I must've been tired today, because I just woke up from a nap and I never nap. As I woke up, I reached for my Iphone to check the time and also checked the 'stocks' app...market's down, and will be for awhile. I then check my Mint.com and check my personal finances as I need to go grocery shopping in the next hour. I love Mint, its a like a personal income statement, balance sheet, and cash flow statement.
I then started to think about my entire financial picture: my cashflow, my debt, my net worth, and realized that you can look at your own financial picture the same way you analyze a company's. All the stuff I've read about company's delaying accounts payable to have working capital is nothing more than me delaying my rent until my next paycheck so I have more cash on hand. I then started thinking about my earnings growth potential, how much do I stand to earn over the next 5 years? 3 years? Tough to say, but I've got a couple things in the works that could add a growth factor...wow, I'm like my own personal stock!
To which I started to really get thinking, that for the past hundred years, investors only had the options to invest in asset classes such as stocks, real estate, commodities, options, and hard assets to name a few. The prices of all of these asset classes is determined by what the market (society) deems them to be through the forces of supply and demand. The interesting thing is that if market participants (people) are really what gives all of these asset classes value, why can't I make in investment in the market participants (people!) directly?
If you really think about it, for hundreds of years both individuals and institutions have been able to 'buy' debt in individual people...this is exactly what happens when you take out a mortgage, essentially the bank is purchasing a bond in you personally so that you can raise capital to pursue your endeavor to purchase a house. This transaction gets puts on the liabilities side of your personal balance sheet. Yet we are missing a huge component to the personal balance sheet: Stockholder Equity, its critical in making the balance sheet balance (Liabilities + Stockholder Equity = Assets ). And as it stands right now, there is no market in which a person or institution can purchase equity in another individual person, and my question is why not? Personal debt instruments have been issuable for the hundreds of years, why can't personal equity be?
Think of it: a liquidable market in which you can buy equity in the endeavors of your favorite celebrities. A market where you can purchase equity in someone's future and get a return on that investment just like they are a corporation. Why not? After all when you look at the stock exchange, essentially what you are looking at are the celebrity companies of the investment world. In fact the very first publicly traded company, The Dutch East India Company, was successful in raising equity capital for the first time in history just by their notoriety alone: they were the most famous company at the time and its success served as a model for other corporations to follow.
How could this be done? Well the same way a corporation becomes publicly listed, you would need underwriters to determine the net worth of each individual and list them on an exchange. By starting with celebrities and the availability of real-time online trading, the market would essentially create itself (think of Twitter and Ashton Kutcher). The stock price of each celebrity would rise and fall not only with supply and demand but by their earnings potential. For example, there would be higher demand for stock in Kim Kardashian than Michael J. Fox, not only because she's more famous right now, but because of that her earnings potential would be perceived by the market as higher from endorsements, shows, and other income producing opportunities.
Think of all those gossip magazines out there could then actually be considered investment research, wow!
Eventually this could extend out to people who aren't celebrities, however the trading volume wouldn't be there (low demand). Essentially, family and friends would just be like penny stocks. That being said though, this creates a whole new industry in cheap personal underwriters: get your personal stock valued and listed for just $99.99! Ha!
All this isn't a matter of if, its just a matter of when it will happen, this market could easily sustain itself and because of that it will eventually manifest.