Washington University in St. Louis (BS)
University of Chicago Booth School of Business (MBA)
Analyst, Fine Capital Partners
Markets are generally efficient, which makes finding excess return difficult but not impossible. To outperform the broader market, you have to find mispricings stemming from a market dislocation or inefficiency. This can be caused by a number of factors, including illiquid markets that aren’t getting enough attention or from misunderstood opportunities – both of which can be found in developing countries. This doesn’t mean every opportunity in developing markets is a gem, but if you invest the time and effort to sift through the deals there are plenty of overlooked opportunities to generate a great risk-adjusted return on capital.
As a college student, I had the opportunity to visit a remote village in southeastern Madagascar that was being transformed by a collaboration between Washington University, the Missouri Botanical Gardens (MBG) and Blessing Basket (a non-profit that connects basket weavers in developing countries with retailers in the U.S. and sends all of the proceeds back to the artisans). MBG recognized that their conservation goals in the region could only be met by improving earnings power in the village, which led to the partnership with Blessing Basket. Once the weavers started earning higher wages and bringing home money to invest in other projects, MBG brought in the University to help identify the best ways to invest those resources in the community. This project demonstrated the powerful impact of economic empowerment. What started as a project to save a local forest ended up bringing healthcare, education, nutrition and many other benefits to the village.
I am always interested in markets where the cost of capital is artificially high and we can create enormous social and economic value by funding new projects. The cost of funding for early stage companies in developing countries is inflated by misunderstood risks (political, legal, economic) and transaction costs. On the one hand, that means that great companies with tremendous opportunity to create value for society and investors never get funded. On the other hand, that means there is a great opportunity for investors that are willing to spend the time to find the best returns.
Impact and return are both incredibly important, but I believe returns should come first. Sustainable economic development is dependent upon generating sufficient return on capital to justify the risk. In the long-term, companies that can generate sustainable economic growth will create value for society and their impact will be enormous. Just consider the “impact” of some of blue chip companies in the United States, such as GE, Intel, IBM, and others. Investors generally measure their success in profits and free cash flow, but they contribute much more to society.
Our view of the past will always shape our understanding of the future, but we have to be careful not to anchor in history. This is especially true in developing countries where there may not be a precedent for what is currently going on in the country. We can try to compare one country to another to see how the markets and the economies evolved over time, but every market is unique and has its own social, cultural and political context. Therefore, we need to always be incredibly humble about our ability to predict the future and to extrapolate based on past trends. This is why I’m focused on investing in companies rather than countries – understanding an individual company is much more straightforward than trying to understand an entire country and economy.
VestedWorld is creating a funding model that can lower the cost of capital for developing market entrepreneurs while providing U.S.-based investors access to opportunities they can’t find any other way. VestedWorld is doing the hard work to sift through the multitude of investment candidates to uncover the few stars that can generate stellar returns. Additionally, the team has a deep understanding of the support and guidance developing market entrepreneurs need to grow and achieve their goals. I am confident that connecting talented entrepreneurs to the investors and advisors they need will create enormous value – both economically and socially.