• Part 1: The JOBS Act will unlock $30 Trillion in long-term investment capital that can legally be invested in startups and small businesses through crowdfunding portals.
• Part 2: Currently, investors have a stranglehold on the fundraising process. Once the JOBS Act is implemented, there will be a leveling of the playing field in which entrepreneurs and citizen-investors control the process.
• Part 3: Investment crowdfunding enables individuals to invest in companies they are passionate about, and in so doing, outperform professional investors.
• Part 4: “Do you want to sell sugar water for the rest of your life or do you want to come with me and change the world?”
• Part 5: There is a second revolution coming: investing directly in people. When it collides with crowdfunding, this will create a perfect storm….

Related posts:

1. The Economics of Abundance
2. Investing in Superstars, part 4
3. Revenue Sharing

Background: part 3, part 2 and part 1.

In the interview with Jon Gunn in Part 3, I mention that I’ve been thinking of what “version 2″ of the Personal Investment Contract might look like.  Here’s the model:

1. Investment Amount - Same as before, intended to give the individual some time to pursue their passion (or figure out what that is) without having to worry about how to support themselves.
2. Maximum Return - The cumulative total amount that the investor can receive as return on their investment.  If and when this amount is reached, the contract is over.
3. Annual Exclusion - The amount of annual income the entrepreneur can make without having to share any of it with the investor.
4. Minimum Revenue Share - The minimum percentage of gross income the entrepreneur returns to the investor after deducting the Annual Exclusion.

Following are some examples of various different career paths and uses for a PIC.  Click on the thumbnails to expand the graphs.  These are modeled with various “reasonable” assumptions but if you want to experiment with how it might apply to you or under different assumptions, here’s the spreadsheet.

Example 1: Entrepreneur

• Investment Amount: $50K
• Maximum Return: $2M (i.e. 40x )
• Annual Exclusion: $100K
• Minimum Revenue Share: 25%

Example 2: Social Innovator

• Investment Amount: $100K
• Maximum Return: $1M (i.e. 10x)
• Annual Exclusion: $50K
• Minimum Revenue Share: 30%

Example 3: Small Biz Expansion

• Investment Amount: $300K
• Maximum Return: $1.8M (i.e. 6x)
• Annual Exclusion: $0
• Minimum Revenue Share: 40%

Example 4: Career Change

• Investment Amount: $1M
• Maximum Return: $4M (i.e. 4x)
• Annual Exclusion: $200K
• Minimum Revenue Share: 60%

Example 5: Investor

• Investment Amount: $3M
• Maximum Return: $300M (i.e. 100x)
• Annual Exclusion: $250K
• Minimum Revenue Share: 100%

Several things to note: the Minimum Revenue Share is calculated from the gross income (all sources) as reported on your tax return; you get to deduct the Annual Exclusion amount before figuring and paying taxes.   If your effective income tax rate is 40% and you quit your job — using the Investment Amount to live off of — you’ve just stretched out your runway by 40% (i.e. you don’t pay taxes on the money someone invests in you).  Finally, this contract gives you incentive to pay more than the Minimum Revenue Share to your investors, since the more you return, the quicker you reach the Maximum and end the contract.

Related posts:

1. Investing in Superstars
2. Investing in Superstars, part 3
3. Revenue Sharing

I get a lot of questions from folks who are interested in learning more about Personal Investment Contracts and so I felt it was time to synthesize some of the most common ones and give you some answers.

Who is the first person you invested in?

A film maker named Jon Gunn.

What is your relationship with Jon outside of this investment?

He is my brother-in-law, and a former business partner of mine in an instructional DVD company we co-founded with Phil Gordon.  I’ve also invested in a couple of his independent films.

Why did you invest in Jon directly?

I have been a big believer in his talent for a long time.  None of the ventures I just mentioned though have made me any return on my investment.  Phil had been suggesting for a while that if we simply invested directly in Jon’s future earnings, we’d do better than investing in his projects.

Why is the contract only three pages if it’s a lifetime deal?

Basically it comes down to this:

1. The contract is there simply to remind both parties of what was agreed to at the time of signing.
2. Inevitably circumstances change for one or both parties and it will be necessary to amend the contract.
3. If both parties are committed to maintaining a strong relationship, then amendment is easy and actually leads to strengthening the underlying relationship.
4. On the flip side, if one or both parties are stuck in the past and are not looking for the continued win-win, it ends in lose-lose (i.e. litigation).
5. If you can’t trust each other to honor the spirit of the agreement when conflicts arise, is a longer contract going to make matters better or worse?

Are there legal and tax consequences you had to consider?

Yes.  It turns out a three-page contract is way more complex than a 30-pager.  If you are considering doing anything like this and want to deviate from the contract template, I recommend contacting Orlando Medina who created the contract and vetted all of these issues.  There are very few lawyers like Orlando who are both legal virtuosos and business-creative rolled into one.

Why not create a fund for Personal Investment Contracts?

Most investment funds are explicitly meant to remove the personal relationships that a PIC relies on.  While not explicitly a PIC fund, the Presumed Abundance fund is based on the premise of investing in people and relationships.

Another approach that might work is to attach a fund to an incubator like TechStars or a fellowship program like the TED Fellows.  The incubator then acts as a proxy for that personal relationship: both investor and investee feel a sense of responsibility to the third party, which can also act as an neutral arbiter if problems arise.

Have you made an equity investment in anyone else besides Jon?

Yes, Michael Keller.  He was a founding partner in the instructional video company (along with myself, Phil and Jon).  Michael and I have been friends for years and I had also invested in one of his movies.

Do you only invest in film makers, I thought you were into technology and social entrepreneurship?

The film connection is somewhat coincidental.  Michael is working on a startup in stealth mode right now.  I’ve talked with a few close friends who are tech/social entrepreneurs about investing in them but the conditions just haven’t been right.

Would you invest in me?

Not unless we’ve known each other for several years and have been through some experiences together that have tested our relationship.  We need to know that we’ve got each other’s back, and are committed to working out problems that arise.

What’s more important to you as an investor, trust or talent?

No question: trust.  I truly believe that “talent” is within us all, and by removing obstacles (financial and otherwise) we can unlock that talent.  That said, not everyone is at the point in their lives where lack of money is the real obstacle.  In fact, very few people are, even though we’d all like to believe otherwise.

So if money isn’t the real issue for most people, what is?

It’s different for every single person, but what I see most often is that there is a tricky balance between the drive/confidence to achieve lofty goals on the one hand, and the courage/commitment to personal development, growth and learning on the other hand.

How have your personal investments turned out?

From an ROI perspective for me as the investor it’s too early to tell (it’s been two years since the first one).  But from an interpersonal standpoint, my friendships with Jon and Michael, it’s been incredibly positive for me so far.  To give you insight into Jon’s experience, we recorded this:

Related posts:

1. Investing in Superstars, part 4
2. Investing in Superstars
3. Investing in Superstars, part 2

• Identity
  • LOSING ONESELF
    • Death / Pain / Insignificance
  • BEING WRONG
    • Self-Exploration / Failure / Change
  • INAUTHENTICITY
    • Being Found Out / Self-Expression / Lying
• Control
  • EMOTIONAL
    • Power / Anticipation / Fear-Itself
  • OTHERS
    • Intimacy / Just Doing It / (Lack of) Freedom
  • THE UNCONTROLLABLE
    • Disaster / Crisis / Unknown-Unknowns
• Authority
  • RIGHTS
    • Being Unworthy / Unmet Expectation / Meaninglessness
  • MORALITY
    • Unfairness / Inequality / Injustice
  • RULES
    • Doing it Wrong / Shame / Guilt

Each of us has a unique profile of what fear is depending on how we related to various value dimensions (intrinsic, extrinsic and systemic).  For me the scariest are: (1) Unknown-Unknowns (2)  Power (3) Being Wrong (4) Self-Expression (5) Injustice

How about you?

Related posts:

1. The Age of Radical Transparency
2. Individual vs. Systemic Causation
3. Placebos Work Even If You Don't Believe in Them

Email

• Non-private: instead use Accelerating Possibilities FB Group.  (and I don’t do FB private messages).
• Private: I read every email but only respond if I feel it’s truly a private matter and I’m interested in responding.

Phone & Video Chat

• Non-private: Create a Vokle Event and post the subject of the discussion to the FB group above.  If I can make it, I will, but hopefully others will join you regardless.
• Private: Email me your phone number and I will put you on my list of people to call when I have time.  I can’t promise if/when I will call you though.

In Person Meetings

• Non-private: Try me at Hub LA Open Fridays 2pm-5pm.  I also sometimes pick a public spot and time period, and invite anyone from Accelerating Possibilities FB Group to join me.
• Private: see “Non-private”

Exceptions

1. If I’m requesting a meeting/discussion with you and you’d prefer it happen a certain way, I’m happy to follow your desires or policy.
2. Organizations I’m in a fiduciary relationship with (e.g. as investor, board member, etc.).
3. Purely social visits/calls/emails.

Related posts:

1. What Obama Needs to Do
2. Want to Influence Financial Crisis Policy Debate?
3. Your Seat at the Table

1. “It depends…”
2. There’s a difference between a good decision and a good outcome
3. There’s a difference between being broke and having no money
4. There’s a difference between a winning person and a winning player
5. It’s all one long game
6. The long run is longer than you think
7. Inaction can be very risky behavior
8. Embrace the beauty of uncertainty
9. Objectivity is the only thing that’s impossible
10. Whatever your “leak”, that’s what will get you in the end
11. Luck and skill are two sides of the same coin
12. Material wealth is a manifestation of interior wealth
13. There’s time enough for counting… when the dealing’s done
14. There’s no difference between value and values
15. Your word is mightier than the law
16. Win-win beats win-lose any day
17. Trust everyone, and don’t count the cards

Related posts:

1. Parrondo's Paradox and Poker

It’s not just the lives of individuals who eat crap (which is most of the country, frankly, even though they have no idea how toxic what they are eating is).  It’s the happiness and achievement potential of today’s youth.  It’s the emperor with no clothes at the center of the healthcare debate.  And it’s a lynchpin for economic recovery and sustainability.

Watch the premiere, and spread the word…

Related posts:

1. Is Hunger Really a Problem in U.S.?
2. The Problem With Processed Foods
3. Biological Immortality

The District, New York and Los Angeles are on track for fewer killings this year than in any other year in at least four decades. Boston, San Francisco, Minneapolis and other cities are also seeing notable reductions in homicides.

Full article is here, in which more sensible police approaches are given credit for the decline.

While it’s probably true that police deserve a lot of credit, it helps to remember that violence is a virus and it spreads from person to person.  The more violence people see around them, the more violence that breeds.  And the converse is also true.  The exogenous factors are hard to suss out, but my suspicion is that the general rise in wealth and well-being in the world is the main factor.  This is consistent with the counterintuitive but real fact that violence has been in decline for centuries and we currently live in the most peaceful time ever.

Kevin points out:

I often mention the availability bias when quoting statistics on crime.  If you ask people, they’ll say crime has gotten worse–IMO because media has become consistently better at shoving stories of violence into our brains.  But the statistics say otherwise.

This is especially poignant when you talk about child abduction by strangers.  People think this is a much worse problem (and why you don’t see kids playing in their neighborhoods).  But I believe the statistics show the incidence is not any different than it was when we were growing up.

Which brings us to the role of media in propagating myths and creating self-fulfilling prophecies.

I’m curious, what are the statistics on abductions and predatory crime towards children now versus 30 years ago?

Related posts:

1. What Stops Terrorism
2. Invisible Etiology
3. Is Obesity Contagious?

Related posts:

1. Red Pill or Blue Pill?
2. Behavioral Economics With Dan Ariely
3. Notes from TED

Related posts:

1. The AI-Box Experiment