I had a brief call with one of the head honchos at a large private equity firm who asked the poignant question of the title of this article; what can private equity do better? So let me repeat my answer, slightly redacted for readability and privacy protection purposes, here online for a broader swath of private equity firms to benefit from.
Here is my response to the question above:
We must build systems of finance compatible with the systems of evolution to expand the fractal of humanity. We, humans, are forever subjugated to nature, and we must, therefore, build systems (of finance) correlated to our best normalization of that evolutionary truth.
Today, our financial systems are, in essence, indexed by finance itself, priced by a margin increase of a foregone and stale set of financial conclusions and distributions, often, as I discovered, intrinsically invalid. As a result, those systems will evolve at best downstream only and are unlikely to outperform themselves. In the same way, the amount of water flowing down the river branches will decrease in volume, while the diversification increases, if you catch my drift.
Proven by nature’s processes over 4.5 billion years, I have defined new principles finance must adhere to trace humanity’s expansion – amidst depleting resources – a process in which the excellence of finance plays a pivotal role. But, unfortunately, ESG fails to meet the most fundamental precept of our natural evolution since it hinges on sustainability, which is incompatible with the process of evolution that relies on the opposite, renewal.
I teach those principles in customized engagements and masterclasses.
Therefore, the answer to your question is not to care about the longevity of private equity primarily, a consequence, but instead to care about the survival of humanity, the cause, and then develop financial systems to best trace and expand the exploration of human ingenuity and capacity.
If finance firms are flexible in reinventing themselves, private equity likely can and shall morph into supporting the evolutionary prospects of humanity, which will produce a broader standard deviation of outliers than the current model will ever be able to discover, let alone benefit from. As a result, private equity firms adopting evolutionary principles of finance will find opportunities for others, by their stale finance-centric thesis and ceiling, will never get to see.
My work does require a financier to take a step back from the daily grind and ponder why we built the (financial) systems we did. I delved into that subject over the last eight years, and as you can read online, my discoveries and conclusions are shaking up the current conventions of the financial industry. But, unfortunately, the disappointing repeatability of many financial instruments proves to be the wind in my sails.
I believe building a better evolutionary proxy into the core of the operating systems for humanity and removing the artificial silos of expertise in policy, capital, and innovation is what creates a brave new world our children will be proud of.