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This is the first in a four part series.  The other are here:  part 2, part 3part 4.

Imagine you are in your early twenties, out of college several years and your best friend, who recently came into an inheritance of $300K cash told you they could think of no better way to invest the money than to invest it in you.  Not the company you started, not as a loan, but invest it in YOU, as if you were a startup.  In return your friend said all they wanted was 3% of your gross income for the rest of your life.  Do you think you would take it?

Now what if your friend said that they didn’t care what you did with the money or how much you made each year.  If you wanted to sit on a beach in Nicaragua learning to surf, go work in the Peace Corps, stay at home and do your art projects, whatever you want it would be fine, just as long as you made sure to always pay the 3% of whatever you make (as little as that may be).

And finally, what if your friend said you could buy out of your obligation at any point for $6 million in cash.  Then would you take the deal?

. . .

Personal Investment Contracts

. . .

Personal Investment Contract

Personal Investment Contract

Phil Gordon and I recently made such an investment in a person we both know very well, call her Marge.  The thing about Marge is that she’s one of these people you know — you can feel it in your bones — that she’s a superstar.  She may have a string of projects and startups that don’t end up producing much in terms of tangible results — in fact she already has.  But you know that all of this “failure” is simply building Marge’s brand equity.  She’s learning how to navigate in the world, how to build value (whether it be monetary value, social good, or however you define it).  She’s also making connections with people who are taking notice of her talent, love her undefinable qualities as a person, and who just want to somehow help her succeed in her life’s mission and be a part of her success.  Everyone who meets Marge knows it’s simply a matter of time before her success is tangible.  Maybe she’ll end up as a founder of a billion dollar startup, maybe her book will top the NY Times Bestseller list, maybe she wins a MacArthur Genius award.  Or maybe over the 40+ years of her career doing what she absolutely loves and was made to do, she will touch the lives of millions of people.

From our perspective as investors, it doesn’t really matter what path Marge chooses or what twists and turns that path reveals.  We’ve already determined that she’s a winner and she will adapt accordingly.  The cash investment was intended to smooth out the earnings curve so that Marge won’t have to take jobs that don’t further her life goals just so she can eat and pay rent.  And even if she blows through the cash, she’s still gotta eat and pay rent, which means she will find a way to make money (while pursuing her dreams).  Maybe one year she makes $10K.  Down the road she herself inherits some money and coincidentally that same year is paid handsomely on a consulting gig and ends up making $400K.  Or perhaps she finds that she loves climbing the corporate ladder and steadily increases her salary from $50K to $500K over the course of 20 years.  Assuming Marge makes an income of some sort for 40 years, she only has to average $250K (in today’s dollars) for us investors to get our money back.

Now here’s were it gets interesting for the investors.  It’s very unlikely that we will be negative on our investment over the course of Marge’s lifetime, unless she dies or becomes incapacitated (which happens of course; there’s no such thing as a risk-less investment).  And in poker parlance, we are “freerolling” to make a substantial return if she hits it big and/or she decides she wants to buy out.  But even if we don’t make a ton of money off of Marge, we know that our investment will have made a significant positive impact on the world.  Why?  Because we hand-picked her as “the one” out of the thousands of people we’ve met over the years to invest in.  Amongst those other there are surely many winners, they’re just not… Marge.

. . .

Simple, Flexible

You are welcome to download and use the document above as you like, it’s hereby placed in the public domain.  Obviously Phil and I have to disclaim any responsibility for what you do with it, and we cannot give you any legal advice.  We are very comfortable that we are not breaking any laws or regulations and we’ve had a team of lawyers and personal agents vet and refine the basic template from both the investor’s standpoint and the investee’s.

And sorry, we are not accepting applications nor will we consider investing in you.  But if you have people who believe in you and trust you as much as Phil and I do in Marge, then show them this blog post and convince them to invest.  The Personal Investment Contract (PIC) can be calibrated for just about any situation where the investor believes the person they are investing in is (a) a true superstar, and (b) completely trustworthy.  Here are the key numbers to keep in mind:

  • Investment Amount – This should be determined by the entrepreneur such that they feel like they have enough breathing room to pursue their passion for at least a couple of years, or longer if they feel like supplementing their income themselves.
  • Annual Return Payment – The idea is keep this low enough so as not to be a burden on the entrepreneur, but high enough to be attractive for the investor in combination with the Termination Amount.
  • Termination Amount – If the ARP is low, this should be high; if the ARP is high, this should be low.  It’s the slider that trades risk for reward.

. . .

Examples PICs

  • Example 1: Technologist or Business Person
    • Investment: $250K
    • ARP: 2%
    • Buyout: 10x ($2.5M)
  • Example 2: Social Entrepreneur
    • Investment: $150K
    • ARP: 5%
    • Buyout: 5x ($750K)
  • Example 3: Do Gooder or Research Scientist
    • Investment: $100K
    • ARP: 10%
    • Buyout: 1x ($100K)

. . .

Important Details

Despite the fact that the contract is ridiculously simple (three pages!), there are some key details in the contract that we believe make this work.  The first is the clause that says the entrepreneur has to give the investor a year’s notice that they intend to buy out.  This is so that the investor can’t be cut out of a big, pending deal that closes soon after the entrepreneur buys out.  It’s possible that the entrepreneur gives notice but for whatever reason (turn of fortune?) can’t come up with the cash required a year later.  That’s fine, the contract stays in effect and the entrepreneur can give notice again in the future.

The second important detail is that the Termination Amount isn’t really just the buyout multiple on the original investment but it also crucially includes the ARP times the net fair market value of all unrealized gains made during the course of the contract.  The reason for this is as follows.  What happens if the entrepreneur buys a house or invests in a business which becomes the dominant (or even just a significant) portion of their net worth by the time they want to buy out.  The investor rightly feels like they contributed to that gain and should get their fair share.  The entrepreneur may not want to (or even be able to) realize the gain at the time of the buyout, e.g. they still want to own and live in the house, or the business they invested in isn’t public yet.  But the investor shouldn’t have to take the worst of the deal.  Hence the fair market value assessment is made (by third party arbiter if necessary) and the investor gets paid.  For instance, consider a PIC using the numbers from Example 1 above.  Entrepreneur buys some property that appreciates by $20M, so the actual Termination Amount becomes ($20M x 2%) + $2.5M = $2.9M.

There are sure to be loopholes that we didn’t close, and it would be great if you could bring those up in the comments section below so the template can be adjusted or variants of the PIC can be made.  Ultimately we decided that because we are investing in people we can trust, and we want to foster that sense of trust and fiduciary obligation, it was better to have the contract be short and to the point, rather than cryptic and air-tight.  Yes, there could be problems down the road, but then again if one party really wants out of a contract or wants to bend the rules in their favor they will be able to.  We’d rather enter into a handshake agreement where we are partners in the success of a budding superstar — as motivated to help them achieve their goals as they are to leverage our resources, experience and connections — than to take advantage of someone because of their temporary circumstances.

. . .

Replicate, Don’t Grow

The first thing that angel investors or venture capitalists think about (once they decide they like the model) is how can they create a fund to achieve scale.  Caution! This way there be dragons.  A PIC is fundamentally a personal investment reliant on mutual trust and respect, not a mechanical device suited to turn into a factory.  PICs can achieve scale, but it will happen from the bottom up, rather than top down.  That is, they are meant to replicate, not grow.

. . .

Feedback

If you have any feedback or experience with this sort of investment, we’d love to hear it!  Share your stories in the comments below.

. . .

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  • http://marketyouniversity.com Eric Duchin

    Brilliant! Love the idea. Funding based on attitude, character, vision, and heart is mostly passed on by others. Business plans with numbers are not always easily created when an idea brews within. Now just need to find me am investor! :)

    (we had lunch together at the Feast—perfect example of people who could use PIC’s!)

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  • http://www.007records.com Q

    Well put….I second Eric’s thought…now only if I can find an investor…hmmmmm

  • JTR

    This is not a business plan nor a great idea. It’s a form of slavery.

    Emergent fool, indeed..

  • http://samlessin.com sam lessin

    this is something that i was super into a few years ago — I actually wrote some provisional patents in the space, and tried to start up a web exchange… there are a few problems that I couldn’t get past.

    1. adverse selection of applicants – unlike a debt structure, this structure actually will screen for the worse candidates. Either really good candidates have cheaper sources of capital elsewhere OR you can’t really make a good return

    2. tax structure — this is a big one… the US government doesn’t have a concept for investing in ‘people’ — you could roll it under an LLC or something, but it gets very messy very fast.

    3. accredited investor — to make a bet like this, you have to be one (most likely)

    4. issues of inheritance, other income, income classification, etc. — this all gets very complicated very fast

    • Alex Golubev

      Also, what if Marge sells her house to a friend for 10 cents on the dollar, terminates the contract and then buys it back for 10 cents on the dollar a year later? so you’d need a mechanism for re-apraising questionable transactions in the last 5 years or something.

      obviously we can have a clause to exclude inheritance, but what about any gains associated with it after having it for 10 years.

      if we can get over these issues then we can definitely have a marketplace for this. there’s much more questionable crap trading on the pink sheets.

      on a more philosophical side – why fund individuals and not economic/quantifiable ideas? the different PIC scenarios recognize that it matters what income model the person chooses. what if their aspirations change from “business” (2%, 10x) to “scientist” (10%, 2x) and the investor gets stuck collecting 2% with a crappy terminal value. a lot of people with “potential” choose the more zen route or are discouraged by the inefficiencies of the current economic and political systems to really contribute to the society. so i think i’d prefer to fund ideas and not humans.

    • Vincent van der Lubbe

      I guess these funds already exist in Europe. It's interesting for accredited investors because it does not correlate with their other portfolio holdings. So better risk-return.

      What these funds did was to target top universities and certain subjects (business, engineering etc.)) and invest in assessment, training and coaching. Basically they recruited students on scholarships who after 3-5 years would want to get jobs in i-banking, consulting etc. They would want to get more than 3% per year, but depending on income and also within a limited time frame.

  • danielhorowitz

    I’ve been a big fan of this idea for a while now…I only skimmed the contract, but I think your definition of Gross annual income (i.e. line 22) might run into some problems. (e.g. If I have gambling wins of 10 million, and gambling losses of 9.5 million, I only earned 500k. I think we can agree on that. The problem is, line 22 is gonna show 10 mil+ I can’t pay you a percentage on this amount. ) I’m guessing there are other problematic situations aside from gambling income, but I don’t know them off the top of my head.

  • http://blog.mikekarnj.com Michael

    Brilliant!

  • http://www.darkenedsoftware.com Travis Johnston

    Not sure about this Rafe. In this case it sounds like your working with someone young and your trying to give them money to skip the hard / slow parts in the growth process which usually involve all the lessons that makes one stronger later on. All the people that I have seen implode later on in life are the ones that got pulled ahead at some point and are missing solid foundations. Sure you can help them so they do not spend any longer than needed in one phase of their development which could be a waste of their time. But that has to be so closely watched to decide when that is the case or when they need to stay there longer. ie only a mentor really following them could make that call.

  • Carter

    This is so stupid.

    If you really are a superstar you’d never let anyone have any % of your income for the rest of your life – and even if you would, that kind of amount is a paltry sum for “superstar” talent. Only sub-par people would take that kind of deal.

    • http://appfrica.org Jon

      To be honest, anyone who’s a superstar wouldn’t know at the time of taking the deal. The risk for the investor to end up with a bunch of sub-par talent that can’t deliver would be far higher.

  • http://www.contentdecoded.com Jinal

    I think it is a brilliant effort that puts the $$ behind what’s most important: the people. For any project.
    I’d love to see how it pans out and hear more often about what’s happening with Marge.
    Congratulations to all of you.

  • marty

    your an ass with more money than sense.

  • Tiltmom

    I think there are stumbling blocks when defining ‘gross income’. What happens when you trade labor, rather than money? What if Marge marries an even bigger superstar and they decide that Marge should stay home and raise the kids? Do you get a piece of the earning spouse’s income? Is child support or alimony considered income?

    What if Marge is in an accident and there is an insurance settlement? Is it offset by medical expenses? What about inheritance money? Life insurance payouts?

    Lots of small details…

  • http://www.lookandtaste.com Sean

    I love the idea.

    Giving someone with the innate talent, ambition and ability an opportunity like this can only be commended. 300k won’t make being a ‘superstar’ easy but it will help and it will also give that person the confidence to keep going no matter how many failures they have. I like the buyout clause but I personally would want anyone who showed such belief in me at an early stage to join me in any of the gains I ever made in my life and I would try to keep a level head and not buy them out. Not gauranteed though! ;-)

    As to this being sub-par for superstar talent? Get real, you’re valuing an individuals career worth at $10m before they even really start! With the high level of risk and stage of investment involved that’s an incredible valuation.

    Good work.

  • http://www.jasonevanish.com Jason @Evanish

    As a young person working to be an entrepreneur, I don’t see the benefit in this. Yeah, it’s hard to scrape by and find ways to make rent/food, but it’s part of the game and reminds you of your goals. It’s also a great learning process as a lot of the various jobs you take can teach you valuable, transferable skills (including living lean at home and at work).

    The one year notice clause is definitely the deal breaker. Essentially, the buy out only helps if you’ve already made a ton of money you had to share with them. The upper limit only actually exists After you’ve made $6M that you then pay out to them. They’re essentially insuring they get a massive return as all she’ll have to do is have one decent exit event in her life and they’re more than covered. Considering a portion of any pay she takes along the way also goes to them, this is a seriously sweet deal for the investor (assuming they really are investing in an A+ talent).

    It’s great to see innovative ideas in investment. I just know I wouldn’t take the deal.

  • Bruce

    Jason, you’re making the mistake of applying linear utility to the money. In theory (for most people), the utility of having the x100,000 now when you’re near-broke is greater than the utility of giving up a mere 2-3% of your presumed many millions down the road.

    This deal can be a win-win if you give money non-linear value, although I’d say the hurdles of trust, loopholes and possible hard feelings are offsetting risks. Still, I think the investor gets to reap big psychic benefits; it could be a very cool blend of charity and investment.

  • http://www.jasonevanish.com Jason @Evanish

    Bruce,

    I understand what you’re saying, but that doesn’t change the lessons learned from bootstrapping and early struggles. Not having a safety net may be an important part of early success (I’ve heard a number of entrepreneurs attribute this to pushing them harder).

    I also wonder how the $300k number was chosen? That’s essentially like an angel investment in someone’s business, but is someone’s first business really necessarily right for that investment (and in that case, should it go through normal channels to get it?) Meanwhile, if it’s just to cover food and rent, you could easily make that last close to 10 years, which seems like a long time to secure your future…few people have that much in savings if you ignore retirement funds.

    It’s certainly a unique idea, and I’d love to track the results of this or any similar investments from both side’s perspectives.

  • JZK

    The fact that commenters are falling strongly on both sides of this seem to indicate what a great idea this is.

  • http://pathdependent.com/ John Nelson

    On a tangentially related note, you may want to pick up a copy of The Stakeholder Society by Bruce Ackerman and Anne Alstott. Or, if you are danielhorowitz you can ask Raanan to get a copy from me. (seriously, small world)

  • Bruce

    Jason:
    Sure, I wasn’t speaking to the motivation part of the deal, I
    agree with you there. Some hunger and scraping by probably
    is a big part of entrepreneurism. Maybe it’s offset a little
    by the reduction of outside distractions that money can bring.

    My comment was purely about the claim that the big payout clause
    was a deal breaker. Even if it was a near given that the recipient was
    going to hit it big, I don’t think it has to be a deal breaker. (And,
    not every gifted person hits a homerun.)

  • ace

    I too love the idea.

    If you did a fund then where you didn’t know the candidates you might end up adversly select but if the numbers are small enough then you can personally vet each candidate. The question then becomes what is the smallest sample size you can fund to eliminate negative variance.

    In response to the “Why would anybody who thought they were going to be wildly successful, sell a piece of themselves?” argument, well just ask Larry and Sergey…they probably didn’t want to give much away either but it is a fact of life if you want to get funded.

    I’m concerned there may be a legal issue. If I can sell 3% of myself then I could sell 100%. But I can only think that indentured labor is illegal in the U.S…

  • Min

    Interesting. :)

    But why just superstars? I have been wondering about this kind of thing as an alternative to student loans for college education. Isn’t it better to have an investor in your future than a creditor? And better for society not to have college graduates saddled with the burden of huge debts?

    • Alex Golubev

      cha ching. the disclaimer of not needing an airtight contract and knowing the person personally rubs me the wrong way.

      i’m sure we can run all kidns of regressions to find statistically significant relationships between historic academic and social achievements and future earnings.

      unfortunately Sam Lessing brings up a bunch of valid issues.

  • http://vitriol.posterous.com Vitriol

    In traditional societies, business families follow a similar model — they invest in their progeny’s myriad business ideas hoping that one of them would be successful and that one would payoff for the lost seed investments in the failures.

    Its important to note that only the especially ‘gifted’ children get the lion’s share of capital / opportunities.

    Also repeated investment in the same person has:
    1. the benefit of his experience in the subsequent investments
    2. for gifted people, at least something is expected to succeed, and by investing in all of the persons ventures you are guaranteed a part of the success when (if) it happens.

    That said, the payout expectations are never codified as an APR and Termination amount, but are expected to be a significant part of annual earnings

  • Nathan

    This seems ridiculously bad for the investor (the 300k for 3% one at least). To earn the equivalent of a 5% annual return on your investment, based on 40 years of work, the superstar would have to average, wait for it, 600k in income per year! If you skew the earnings more towards the later years, this average would have to increase even more! The probability of this occurring, even given that the person is a superstar, is extremely slim – there is just a huge luck factor in founding a successful company or becoming a big CEO. And what’s to stop the superstar from just retiring after 20 years with 10mil+ in the bank?

    Just did the other examples quickly,
    Example 1: Technologist or Business Person – 725k annually
    Example 2: Social Entrepreneur – 175k annually
    Example 3: Do Gooder or Research Scientist – 60k annually

    These examples suck pretty hard, I get that the social entrepreneur and the do-gooder won’t be aiming for the cash, but the fact that the ARP is going up so much as the investment decreases makes no intuitive sense.

    Plus, the buyout doesn’t add value as you seem to think – you actually lose value (potentially a lot) by including it. The investee is not going to exercise it unless it is in their best interests – the investor loses out on the potentially huge returns that you are “freerolling” for. (an extremely misused term in poker – only applies to the kind of situation where two players have the same hand (the nuts let’s say) and one has a redraw to a better hand, not really in situations like where you’ve doubled your money, and you’re freerolling with the winnings – no, the winnings are now your money, you shouldn’t make -EV plays just because your up or anything like that).

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  • http://enzifutures.org/ Ashni Mohnot

    A friend sent me the link to this post because this is exactly the kind of social venture I am working on. I just founded Enzi, a people to people social investing venture that lets individuals invest in the education of talented students, in exchange for a share in their future income for a fixed period of time (not lifetime) – http://enzifutures.org/. We just started a pilot at Stanford University, my alma mater. Enzi has the support of university administration, including the Director of Financial Aid, and has benefited from the advice of many prominent folks in this space, including Jessica Jackley, cofounder of Kiva. The pilot is open exclusively to the CS and EE departments and we have already received applications.

    To address the issue of trust and integrity, we plan to grow through university partnerships. Starting at Stanford is key because Stanford students are a great bet (even if you don’t personally know them). To address the concern brought up earlier about individuals who take this kind of deal being sub-par, this is untrue of international students, Enzi’s target market. International students, especially those in Stanford CS and EE, are ‘superstars’ who would take this kind of deal because they desperately need the money and are under-served by the traditional student loan market. (Of course there’s the risk of not getting a work visa but 1) I think this is a policy issue that will change with time and 2) we encourage investors to put their money into a fund of students to diversify their risk).

    While the pilot is offline for now, eventually we will be a Kiva like marketplace inviting not only accredited but also retail investors to invest in these students. And yes, it’s possible to deal with the legal and regulatory issues – I am working with a great legal team at Orrick. Our goal is to do what Min wondered earlier – create a paradigm shift in education finance by offering future income (equity-based) ‘loans’ as an alternative to debt-based funding. Our aim is to remove the financial barrier to education.

    We are looking for Enzi Angels – investors in this first cohort of students. If any of you are interested in investing in them (or even just have questions or comments) I’d love to hear from you – ashni@enzifutures.org.

    Rafe, you’ve clearly done a lot of thinking on the subject of investing in people and I’d love to talk to you more about what I’m doing. Please email me if you’re interested in having a conversation. (Incidentally, I am also a PopTech blogger on social entrepreneurship – I read some posts where you mention going to the PopTech conference).

    Ashni Mohnot

  • http://www.wordnik.com Grant Barrett

    I’m doing this kind of investment, too! My superstar is my toddler son. Payouts are delayed and will commence at about the time my payouts to my own father have stopped and my first grandchild is born. My son has agreed to the arrangement according to the laws of his culture, which call for a frantic improvised pantomime involving us being gorillas driving a fire truck on the way to rescuing a kitty in a library and then falling down and laughing.

  • http://www.bugleme.com Rachael Qualls

    I LOVE IT!!

    Not that I would expect any less from the two of you, but this is really amazing!

    Capitalism and idealism – now you’re talking.

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  • Michael

    This is so silly. Indentured servitude. Didn’t we get quit doing this in the 1700s?

  • http://winningbusiness.com Cole

    I thought this was a joke. Isn’t it? It isn’t. Wow …

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  • Marissa

    Warren Buffet at a recent talk at Columbia Business School televised on CNBC offered 100k for 10% of a future student’s earnings.

  • http://www.lumberkings.biz Joe Simiriglio

    Has anyone ever read the short story or watched the movie:
    “The Devil and Daniel Webster?” If so you know that Jabez Stone was down on his luck, his farm could not grow anything, along came “Scratch” and what appeared in the barn was Hessian Gold Coins, soon after Jabez’s farm was saved from hail storms, floods, frosts, etc, he became greedy too, but in the end Good old Rock bottomed and Copper Sheathed Congressman Daniel Webster of Cross Corners,NH came to the rescue.
    While the idea of offering someone $300,000 to do anything with the money, and collect 3% of their income for “life”, its not human bondage, but its the first human mortgage.
    I wouldn’t do it. $300,000 doesn’t offer enough capital for research and development in many industries, it may be enough to write code and do programming to develop a software tool, but not enough for Medical device design and prototyping, etc. I say NO.

  • http://www.bohemiansoul.com.au/ Deborah Adams

    I would love and welcome the opportunity to be invested in and to network with driven people who wish to create lasting postive results for humanity and the planet.

    I am a social entrepreneur and have a huge vision that needs to happen one way or another.

    I will knock on every single door to make this concept happen and gladly give over 3 % of my income every year if it meant I could make an impact on humanity and the planet.

    I am already making a difference to humanity by self funding my work – If you are curious by what I am doing I would passionately love to tell you and anyone who is willing to listen.

  • Luke

    This does not sound ethical. Can you say, “modern indentured servitude”?

  • Terrence

    I agree with the indentured servitude comment. It also seems as though the recipients of these sums of money are likely to be people who are highly educated and connected to wealth themselves, so… this seems more like an elitist social experiment than anything worth getting excited about.

  • http://www.openworld.com Openworld

    A few thoughts on how Rafe’s idea can be adapted to reach millions of students and jobseekers at the Base of the Pyramid –

    1) “Bundling” of micro-investment offers for human capital investment can spark maximum interest in struggling communities. By pooling such offers, providers can make possible a significant impact on local skill levels – making the offers interesting to prospective local allies including eLearning networks and entrepreneurial schools for the poor that want to grow their market share. James Tooley has estimated the number of private schools for the poor at more than 1.5 million in studies for the Templeton Foundation and the IFC. Students and jobseekers could qualify for increasing levels of micro-investment based on reaching (digitally verifiable) milestones in skills and online work-study progress.

    2) A huge and rapidly growging number of freelance jobs – 50,000+ daily via http://www.FreelanceQ.com – provide a new path for recipients of human capital micro-investments in emerging economies to earn a living as they build new skills. Vinod Khosla has estimated that markets for “remote services” will grow to trillions of dollars.

    3) Rather than get mired down in arguments on whether human capital investments amount to indentured servitude, a better way to launch the idea will be to extend the human capital investment offers on a “pay forward” basis. By this means, repayment of micro-investments/loans can flow back to a revolving fund that expands further human capital investment resources for the partnering communities.

    4) The exit strategy for at-risk initial funders can be to participate in returns from land grant development opportunities (local land grants can be a key commitment given by partnering communities interested in partnerships to spread skills and create jobs). Development of these sites as “success-sharing free zones” (see http://www.openworld.com) can generate enormous uplift in land values, for the benefit of the initial funders as well as community trusts to fund ongoing human capital development. Build-Operate-Transfer concessions for free zone development can spread asset gains directly to all residents of the community.

    We’re keen to hear from people who are interested in seeing this variation of Rafe’s idea take root and spread.

    Best,

    Mark Frazier
    @openworld

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  • Aki_Izayoi

    You could buy 30 year US Treasuries with yielding 460 basis points now. So 300k * 0.046 = $13,980 per year in coupon payments and you get the principle back after 30 years assuming the government doesn’t default. If you’re optimistic about emerging markets and are willing to take currency and sovereign risk in those countries, you might get more.

    In order for Marge just to match the coupon payments, she must earn $466,000 per year.

    • Rafe Furst

      Yep. Gives you an idea of what we expect Marge to make. Marge is not in a salaried position, so the average is a bit misleading. Indeed this whole exercise is one of smoothing out the massive discontinuities that dominate the distribution for superstars (who almost by definition aren’t salaried).

  • http://www.alectorelli.com Alec Torelli

    Hey Rafe,

    My name is Alec Torelli and I’m also a professional poker player. I’m sure we’ve crossed paths before, although I don’t remember formally meeting. I’m sure you get 1000′s of inquiries, however it’s a freeroll to take a shot. I’m often presented with a variety of eclectic investments, yet haven’t found any really promising – that is until I read your blog. I have a friend who fits the criteria and I’m just wondering some specifics or advice that you have on the subject. I live in OC but spend a great deal of time in Vegas and on the road – if our paths cross sometime I’d love to grab lunch. You can reach me at alecmtorelli@gmail.com. Either way I love the blog and will continue to pursue this option.

    Cheers bud,

    Alec Torelli

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  • http://la-ip.com cooper

    Wow, this is really interesting. I had somebody invest in me in similar way, not with cash directly to me but in travel as in, he paid for all my travel and sent me around the world. It changed the way I think and do things and set me on this perpetual path to give back to others behind me in as many ways as i can.

    This is beautiful, guys.

    Cooper Bates

  • http://www.ArtofPop.com/angelsearch Art of Pop

    As an entertainment entrepreneur, a “Marge”/budding superstar, I definitely regard this as a good idea. Even a great idea! All specific arguments aside (relative to the letter of the PIC), it’s an excellent template, not a set in stone contract, but a model that enables investor and highly gifted+motivated+ambitious+enterprising artists to accomplish things as business teams that may effect a lot more competitive diversity in the marketplace, on the radio, in the media…, extrapolating to less mediocrity and an higher degree of mastery, as well as hope, ergo creative manifestation among aspiring professional artists.

    We are in a Time when we must develop ways for those who are talented and creative with money to work in collaboration with those who are talented and creative in the performing arts to build creative careers into their full promise. This idea comes in a period where there is far more talent with huge commercial potential in the pool than there are companies capable of investing and nurturing such talent. Relative to the pros who are running their careers as small businesses, that pool’s a virtual gold mine for investors! The artist as a company unto herself, as I am, is a viable investment opportunity, particularly when the artist is also an LLC, (as I am).

    It’s time for artists and investors to work directly with each other to create a radical new and (manifold) successful music business paradigm. If I was an accredited investor, I’d use the PIC template to forge a mutually pleasant agreement with such an artist, in order to help change the entire entertainment business paradigm into one wherein remarkably more independent money and profit sharing flows into and from the arts, into a paradigm that surely gives back to the world and mutually enriches the artist and investor, directly. As an artist, given angel investment in line with this model (or any other), I would (and do) assure investors of their return by doing my part; being the product and generating product(s), consistently, for ever widening markets and market shares. We (independent artist and investors) can DO this. Let’s do it!!

    AoP

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  • A16ozsoda

    If you believe that $300,000 is slavery then try living like the majority of citizens of the world and I think you will then understand all things are relative. I have known many people in my life that may have done amazing things with such support. You can be the greatest batter that ever lived but if you spend life as a janitored then what good has it done you. I think the to have someone believe in you like this must be an amazing an feeling that has no monetary value but would make you wealthy far beyond $300,000. Rafe n Phil are gin!

  • A16ozsoda

    If you believe that $300,000 is slavery then try living like the majority of citizens of the world and I think you will then understand all things are relative. I have known many people in my life that may have done amazing things with such support. You can be the greatest batter that ever lived but if you spend life as a janitored then what good has it done you. I think the to have someone believe in you like this must be an amazing an feeling that has no monetary value but would make you wealthy far beyond $300,000. Rafe n Phil are gin!

  • A16ozsoda

    If you believe that $300,000 is slavery then try living like the majority of citizens of the world and I think you will then understand all things are relative. I have known many people in my life that may have done amazing things with such support. You can be the greatest batter that ever lived but if you spend life as a janitored then what good has it done you. I think the to have someone believe in you like this must be an amazing an feeling that has no monetary value but would make you wealthy far beyond $300,000. Rafe n Phil are gin!

  • A16ozsoda

    If you believe that $300,000 is slavery then try living like the majority of citizens of the world and I think you will then understand all things are relative. I have known many people in my life that may have done amazing things with such support. You can be the greatest batter that ever lived but if you spend life as a janitored then what good has it done you. I think the to have someone believe in you like this must be an amazing an feeling that has no monetary value but would make you wealthy far beyond $300,000. Rafe n Phil are gin!

  • BlakeKirkpatrick

    Beyond external factors such as housing and finances, it is also important to focus on building a strong argument for obtaining custody. This becomes a matter of putting all of the facts and circumstances together in child custody issues such a way that will influence the judge to side with the mother. This can include things like time spent with the child, care giving tendencies, and emotional support. While not all of these factors can be measured on paper, they still hold significant weight in the eyes of the court. This is an area where a devoted mother can excel by proving that she is the most prominent parental figure in the child’s life.

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  • http://www.electroniccigarettelounge.com Electronic Cigarette

    It’s really rare for people to actually get money for their startups. It would definitely be a great honor if someone did.

    One can dream…

  • http://www.auto-rent.ro Rent a Car

    I’ve been a big fan of this idea for a while now…I only skimmed the contract, but I think your definition of Gross annual income (i.e. line 22) might run into some problems. (e.g. If I have gambling wins of 10 million, and gambling losses of 9.5 million, I only earned 500k. I think we can agree on that. The problem is, line 22 is gonna show 10 mil+ I can’t pay you a percentage on this amount. ) I’m guessing there are other problematic situations aside from gambling income, but I don’t know them off the top of my head.

  • http://www.inchirieri-masini-bucuresti.ro Inchirieri masini Otopeni

    I’ve been a big fan of this idea for a while now…I only skimmed the contract, but I think your definition of Gross annual income (i.e. line 22) might run into some problems. (e.g. If I have gambling wins of 10 million, and gambling losses of 9.5 million, I only earned 500k. I think we can agree on that. The problem is, line 22 is gonna show 10 mil+ I can’t pay you a percentage on this amount. ) I’m guessing there are other problematic situations aside from gambling income, but I don’t know them off the top of my head.

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