In the world of finance, carried interest is the share of the profits in an investment that a manager (of said investment) earns in excess of what they may have contributed to the partnership. For example, let's say that a manager is putting in 10% of the cash that is required for a particular project. If the project goes really well, the manager, through carried interest, could earn more than their 10% share of the profits. Put another way, it is a performance fee that is intended to incentivize and reward the manager.
Today I learned (credit to Lucas Manuel) that the origins of carried interest go all the way back to the Middle Ages. The concept and term supposedly came about because the captains of European ships would take a share of the profit from the "carried goods" that they were transporting. This was to compensate them for the work and for the risk of sailing all over the place. Keep in mind that, just like today, any number of things could have gone wrong. Maybe you don't make it or maybe pirates steal all of your goodies.
In the world of finance, carried interest is the share of the profits in an investment that a manager (of said investment) earns in excess of what they may have contributed to the partnership. For example, let's say that a manager is putting in 10% of the cash that is required for a particular project. If the project goes really well, the manager, through carried interest, could earn more than their 10% share of the profits. Put another way, it is a performance fee that is intended to incentivize and reward the manager.
Today I learned (credit to Lucas Manuel) that the origins of carried interest go all the way back to the Middle Ages. The concept and term supposedly came about because the captains of European ships would take a share of the profit from the "carried goods" that they were transporting. This was to compensate them for the work and for the risk of sailing all over the place. Keep in mind that, just like today, any number of things could have gone wrong. Maybe you don't make it or maybe pirates steal all of your goodies.
There is also a compelling argument (
made here
) that this simple concept has been instrumental, since the Medieval Period, in improving the fortunes of many, but most notably those that weren't born into riches and that were starting out with limited means. Carried interest allowed Medieval merchants to (1) initiate sailing ventures for which they didn't have the requisite money and (2) earn a disproportionate amount of the profits so that they could more quickly improve their socioeconomic position.
Do good work, take on some risk, and then hopefully make a few bucks. That's still how things work today. Supposedly David Rubenstein, cofounder of The Carlyle Group, also talks about the origins of carried interest in his recent appearance on the Tim Ferriss Show. I say supposedly because podcasts generally take too long for me and I haven't listened to it.
Bill Gates recently spoke with David Rubenstein at the Economic Club of Washington, D.C. Full video, here.
made here
) that this simple concept has been instrumental, since the Medieval Period, in improving the fortunes of many, but most notably those that weren't born into riches and that were starting out with limited means. Carried interest allowed Medieval merchants to (1) initiate sailing ventures for which they didn't have the requisite money and (2) earn a disproportionate amount of the profits so that they could more quickly improve their socioeconomic position.
Do good work, take on some risk, and then hopefully make a few bucks. That's still how things work today. Supposedly David Rubenstein, cofounder of The Carlyle Group, also talks about the origins of carried interest in his recent appearance on the Tim Ferriss Show. I say supposedly because podcasts generally take too long for me and I haven't listened to it.
Bill Gates recently spoke with David Rubenstein at the Economic Club of Washington, D.C. Full video, here.
The bit that got a lot of attention is his admission that Microsoft should have dominated in mobile (in lieu of Android). The core competencies were all there and the company was in investing in mobile at the time.
The technology discussions in general are interesting, but I also really enjoyed hearing about his efforts to address climate change. He spends a good chunk of time talking about that. Strongly recommend. (Related link: Breakthrough Energy.)
On a somewhat unrelated note, this is also the first time I've seen every question and answer neatly transcribed below a video. This makes it very easy to find the parts that may be of interest. All video discussions should have this.
The bit that got a lot of attention is his admission that Microsoft should have dominated in mobile (in lieu of Android). The core competencies were all there and the company was in investing in mobile at the time.
The technology discussions in general are interesting, but I also really enjoyed hearing about his efforts to address climate change. He spends a good chunk of time talking about that. Strongly recommend. (Related link: Breakthrough Energy.)
On a somewhat unrelated note, this is also the first time I've seen every question and answer neatly transcribed below a video. This makes it very easy to find the parts that may be of interest. All video discussions should have this.
