1/ Where is their alpha left in markets?
2/ This is one of the questions @EpsilonTheory talked with @Patrick_Oshag about. - investorfieldguide.com/hunt/
3/ One of the answers that Ben gave was legal private information.
4/ He gave the example of his farm where he lives in Connecticut. He knew the area well from having spent time there in a way others didn’t.
5/ That information was private in the sense that someone sitting at a desk in Manhattan can’t pull up the stats for a farm in Connecticut the way they can pull up the stats for a publicly traded company.
6/ Private information has always been a source of alpha but the computing/internet revolutions have made acquiring private information more difficult.
7/ There is far more information symmetry today than at any time in history, particularly in public markets.
8/ The rise of micro-PE is in response to this phenomenon.
9/ Compared to public markets, the market for small businesses is very inefficient and opaque which creates the possibility for out-sized returns. See @patrick_oshag interview with @BrentBeshore - investorfieldguide.com/beshore/
10/ I have been thinking about how public blockchains will change this. A few (unstructured) thoughts.
11/ One major problem with investing in the vast majority of businesses is liquidity.
12/ They may be growing 30% YoY but they are unlikely to ever go public or, if they do, it will be a long time and no one wants their capital locked up for 20 or 30 years.
13/ Through security tokenization, you can create liquidity in these businesses.
14/ The business owner will be able to set parameters on how often the token can be traded and other parameters.
15/ For example, you could even have a whitelist of investors that are able to own the tokenized equity (maybe these whitelists are TCRs?).
16/ As a business owner, this gives the opportunity to generate more capital for reinvesting into the growing business. It’s also a value-add in marketing. By getting key stakeholders invested (literally), they are more likely to help the company.
17/ As an investor, it creates a huge new market space. In 2010 there were 27.9 million small businesses in the U.S. alone.
18/ You can use cryptographic to reduce the transaction costs of listing a company publicly (i.e. dramatically reducing the number of lawyers and accountants).
