A New Model for Investors
Invest in investors, use bankers once the work is done.
Most Investors Don’t Invest, They Bank. It is important for founders to understand the difference between the two. I’ve spent a LOT of time educating those with capital and developed my own theory on how I categorize them in each of my calls. I hope this will help other founders to focus their energy on the Investors, and deploy the Bankers when needed.
A Brief History of Investment
We go all the way back to the city of Babylon and look into Hammurabi’s Code, written around 1700 BC. The Code was a framework for establishing social order and a series of “best practices” for the time. To quote from Yuval Noah Harari’s book Sapiens:
“According to the code, people are divided into two genders and three classes: superior people, commoners, and slaves. Members of each gender and class have different values. The life of a female commoner is worth 30 shekels in silver and that of a slave-woman 20 silver shekels, whereas the eye of a male commoner is worth 60 silver shekels.”
The patriarchy embedded in the oldest of Codes.
It is painfully obvious there is inherent bias built into the Code by standards of today. Women are not as valuable as men. And both women and men of lower social classes were valued even less. We haven’t traveled all that far in three thousand seven hundred years. Women are still regarded as lesser and, sadly, make up a measly “7.4 percent of Fortune 500 CEO’s”. Not to mention that the biggest factor in predicting success today comes from, well… already being in a successful family class with access to capital and resources.
Back to Babylon, Hammurabi’s Code gave a legal framework for investment. Essentially, the law established a way to pledge collateral in exchange for “investing” in a project. Land was required to be pledged as collateral and anyone who broke their obligation as debtor or creditor was punished.
Fast forward to modern-ish times — Queens and Kings and Nobility would fund projects of war to expand their power and colonization. Unconsciously, the bias in the initial set of laws in Hammurabi’s Code did not change all that much… cultures were ranked based on their class and more often than not, decimated in the name of profits and power.
Not all was lost. Somewhere in between Babylon and the conquests of the European settlers emerged the artistic idea of commissions. Art commissions is the act of requesting the creation of a Work, often on behalf of another. These requests came from persons of power and conquest (Queens, Kings, and Nobility) but modified concepts of dehumanization via conquest and reshaped around endorsement of humanism as a show of their power and wealth. Great works came to be for the private and public to admire including the Sistine Chapel ceiling, The Last Supper, and more.
I want to focus on the character differences between commissioning and conquering for a second. With the rise of idealism, nobility would come to express themselves with lavish works of art and pay commissions to have them made. Great Artists would apply their skills to promote new ideas of the commissioner along with their own perspective mixed in. And generally, there was a shared sense of care and nurturing held between the commissioner and creator.
Nobility still needed to manage wealth, so they would hire Bankers to manage the day to day in land and financing projects. But indeed the role of the highest Nobility became more and more an act of co-creation alongside artists, and less and less of managing time and materials.
Life Finds A Way.
I try to relate all big ideas back to examples in Biology and Ecology (which is just systems thinking). Biology has no master or top down design, so winning metaphors seen in business are usually ones that can be observed in biological and ecological systems too.
When an organism becomes significantly complex, it invests resources into traits and adaptations that promote survivability.
Nobility had to evolve to invest in art, because they learned that life without art is not one worth living… As Oscar Wilde puts it, “It is through art, and through art only, that we can realize our perfection” An artistic mind becomes the highest achievement as humans move towards self actualization.
Self actualization in the modern sense is still new, but beginning to become well documented in many current-era observational studies on human motivation, including Maslow’s Hierarchy of Needs.
The difference between Investors and Bankers
Investors contribute time, capital, and network to enable opportunity. They align themselves with the aims of a society and commission works alongside artists to express their power.
Bankers manage time, capital, and network to capitalize on opportunity. They align themselves with the aim of conquest to express their power.
99% of investors are actually bankers. They are managing capital, and not investing on the fringe or ‘state of the art’. Yes, both are needed, but there is a huge distinction between the aims of each, and it’s important to recognize when to properly deploy.
What Next.
As a civilization, it begs the question: Who do we want to become? Do we want to invest in traits and adaptations that are going to increase human survivability and thriving? Or are we going to stick with the original human-reducing version of Hammurabi’s Code? That is up to all of us as a community to decide based on our actions and behaviors. And in the types of companies we create and invest in.
It is my opinion that the next big investors will be Artful. We live in a time of great productivity and abundance. Marc Andreessen’s call to build is correct, however it is important to keep in mind that he is writing from a position of bias. He himself is a privileged male that had access to computers at a relatively young age. I would modify his call to build with an emphasis on diversity and empathy.
To My Founder Friends: Relish in the no’s. Investors have no idea what is going to happen in the future. You are the future. Continue to refine your techniques in Art and find the investors that care.
To My Investor Friends: Make sure you’re aware of your own unconscious bias. It goes back centuries. Invest in more females and founders of diversity and be part of the change. Play bigger and invest in the future you want to create.
Ross
