📈 Mailbag: Your questions answered (Part 1)

Letters to the Editor of Private Capital Insider

Author

Jake @ Equifund
February 14, 2024

We get a lot of great comments and questions from our regular readers of Private Capital Insider. 

Today, I’m going to be doing a “letters to the editor” style mailbag issue.

For consistency’s sake, I’ll be posting the raw poll numbers at the top of each section, some minor commentary from me about the data, followed by the mailbag.

[Note: This issue originally clocked in at ~5,000 words to cover mailbags for all seven issues we’ve published in 2024. We’re going to split this up into two emails, one today and one next week. After that, we plan on including the mailbag section at the bottom of every issue to address any questions/comments from the previous issue]

Let’s dive in, 

-Jake Hoffberg

P.S. While I know that, to some degree, the number of ratings and comments we get on each article is a vanity metric…

It’s always gratifying to know that people like our editorial enough to read ~2500-word essays all the way through, hit the rating, and leave a comment. 

Thank you to everyone who takes the time to do their part to boost the ego of our editorial team :) 

P.P.S Looking for back issues of Private Capital Insider?

Searching for “Truth” in Early Stage Investing

This was our first issue published in 2024. 

In 2023, we published ~50 issues of Private Capital Insider and the Weekend Edition, combined. 

For the most part, the weekly issue of Private Capital Insider was focused on an investor education-related topic, while the Weekend Edition was focused on current events.

At some point, we felt like we were quickly hitting a diminishing point of return by continuing to address corporate finance-oriented investor education.

That’s why we decided to take a bit of a step back from “nuts and bolts” education to a more “big picture” discussion around philosophy. 

Let’s take a look at some of the comments.

Comment 1

Interesting read. Very few things in life are an exact science (per se). The very act of investing always contains risk & investing in privately owned startups is inherently risky. 

I understand the basic premise and am willing to accept the risk level. 

I personally try to mitigate the level of risk by keeping the amounts I invest in any given opportunity relatively small. Having said that, I never invest more than I can afford to lose.

Comment 2

It shows a thought process needed to gather information. Using this information to form a solid base from which you can develop a strong belief the info is as accurate as can be at this moment. 

If it falls short of certain expectations or is completely blue sky… Run.. if it does meet the criteria you have developed in your search for potentially profitable ventures. 

Then with your experience you have over time gained, you start to know when someone’s idea or business plan is worth continuing to gather the information needed to make a sound decision.

Comment 3

Very interesting! Some of this information in the article are playing out in politics right now. "More often than not, we tend to default to whatever Narrative sounds most believable to us, based on our current worldview and emotional state, regardless of the supporting evidence.

Comment 4

This is the challenge for all of life: what is truth, and where lies wisdom? To the degree that one can find this and hold oneself accountable to it, is the degree to which one can flourish and avoid troubles in this life.

Comment 5

What a thoughtful & thorough explanation of how decisions are made. Also deciding in a correct process, though doesn’t guarantee an outcome, you can be at more peace that your process is sound if you[r] forecasts are not. If a sound process leads to more wins than losses that is good enough for me.

I was wondering how this essay would land with our audience, as it was quite a bit more abstract than our usual issues. 

Great to see that many of our readers found this to be helpful.

This was our second issue of Private Capital Insider (published January 25th, 2024).

While our first issue of the year was focused on Epistemology, this issue was focused on Worldviews.

This is a topic I’ve regularly discussed behind closed doors with other investment analysts… but rarely get to discuss with retail investors.

One of the reasons I like to talk about Worldviews is it sets the stage for people to have a productive conversation about the past, present, and future – especially people who disagree with each other.

More often than not, if you tell a smart person something, they have a tendency to simply disagree with you. 

That’s why it’s important to “show your work,” so to speak, and explain HOW you came to the conclusion (i.e., the assumptions driving the model).

This way, instead of getting yourself into a heated discussion that devolves into a straw man argument (or ad hominem attacks)...

Everyone can “attack the assumptions,” instead of attacking the person.

And if they are unwilling to challenge (or even disclose) their assumptions, then you can stop wasting your time arguing.

Let’s take a look at the comments.

Comment 1

Yes, agree. worldviews shape investing preferences and behavior. 

For me, one of my "Stabilized Worldviews" would be to understand the company's business model. How does this company make money? How does it acquire customers and monetize them at a profit? 

One additional core skill would be to understand how realistic are the assumptions you make in the model. Does this company have a real chance of selling the 1 million units at 50 bucks each next year the model says based on market circumstances and competition? 

Most VC founders ignore competition, so assumptions are worthless. "If I capture 1% of the TAM we made it". The investor should say: "really? I don't see a realistic plan to accomplish that figure"... 

Speaking of Peter Lynch, in many cases, it boils down to challenging the model's assumptions and then getting to a conclusion "This has a real chance to become a "tenbagger". Something like that. Regards.

Comment 2

Your overview of basic worldviews shows that the Christian worldview is the only one that makes sense in the business context. With no God there is no right or wrong. 

Who could trust almost anything in a business sense without being able to make certain assumptions about what is being presented? It would be impossible to start from scratch in every transaction to determine if there is common ground or trust warranted. 

Without trust, our way of life and common assumptions can not exist. That’s why things are falling apart as those common assumptions and values are dissipated. How do we know if a 'no right or wrong' person is presenting? 

But then again, that person can avoid the pitfalls of his/her non Christian world view by presenting like a smooth con man or woman. A fake Christian could, too, of course. 

Which is why, basically, the Western world and its Christian basis/assumptions that people commonly believed engendered more progress, innovation and trust in its societies in history over the modern times. 

Thanks for your thoughtful essay. Makes me realize sometimes I might need to be less trusting. 

People I do trust brought me to Equifund. I see for myself as well that you vet things very well. I appreciate it.

While I am not personally a card carrying member of any religious organization…

Any study of philosophy inevitably leads you to law, which inevitably leads to ethics, which inevitably leads to religion.

Interestingly enough, the more I study banking and capital markets – and the more I’ve learned about legal and ethical issues – the more interested I’ve become in understanding how world religions are the bedrock of modern legal systems. 

Regardless of whether you are a Christian or not, you cannot ignore the Biblical foundation underneath much of the Western world. 

It is also my opinion that you cannot understand America without understanding its Christian roots. 

If you’re looking for a good book recommendation, check out the 2017 book Fantasyland: How America Went Haywire: A 500-Year History

While I don’t agree with all of the author's conclusions, it’s an excellent deep dive into American history… and how we arrived to the “Post Truth” world we live in today.

Comment 3

The text gave me pause; to think more broadly , to interpret what I see, which in turn cause more focus. 

I agree that learning the language and how to understand how it is written is key. I experienced that revelation when reading Physiology.

Comment 4

This reminds me of a quote I heard from Bob Proctor, "Your belief system is based on your evaluation of something. 

Frequently if we reevaluate a situation, our belief about the situation will change." He goes on to use an example of sitting at different chairs around a big table. 

He says your evaluation/viewpoint changes based on where you are seeing it while in the specific chair. Anyway, I really enjoy reading your articles. Thanks So Much.

This idea of “your viewpoint changes based on where you are seeing it while in the specific chair,” is such a useful idea. 

It reminds me of John Godfrey Saxe’s poem “The Blind Men and the Elephant” – based on an Indian fable about six blind men who come across an elephant for the first time in their lives, and try to conceptualize it by touching it.

Each of the blind men feel a different part of the elephant, which leads to a disagreement on what the object in question is. 

From the poem...

And so these men of Indostan, disputed loud and long, each in his own opinion, exceeding stiff and strong, 

Though each was partly in the right, and all were in the wrong!

So, oft in theologic wars, the disputants, I ween,

tread on in utter ignorance, of what each other mean, and prate about the elephant, not one of them has seen!

While the identification of an elephant might not be of significance in the modern world, the allegory still is.

Comment 5

Need more concrete examples of image and investment opportunities.

The most concrete example of an image I can give you is “any marketing material you’ve ever seen promoting an investment opportunity. 

For example, the offering pages you see on Equifund fall into this category.

This was our first Weekend Edition of 2024. 

One of the biggest challenges with covering current events is the tendency to focus on clickbaity or scary sounding headlines. 

While we can’t ignore the truth that concerning things are happening, generally speaking, doom scrolling through the financial news is a great way to make poor investment decisions. 

Hence, the reason why we kicked off the 2024 editorial with discussions on Epistemology and Worldviews.

If you want to be a successful investor, you have to be willing to change your mind when presented with new data (i.e., should you buy, hold, or sell?), assuming the data is compelling enough to warrant a change.

If the goal is to generate investment returns, the worst thing you can do is insist you are “right,” in the face of changing data, and ride a losing position all the way down (or worse, double down as it falls).

For this reason, it’s helpful to have what some people call “Mental Liquidity” – articulated by Aristotle: "It is the mark of an educated mind to be able to entertain a thought without accepting it." 

This allows you to put your assumptions to the test in your search for “Truth” (or at least, usefulness).

The goal of our Weekend Editions is to expose our readers to new ideas that we think are useful to consider when building your Worldview.

Comment 1

Great article, Jake. This thing about Basel III will cause repercussions in the banking/financial world if not already doing so. Good points you make at the end of the article, about thinking "local". The role of small businesses, direct company credit, etc. 

I remember back in Venezuela, you used to purchase a home appliance (e.g. air conditioning, washing machine, etc.) with credit offered directly by the store. No banks involved.) 

One more thing to add to the "local" ecosystem. (The community banks and local farmers etc.) 

Don't forget local "Fraternal" insurance companies owned by policyholders. They offer excellent products to cover risk or compound interests tax-free, with much less risk and more stability than big, publicly-listed insurers. 

Another example of how local, private, small, can be better. Take care. Have a good week.

As I’ve gone on this journey of writing Private Capital Insider, I continue to learn new things about how the financial system ACTUALLY works…

And more often than not, it’s contrary to how I was taught. 

After feeling so disillusioned with the “too big to fail” banking system, I’ve found great comfort in knowing that we all did just fine without them…

And that a return to local / decentralized banking offers citizens an actual solution to the problems we’re facing today.

Comment 2

I thought that I was fairly-well informed about Basel and its history and found this not to be the case...until today. 

The outline and evolution of this was remarkably simple and informative, as was the insight to the treatment of gold. 

Share your views on what everyday people can do to help small businesses, as a SB owner and provider of private capital to others. 

Congratulations on the great work, and thank you.

My only suggestion here, regarding small business, is this – keep as much of your money in your community as you possibly can. 

One of the major lessons I learned from Jim Clifton’s 2011 book, The Coming Jobs War, is that (most) problems are solved at a local level. 

Leaders of countries and cities, Clifton says, should focus on creating good jobs, because as jobs go, so do the fates of nations. Jobs bring prosperity, peace, and human development — but long-term unemployment ruins lives, cities, and countries.

Remember: giving the government more money isn’t going to solve our problems. 

If we want our local community to improve, we need to take responsibility for improving it. 

One of the easiest ways you can do that (outside of starting a non-profit bank) is to support small business owners and local job creation.

Comment 3

This is the kind of information on "how things work" that high schools and Jr. colleges should teach, but DON'T. Thank you for closing the gap on my public education. 

Comment 4

Can you tell me why the Bank of Canada has no gold reserve? Risks? Consequences?

I actually didn’t know anything about this topic prior to seeing this comment. As of April 29th, 2016, Canada’s official gold reserves stood at a record low 55 ounces, valued at US$70,711.

While I am well versed in most American-oriented conspiracy theories, I’m largely out of the loop when it comes to most things Canadian. 

However, the real question I have is this – how many other countries have also sold all their gold, but just haven’t said anything about it?

Either way, it creates a lot of questions when the fourth largest gold producing country in the world has basically zero gold reserves.

Comment 5

As my distrust in government institutions and the possible motives of worldwide oligarchy rises, I appreciate this article that gives an increased understanding of the banking system and some viable ways in protecting myself and my family.

Comment 6

I agree! Central banks were created during a secret meeting on Jekyll Island for millionaire bankers, such as JP Morgan. We Americans have been under the Federal Reserve’s thumb way to long. If a movement doesn't happen now it’s my belief that we will be under the Governments surveillance from now on, losing our freedoms. 

This Federal Bank system is simply unconstitutional, no one was elected to these positions and elitist greed will destroy our country. The question is: how do we eliminate, or decrease the ignorance of the electorate.

Want to help educate the electorate? Be sure to recommend they read Private Capital Insider 🙂

Comment 8

Do you think that crypto ledger will be a safe place to put our dollars? What about owning gold? Right now it’s still affordable, however more than likely when these regulations kick in in July 2025 it could be a disaster for the small guy. 

So to me owning physical gold seems to be the answer. 

Great report. Thank you for looking out for the little communities that make up the majority of work.

When I got started as a financial ghostwriter in 2016, I thought the whole gold bug thing was ridiculous. 

Also, after seeing what was (to me, at least) the obvious scam that is the majority of the crypto space, I stayed out of that space entirely.

However, that doesn’t mean I don’t see value in either of these asset classes for diversification. 

With that said, let’s talk about what I see as the inevitable problem with the gold bug / dollar collapse narrative…

It is my opinion that anyone we’d call a “Prepper” is, in reality, an optimist. They have made a conscious decision that, in the event of a collapse, they are going to survive.

It is also my opinion that, should we truly be in some sort of major collapse, the way you survive is inevitably the same… Community. 

One of my favorite quotes is “True wealth is how long you can survive without money.”

While I have no idea whether or not gold, silver, or bitcoin will be any better than guns, ammo, and medical supplies…

I think the better “trade” to make comes from building trust with your neighbors, and having a plan on how you can support each other. 

Inevitably, this all comes back to the ideal of using private credit and decentralized banking. 

If you’re someone who can get people organized and get things done, that is the best way to survive.

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