You Are Your Best Equity Investment
It was October 9, 2013, and a close-knit group of family and friends gathered at our home to celebrate my oldest child’s 16th birthday. For most fathers, this is a bittersweet moment when you appreciate your daughter’s transition from a young teen to a young woman, while dreading the realization that the clock is ticking on your time together.
In those moments, a dad tends to oscillate between reflection and projection. I wondered which college she might choose, the professional path she would be embarking on and how she could realize her full potential in life.
About a week later, I stumbled across a potential glimpse of her future—as well as that of many other talented and skilled people just beginning to pursue a successful career. It was a Reuters online article, “NFL star Arian Foster sells stock—in himself,” by Stephen Lacey.
The article talked about a company called Fantex Inc., which enables investors to trade athletes as equities through “tracking stocks.” Approximately eight months later, Forbes posted online “NFL star Vernon Davis talks about being a stock.”
“The way it works, in simplest terms, is this: in order to succeed, Fantex had to raise $4 million to pay Davis up front, in exchange for 10 percent of all his future earnings. One way of looking at it is that Fantex is investing in the athlete’s future marketability, while those who buy shares of the tracking stock are investing in Fantex. … Hypothetically, the stock should fluctuate based on how strong the market perceives Davis’s brand to be. …Whether Davis or Fantex is the one getting the better deal out of this depends on what you think Davis, at 30 and entering his ninth year in the league, could stand to earn in the future. By signing over 10 percent of his future earnings to Fantex, Davis gets the immediate cash, but Fantex gets the potential.”
I was almost giddy with the possibilities of future contracts and hedging by both individuals and investors as a new way to acknowledge a talented person’s current and future value. This must be what the early stages of commodities markets and Wall Street felt like!
Fast-forward to June 2017 and consider all of the apocalyptic dialogue out there about talent shortages. Organizations are scrambling to solve this problem while retaining their highly skilled labor at an affordable cost. They’re being forced to consider alternative strategies and innovative solutions, including better talent intelligence, pipelining and partnerships.
However, I keep going back to the idea initiated by Fantex, where emerging talent in this shortage environment could truly benefit if they think of themselves as stocks. Investopedia defines an initial public offering (IPO) as “the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand. … In an IPO, the issuer obtains the assistance of an underwriting firm, which helps determine what type of security to issue, the best offering price, the amount of shares to be issued and the time to bring it to market.”
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Imagine a world where Facebook, Google or Instagram see themselves as more than just social or consumer exchanges, but instead double down and partner with broker-dealers to redefine the financial and transactional exchange market, trading stocks in talented people, not companies.
Imagine a world where individuals truly comprehend the talent shortage environment they exist in and transform industrial-age employment and job creation models by hedging their future market value for a present-day investment. In doing so, they could avoid student debt and create access to capital for their entrepreneurial activity while they are in school or interning.
Imagine a world where businesses can invest in these individual IPOs and offset some of the forecasted rise in labor costs by actually changing the employment paradigm, including earning a future income stream even when the individual leaves to go to a competitor or chooses another field. The possibilities are endless.
My daughter just completed her first year at Wharton School of Business, is getting real-world experience interning at a local PR agency and has plans to pursue a Stanford MBA. And she remains intrigued by this idea of issuing an IPO for a minimal share of her future earnings, in return for a significant investment today. We’ll see what happens. In the meantime, take care of yourself and each other!
Ravi Norman (RNorman@ThorCon.net) is the CEO of Thor Cos., a holding company for development, design, construction and consulting businesses. He holds degrees in economics, business management and finance from the University of Minnesota.