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Results That Stand the Test of Time

Summary: 

We frequently use the phrase results that stand the test of time. Here are the details.

Individuals (typically agency management+ and management of Investible Units+) will eventually have a significant stake-in-the-game in the form of reinvested equity. This equity is at risk. We will reach into reinvested equity to repair damages caused by those individuals. These monies stay reinvested until they can be shown to result from success that is repeatable, that strikes twice. They monies must also be shown to not have been the result of having mortgaged the future of the agency.

What this means is agency management (and manager-owners of the Investible Units) will not receive extraordinary compensation until many years after it is assigned them. Managers would be wise not to use this assigned equity as security for personal loans. This money is restricted. It can be taken back should the manager later be found to have earned it inappropriately (based on subsequent agency history). A better description of these monies would be ‘equity assigned but not yet earned’.

These ‘assigned’ monies come from Investible Units going IPO+, from sale of sub-blockbuster+ products, or from sale of the first blockbuster product for an Investible Unit. These winnings provide enormous amounts of cash, creating instant millionaires, but only on paper. They can just as easily be lost.

What results might indicate these ‘assigned’ monies should not be converted into ‘earned’ monies for management? That they should revert back into agency general funds?

  • The funding agency+ fails to achieve an accelerated rate of growth in blockbuster success
  • The funding agency becomes overly-laden with potential systemic risks
  • The fidelity of mandated reinvestments gets compromised.

This determination is made by the judiciary, which is also tasked with assigning blame for any damages.

How does this play out?

  • Building up a $100 billion fund may mean no extraordinary management compensation if products are not commercialized
  • Commercializing products may mean no extraordinary management compensation if perpetual fund+ growth is anemic
  • Commercializing products may mean no extraordinary management compensation if they are not followed up by subsequent products.

It’s going to be very challenging for agency management or management of Investible Units to exit the funding agency with outrageous fortunes. They must show they’ve earned it as evidenced by the passage of time. But this is consistent with our agency mission. We create high quality blue collar jobs and high quality consumer products and services. Interim successes and interim assigned wealth should be considered as incentives to achieve the final mission. We do not reward partial success, no matter how much money is involved.


Editor's Picks for September, 2011

Reba Tull
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Joined: 03/30/2011
You need more details

You need even more details. What about agency managers who leave? What about funds that mature and level out? What about agency managers who switch between funds? What about ambiguity in the assignment of blame for an agency failure? There are many more open questions that must be resolved before this ‘phrase’ can be accepted at face value.