Specific Expectations

The Context of Wealthy Investors

While Govtech Fund manager Ron Bouganim was speaking to a group of us at Code for America Headquarters today, I couldn’t help but fixate on a specific statement. Only tangentially related to his main point, the statement was simple: “My investors are expecting a 4x or 5x return on their investment.” Not, “hoping for,” or, “wanting,” but, “expecting.”

He went on to clarify the period over which the return was expected and that it came out to a 25% per annum ROI. Given that investment is basically a form of big picture gambling, I kept asking myself how intelligent, successful human beings could expect results that differ so tremendously from the expected ROI in the market as a whole. For example, even over a relatively good period (since January of 2009), the S&P 500 only produced a 15% per annum ROI (as calculated here). A more solid investment strategy will likely yield such high returns only in the best years.

The best explanation I can come up with is that very successful individuals (Govtech Fund has some high-powered investors — e.g. Jeff Bezos) have access to specific investment contexts that the rest of us don’t. When you can afford to invest millions of dollars in a single place, the current economic climate lets you ‘expect’ to make money at a much higher rate of return than the average investor.

While I think this is pretty common knowledge — that super wealthy investors are privileged to a specific context with specific expectations, expectations well above what I would consider ‘normal’ — it consistently makes me wonder, “Do I really want to live in a world where power, influence and the course of human evolution are decided by such a small portion of the species?” And, does my answer change if that world just happens to be more or less awesome?