Securitizing Happiness  … or,
How to Solve All the World’s Problems by Making Trillion-Dollar Markets for Individuals, Small Business, & Natural Resources Dave McClure (@DaveMcClure) TEDxShanghai - 06/15/09

Can You Buy “Happiness”? <ul><li>Concepts
</li></ul><ul><li>What is Money? What is Value? </li></ul><ul><li>The Un-Level Playing Field of “ Securitization ” </li></ul><ul><li>Money 2.0 & The Missing $T Asset Classes </li></ul><ul><li>The “Atomic Unit” of Happiness </li></ul><ul><li>Solutions </li></ul><ul><li>Capitalizing Small Business </li></ul><ul><li>Capitalizing Natural Resources </li></ul><ul><li>“ Hacking” Human Suffering thru Capital Markets Innovation, Prediction Markets, & Contests </li></ul>

What is Money? What is
Value? <ul><li>Money 0.0 = Barter = “Past Money” </li></ul><ul><ul><li>= Exchange of Goods & Services for “Value” </li></ul></ul><ul><li>Money 1.0 = Cash = “Present Money” </li></ul><ul><ul><li>Commodity money (rice, barley) </li></ul></ul><ul><ul><li>Representative money (gold, silver) </li></ul></ul><ul><ul><li>Fiat money (govt coins, paper, notes) </li></ul></ul><ul><li>Money 1.1 = M1.0 + Debt = “Near-Term Future Money” </li></ul><ul><ul><li>Secured lending (housing, automobile) </li></ul></ul><ul><ul><li>Unsecured lending (credit cards, microcredit) </li></ul></ul><ul><li>Money 1.5 = M1.1 + Securities = “Long-Term Future Money” </li></ul><ul><ul><li>Stocks, Bonds </li></ul></ul><ul><ul><li>Mortgages </li></ul></ul><ul><ul><li>Private Equity & VC </li></ul></ul><ul><ul><li>Derivatives </li></ul></ul><ul><li>What is Money 2.0 ? </li></ul><ul><ul><li>= All Possible Asset Classes </li></ul></ul><ul><ul><li>= Fn(“ Happiness ”) </li></ul></ul><ul><li>What is Value- able ? </li></ul><ul><ul><li>What do we value? </li></ul></ul><ul><ul><li>What can we value? </li></ul></ul>

What Is “Securitization”? <ul><li>Securitization :
the process of making an illiquid asset into a liquid asset, via financial engineering. </li></ul><ul><li>Securitization enables capital access & availability for items that have value, but were not previously accessible via capital markets. When this happens, a significant amount of new capital formation and economic activity becomes possible. </li></ul><ul><li>Examples : stocks, bonds, mortgage-backed securities. </li></ul>

The Un-Level Playing Field of
Securitization <ul><li>Securitized Entities & Asset Classes </li></ul><ul><li>Corporations (Stocks, Bonds) </li></ul><ul><li>Governments (Bonds, Central Banks) </li></ul><ul><li>Some Real Estate (Mortgages) </li></ul><ul><li>Some Derivatives (Weather, etc) </li></ul><ul><li>A Few Individuals (David Bowie, The Beatles, Michael Jackson) </li></ul><ul><li>Un -Securitized Entities & Asset Classes </li></ul><ul><li>Individuals = 6B people * life-time earnings/savings </li></ul><ul><li>Small Business = 20-50% of Worldwide GDP </li></ul><ul><li>Other Real Estate (Mortgages) </li></ul><ul><li>Natural Resources = ? </li></ul>

Money 2.0 = The Missing
$100T Asset Class <ul><li>Individual Futures = $X00T </li></ul><ul><ul><li>1 st world = 2B people * $25K * 40years * 10% savings = ~$200T? </li></ul></ul><ul><ul><li>2 nd world = 2B people * $2.5K * 30 years * 5% savings = $?T </li></ul></ul><ul><ul><li>3 rd world = 2B people * $250 * 20 years * 0% savings = $?T </li></ul></ul><ul><ul><li>Health & Education Derivatives </li></ul></ul><ul><li>Small Business </li></ul><ul><ul><li>Debt & Equity </li></ul></ul><ul><ul><li>20-50% of US GDP </li></ul></ul><ul><ul><li>50-80% of World GDP </li></ul></ul><ul><li>Natural Resources </li></ul><ul><ul><li>Air, Water, Land, Biodiversity, etc </li></ul></ul><ul><ul><li>How to Value? </li></ul></ul><ul><ul><ul><li>= based on some F(n) of “ Atomic Unit of Happiness ” (individual futures) </li></ul></ul></ul>

The Atomic Unit of Happiness
= Futures Markets for Individuals <ul><li>Q1: If we could provide health + education for every individual at birth, what is impact to lifetime GDP? 10x? 100X? </li></ul><ul><li>Q2: If you could invest in this asset class, what is the ROI? </li></ul><ul><li>Example: Big Pharma swap of AIDS drugs for upside in some derivative F (future earnings of Botswana) </li></ul><ul><li>Assertion : this is a $X00T asset class, with opportunity for substantial ROI over a 10-20 year period. </li></ul>

Solutions for Happiness  Let’s
Start Hacking...

Capitalizing Small Business Equity <ul><li>Capital
Access (Debt, Equity ) </li></ul><ul><li>Valuation Metrics, Automation </li></ul><ul><ul><li>see Startup Metrics 101 </li></ul></ul><ul><li>Back-End Liquidity, Secondary Markets </li></ul><ul><ul><li>“ Fannie Mae for Small Business Equity” </li></ul></ul><ul><li>Trick1 : Small Business GSE in CA/NY? </li></ul><ul><ul><li>CA funding from STRS, PERS </li></ul></ul><ul><ul><li>=$250B funds (20% CA, 10% in PE/VC = $5B) </li></ul></ul><ul><li>Trick2 : Real Estate Hack for 3 rd -world SME </li></ul><ul><ul><li>Invest in both [really cheap] land + business </li></ul></ul><ul><ul><li>Sell land if biz goes up in value = synthetic liquidity </li></ul></ul>

Capitalizing Natural Resources <ul><li>Clean Air
= A Better Kyoto </li></ul><ul><li>Clean Water = No More Mercury </li></ul><ul><li>Land = No More Dumping </li></ul><ul><li>Biodiversity </li></ul><ul><li>Other Derivatives </li></ul>

Hacking Human Suffering thru Capital
Markets Innovation, Prediction Markets, & Contests <ul><li>Create & Securitize “ SpaceX ”-style Contests for: </li></ul><ul><ul><li>Cancer </li></ul></ul><ul><ul><li>AIDS </li></ul></ul><ul><ul><li>Malaria </li></ul></ul><ul><ul><li>Tuberculosis </li></ul></ul><ul><ul><li>Others? </li></ul></ul><ul><li>Use Prediction Markets to Jumpstart Valuation </li></ul><ul><li>Use Foundations to Fund/Back “New” Asset Classes </li></ul><ul><li>Use Contests to Jumpstart Liquidity </li></ul><ul><li>(Rinse/Repeat/Re-Value) </li></ul>

Related Books & Posts <ul><li>Books
That Will Change Your Mind, Your World: </li></ul><ul><li>Guns, Germs & Steel, Jared Diamond </li></ul><ul><li>The Mystery of Capital, Hernando de Soto </li></ul><ul><li>Banker to the Poor, Muhammad Yunus </li></ul><ul><li>Related Posts (500 Hats blog, Microfinance & Social Entrepreneurship): </li></ul><ul><li>Securitizing Happiness : Solving the World’s Problems by Making Markets for Individuals, Small Business, & Natural Resources </li></ul><ul><li>Real Estate as Synthetic Liquidity Hack for Small Business equity </li></ul><ul><li>Ex. Scenario for Securitizing Individuals (Pharma/Botswana swap) </li></ul><ul><li>Inspiration & Capital Markets Heroes: </li></ul><ul><li>Soros </li></ul><ul><li>Milken </li></ul><ul><li>Gates, Buffett </li></ul><ul><li>Omidyar, Skoll, Google.org </li></ul>