I recently read the entertaining science fiction novel The Unincorporated Man by brothers Dani and Eytan Kollin. The premise is that several hundred years in the future everyone is incorporated at birth, with the government owning 5% and parents 20%. People trade equity in themselves for their education and development, then spend their life trying to earn back majority ownership so they can control their lives. Into this world an entrepreneur of today who underwent cryogenic freezing is revived, and refuses to cede ownership of himself.
This is not a new idea. In 1995 aspiring British actress Caroline Ilana, trying to fund her attendance at acting school, established a corporation with herself as the sole asset, giving shareholders 10% of her earnings. Andrew Lloyd Webber, Ben Elton, Julie Christie and many other celebrities she approached bought shares.
In their 1998 book Blur, Stan Davis and Chris Meyer wrote about the blurring line between being a laborer and a capitalist, resulting in the securitization of individuals.
Over the next decade it’s safe to predict that Wall Street will devise new instruments to develop, measure, evaluate, and reward the knowledge and experience of individuals. He or she will be the investment vehicles of the twenty-first century just as small companies were in the twentieth and large ones in the nineteenth.
While over a decade later those forecasts have not come to fruition, others are trying to implement these models. Thrust Fund comprises three young social entrepreneurs, each of them valuing their future earnings at $10 million, and seeking to sell 3-6% of their personal equity for that share of their earnings for life.
The attention they have garnered may lead others to emulate them if they are successful. Many young people would leap at a chance to get cash in hand. Potential investors may be more circumspect for most of them.
It is unlikely that highly liquid marketplaces for personal equity will emerge, at least until there are standardized contracts for selling personal equity, that have been shown to be enforceable by law, preferably across jurisdictions. However in the shorter-term there could well be enough transactions for valuation criteria for individuals to emerge.
This would be a strong driver of the reputation economy, where reputation measures would be probably the most accurate indicators of the value of personal equity.
Building on my capital markets background (notably a good while ago working as Global Director – Capital Markets at Thomson Financial) I’ve long talked about how new capital markets are likely to emerge, particularly for non-listed companies in knowledge-intensive industries. A decreasing proportion of value creation in the economy is in stockmarket-traded companies. Investors seek new opportunities.
Let’s see whether and how fast the capital markets for personal equity develop.