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Reason #17 of 52 to participate in venture

How to create capital

In last week’s post, we discussed the notion of money versus capital. Most people are being programmed to make money, not create capital, and that presents a systemic problem in society in terms of the growing wealth gap.

But this leads us to the next question: “How is capital created?” There are only two ways, in our estimation. The first way is to buy and hold assets that appreciate in value over a prolonged period of time (i.e., equity, property, bitcoin, etc.). This strategy presupposes that an individual has the financial bandwidth to tie their money up in assets by forgoing immediate enjoyment. It's an effective strategy for individuals who already have excess money beyond their living standards. Many young professionals just getting started are not in such a position when considering potential student loans, housing, transportation, and having money set aside for near-term uncertainties (i.e., potential job loss). So, while this is an effective strategy, it’s out of reach for most.

The other proven way to create capital is through a process known as alchemy - creating value from nothing. In this realm, there is no better pathway to creating something from nothing than participating in the venture process where ideas become valuable properties that grow in value much faster than inflation. To quote one of the greatest venture capitalists of our time, Fred Wilson, “venture is the only legal way to turn pennies into dollars.” The challenge here is that most young professionals don’t have the time and financial resources to invest meaningfully in alchemy, nor do they have the luxury of quitting their day jobs to engage in alchemy on their own. So, once again, this is a domain that becomes dominated by the wealthy and elite, and they are not incentivized to bring a form of venture to the market that works for young professionals with minimal resources but who seek a pathway to turn their pennies into dollars.

Here at Doriot, we’ve been studying this problem since 2018 as both an observer and participant to see what a retail form of venture might look like for young professionals. In the next blog post, we’ll begin to discuss what this new form of venture might look like.