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Posted by on September 4, 2008, 3:05 pm
nonsense@mynonsense.net writes:
> have Phd's, but almost none have any experience with the day to day
> nitty gritty of actually running a business.
People have different skills. Someone who's a great CEO
may not be a great financial manager. Chances are that
he's got the help of a great CFO. I'd expect there to
be more in common between CFOs and investment managers.
> How are these the kind of people to trust with your money on which
> company is going to do well? Can the complexity of a company be
> reduced to a fancy spreadsheet calculation? I run my own little
Again, you seem to be confusing "running a company" with
"managing finances". They are different (if in some places
overlapping) skill sets.
> So my question is, shouldn't actual business owners be the best people
> to judge whether a company is good for investment?
Why would they? A guy who owns and runs a car repair shop
is probably vastly better at repairing (and knowing what
it'll take to repair) cars than he is at computing rates
of return and financial feasibility. So he consults with
his accountant, his bank, and perhaps his financing partners
before he, say, borrows a heap of cash to buy new equipment.
It's his job to convince his partners that he'll use that
equipment to profitable purpose and that he'll pay them
back. It's their job to decide whether they think he
can or not and how much to give him to do so. Different
skills.
> Why should I pay 1%
> management fees for people who can not consistently outperform random
> luck?
Seems kind of silly. Why should you?
Of course, if they're doing more than simply failing to
outperform - if they're doing things like managing risk,
handling volatility, dealing with tax efficiency and such,
perhaps you are getting your money's worth. If not,
then, again, why should you pay them all that?
> Should I think about becoming a venture capitalist so I can
> invest in people I get to know personally?
Sure. You have a heap of money to invest? Connections?
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