders? That could get a little awkward if someone were to come along and offer to buy for more than the current market cap. You'd kind of be obligated to sell. I think there's a word for that.

>The brothers were quiet for a long moment. A wealth tax, in fact, could disrupt their scheme: young people, valued by shares in their own futures, would be taxed as wealthy before they’d ever been rich.

That's pretty funny. You can kill your success in the cradle by being taxed to death on your future potential.

For such a puffy piece their resume is pretty underwhelming for people getting so much attention.

One of their plaudits was figuring out that the release of a bad version of the Snapchat app coincided with user loss? Really? Isn't that like basic telemetry queries? Oh look all the missing users are on one platform. Oh look, they all start dropping the same day we rolled out a major release. We should load that up on some phones and see what's up...

It just feels like the article is really stretching for us to believe that these are indeed wiz kids.

Seems ill-advised to buy shares from someone with that much inside information who wants to sell.

How is this not indentured servitude 2.0?

I believe there’s a constitutional amendment that makes this illegal in the united states, except in the case of prisoners.

Doesn't the idea comes up again and again?

Somehow that bullshit sounds familiar to me.

... ah, there it is: https://www.fool.com/investing/mutual-funds/2006/01/18/selli...

And here: https://www.wired.com/2013/03/ipo-man/

Of course one can also find it in some form here and there on some crowdfunding platform: https://www.indiegogo.com/projects/buy-stock-in-a-person-sel...

https://www.youtube.com/watch?v=rdwc9EBmOk0

You know that mostly 1% of human population have a say in their own fate? And there I am already optimistic.

And yes, coincidentially there is a large intersection with that 1% in which investing is predictably profitable.

But even then, I remain conservative, do not put all eggs in one nest and invest in organized groups of people, aka the businesses of those 1%.

Highly recommend reading 'The Unincorporated Man' for anyone interested in this.

"Improbably, though, the Libermans see this endeavor as part of an effort to stem twenty-first-century inequality. If they can sell life shares, they think, others can, too."

This may work for them, but idea cannot be generalized and absolutely will not solve the problem they say it would solve which is inequality.

Young people who haven't achieved anything yet will have very little potential value to investors, in general. But, those who have rich or well connected parents are statistically more likely to become wealthy themselves, and therefore are better investments and so those people, who already have systemic advantages, will be the primary beneficiaries of such a system. Also, it is the already rich that are making these investments, so if it pays off they become richer still. So inequality is re-enforced with this system.

Exceptional people like prodigies in sports or music etc. might also get a higher prices for their shares, but for them its probably a bad idea to sell them because they will themselves lose out on future earnings because they will have to pay out to the shareholders. They would be better off getting a fixed rate loan if they needed funds as their success is very likely.

In other words, those people that would make the best investments and get lots of money from this are the ones who don't really need it, and those that do need it won't get it because the investor would most likely lose money.

Again, this idea may work for specific cases, but it is not generalizable.

This is such a terrible investment. Let’s try a thought experiment:

Option A: Invest in a specific company. You have a business plan etc and you can talk to the founder(s) to see what you think of them. If the business makes money hopefully you get some kind of exit. This is VC. You can make a decision based on the idea, what you think of the founders, the general market for exits or a bit of all of the above. It’s pretty uncertain but the companies that work out make you returns that hopefully compensate for the others.

Option B: Invest in those two brothers. They may or may not come up with a viable business at some point in the future. This has all the downside and risk of option A except that you also don’t know what business idea they may come up with, how much capital that idea will need (ie you could be further diluted or they may not be able to deploy all the capital, reducing your rate of return) and how long you have to wait until they do that.

Now, if they had a good idea, why would they not tell you about it as part of their sales pitch for investment? (Ie why would they not insist on option A?). This would decrease risk for investors and thereby mean they wouldn’t need to sell as big a slice to raise the capital they need. It feels like by going down this route, they are self-declaring that they don’t have any business ideas likely to stand up to scrutiny.

I had this idea in 2015. A way for teachers to get equity in the students they teach. A way to lower college tuition. Where is my twelve thousand word write up?

Wasn’t this the initial business model of Upstart?

https://www.upstart.com

This idea gives "hostile takeover" a whole new meaning.

Interesting article!

It's probably a lack of imagination on my part, but how could this possibly work for any but a tiny minority of people? Or, worse, how could this not become a new form of indentured servitude?

It does seem curious to look at the world and think: this has insufficient financialization of people's lives. But then, while we can buy life insurance policies, we can't, say, buy a policy insuring against being poor by middle age. Not a pension, not shares in one's future: insurance. That seems more likely to work as a product. That could work now.

this is some dumb shit. how about just paying taxes? what happened to democracy?

No. God no. What capitalist nightmare brain came up with this idea?

Better not be experience mental illness, injury, disability, career burnout, time off for parenting, a bad choice, etc.

Holy fuck this is a terrible idea. Humans are so much more than their work output.

What happens if the "shareholders" wish to wind you up?

Let me tell those brothers that there are tricks such as two classes of shares and the ability to create and dilute the common shareholders.

Didn't some hacker boot camp try this a few years back? Customers paid by committing some fraction of their earnings for a decade or two.

Selling shares in people isn't a new idea. Upstart started by doing this exact same thing in 2012 (they pivoted to personal lending and were very successful). But Upstart couldn't make the investing in people marketplace work.

There's too much information asymmetry. The highest-potential people (i.e., the ones you'd want to invest in!) know they're rockstars. And they value their future earnings potential as such. But it's very difficult to evaluate someone's potential as an ordinary investor. Just look at the hit rate on hiring people into jobs (not ideal) – and hiring likely has more diligence than here.

The highest-potential people therefore feel the deal the investors would give them is bad (and don't take it). The mediocre people will take the deal. But investors won't get a good return, and the company will need to make the deal less and less advantageous to the mediocre people until the mediocre people even find it unappealing.

There are many examples of failures in people-related investment products. The information asymmetry leaves someone holding the bag – typically the investor. 3 examples:

1. Income share agreements (ISA) for education. Many companies and even states (e.g., Oregon) have tried this to poor effect. People majoring in STEM degrees didn't take the deal (as it was a bad deal for them given their future earnings power). And people majoring in humanities did take the deal (as it was a good deal for them given their lower future earnings power). Also, many people who actually may benefit from ISAs don't really understand them and also won't take them. Note: Bloom Tech seems to be making ISA's work through force of will. But they also are in a specific niche where the ROI is much clearer and the ISAs are therefore easier to underwrite.

2. Life insurance for people with illnesses. There's a market for paying ill people money now in exchange for being the beneficiary on their life insurance. It provides the ill people a better living now and provides a return later for the investors. But, the information asymmetry and potential fraud with medicals can lead to a bad outcome for investors. For example, if I agree to pay someone $50k per year until they die in exchange for being the beneficiary on a $500k life insurance policy, then I'm in the red if they live for more than 10 years. The medicals may indicate the person may have 3 to 5 years to live. But what if they live 20? So while this market exists, it's very niche and very risky due to the information asymmetry.

3. Buying shares in an athlete. Fantex pioneered this starting with NFL players. Players took the deal because they are injury-prone and many have short careers. There was information asymmetry at work again. And nearly all investments in athletes went poorly (shorter careers, less than expected earnings).

So overall, I think we'd all love to see a model work where we can bet on individual people to succeed and share in their success. However, it just doesn't work. It's not the same as investors betting on the founders of companies – those founders have to have the money for success. The individuals probably don't need substantial capital (and even if they were using the money to create something – wouldn't you rather have the piece of the company than a piece of their earnings?).

Isn’t this what BitClout is trying (unsuccessfully so far) to do? I think the concept is interesting.

Is selling shares of oneself considered trichitolomania?

Is buying back shares of yourself considered nose picking?

I'd start embezzling myself in a heartbeat.

This is the final form of rent-seeking.

Surely this is just a parody of our current financialized capitalist system, land rentiering, etc?

I can just hear the VC elevator pitch for this now, "We're democratizing chattel slavery on the blockchain!"

No

This concept completely fixes inequality and fully replaces all forms of social welfare - no more wasted potential because a smart person is born in a bad environment due to genetic lottery. Advantage from growing up in a rich family would shrink to the point of irrelevancy. Investors would filter out ghettos in search of high iq kids to buy their shares early. No more need for public schools - because everyone would get the quality they actually deserve, all paid for by private investors. Same would apply to literally every form of social welfare that exists anywhere. Right now there's no market pricing of people at all - everyone either gets less than they deserve, or more, with the fair outcome statistically borderline impossible. The outcome is a horrific waste of human potential.

I think effective tax rate would go way down - because bidding wars on people would reduce it to the market rate, and given the increasing global abundance of capital, I'm pretty sure that's going to mean low single digit taxes (ie. selling only single digit percentage of ownership).

While the end result would be a utopia, it's hard to see how it could become the norm anytime soon. The concept directly takes power away from politicians, so to become the norm a large scale collapse of the state is required. Perhaps it needs a completely new environment - like space colonies in O'Neill cylinders, in which case we're sadly centuries too early.