While this market does conceptually exist in various forms -- credit cards & microfinance provide unsecured debt, the real estate market is sort of a proxy for individual incomes, and government bonds are perhaps the largest aggregation of groups of individuals within geographic boundaries -- as yet there isn't a market for taking individuals (or groups of individuals) public.
(UPDATE & CLARIFICATION: many folks in the comments are focusing on the literal interpretation of my headline, namely taking *one* individual public. while i'm neither for or against that concept, what i'm really talking about here is more likely the creation of a derivative instrument that maps to the future income of an *aggregate group* of individuals. i severely doubt any one person is going to be enslaved as a result of an individual IPO, but regardless that's not really what i'm getting at... the calculation for an individual market cap below is merely an exercise by which to arrive at an estimated value for the asset class.)
If we were to create an asset class for "human capital" securities, how might we calculate it?
Well, we would probably add up the total market cap of all "stocks" in this potential market... which would be the equivalent of the collective market cap of ~6 billion people.
So what is the market cap for an individual?
Let's assume the following:
in developed economies, average wage earner makes ~$25K/yr
the average individual works for ~40 years during their lifetime
they save an avg of ~10% of income per yr (probably optimistic)
their savings earns ~6% and inflation is ~2% (net int. rate = 4%)
Ok, so now the average wage earner in a developed economy might earn a cool million in revenue during their lifetime ($25,000/yr * 40 yrs = $1,000,000). If they saved 10% of their income, they'd be able to put away $100K, which if invested appropriately might be worth ~$250K by the beginning of their retirement. finally, let's assume that a present value (PV) calculation for that $250K using a discount rate of 4% results in a value of $50K at the beginning of the wage earner's working career.
If this is a reasonable way to calculate it (not sure if i've made any obvious errors here; please comment if so and i'll revise), then the market cap for an individual might be around $50,000. if you wanted to be generous, it might even be north of $100K. if you're pessimistic on the savings rate, then it could be as low as $10-25K (or even zero i guess?).
anyway, i think i'm close enough to go on record in saying the Atomic Unit of Happiness = The Value of an Average Human Life = $50,000 (roughly).
if this is correct, then the overall market value of the asset class representing Individual Income Futures is $50,000 * 6 Billion people = $300T (T=Trillion)
now here is where it gets interesting...if we assume that at least a 1/3 of the world isn't earnng $25K per year, but perhaps only around $5K per year, and another 1/3 might only be making $500/yr or less (the Bottom of the Pyramid, or BOP), then what we're really saying is that the overall asset class is currently only worth around $100T, and is undervalued by about $200T due to the current state of healthcare, education, housing, and overall economic opportunities for 4 billion of the world's 6 billion people.
imagine then if you could invest in the undervalued portion of the asset class, and then enable access to healthcare, education, and housing for those $4B people. you'd have one of the best and largest investment opportunities ever.
Fifty thousand here, two hundred trillion there... pretty soon you're talking real money.
A big hearty congratulations to Tamar Weinberg, who became both an author and a mother recently.
The baby arrived a little bit early, which made it tough on the delivery of the book, but she managed to pop both out this summer :)
I had the very good fortune of being asked to write the foreword to her book "The New Community Rules: Marketing on the Social Web", which i've reproduced below. My foreword can't compare to the book itself, but i hope it gives you a flavor of the stuff she writes about.
The New Community Rules: Marketing on The Social Web
Your lights are on, but you're not home Your mind is not your own Your heart sweats, your body shakes Another kiss is what it takes
You can't sleep, you can't eat There's no doubt, you're in deep Your throat is tight, you can't breathe Another kiss is all you need
Whoa, you like to think that you're immune to the stuff (oh yeah) It's closer to the truth to say you can't get enough You know you're gonna have to face it You're Addicted to Love - Robert Palmer, Addicted to Love (1985)
Hello. My name is Dave and i'm a Facebook-aholic("hi Dave, keep coming back!"). The rest of you may not be addicted to social media the same way i am, but i guarantee you it's only a matter of time. Now that Oprah & CNN have become run-of-the-mill streetcorner pushers for social media crackpipes like Facebook & Twitter, you can bet the rest of consumer mainstream ain't far behind. Mark my words folks: we're all being seduced by a dangerous & sexy online mistress named Social. If you haven't fallen for her yet, you will.
This book is dedicated to everyone who has ever read a blog, visited a MySpace page, watched a YouTube video, checked out a photo on Flickr, or clicked on a link in Twitter. Then five hours later, looked up to check the clock and realized it was 4am. Admit it, you've been there: heaven help me the baby is screaming and needs a diaper change but gimme a sec i just need to click on one... more... link...aaah. Now doesn't that feel better?
You might be a teenager on Hi5 profile-hopping all the hot girls in your freshman class at high school, or a grandmother anxiously checking YouTube to see if your daughter has uploaded the latest video of your 3-year-old grandson. You might be a punk rocker adding a new song to your band's MySpace page, or a Harvard grad surfing LinkedIn to see who you know at Google who's hiring. You might be the Real Shaq Daddy tweeting out nightly box scores and a slam-dunk on Yao Ming, or Barack Obama rallying the faithful to get out the vote via SMS on the eve of the most historic election in American history. From the largest to the smallest, from the youngest to the oldest, the world has become engrossed, enthralled, and addicted to social media.
Unless you've been in a coma for the last five years, your behaviors and interactions with social media have changed dramatically. We now spend more time connected -- both literally and figuratively -- than ever before. Our offline-online existence is fused together into an electronically-enhanced experience that would have seemed unbelievable just over a decade ago, but now seems almost second nature. One wonders how people ever managed to make plans to meetup for dinner or a night out on the town before everyone had email, eVite, Yelp, or text messaging? Our fascination and fastened-nation with all things digital has been both a blessing and a curse, enabling people to communicate whenever and wherever they please... even if that means listening to the sales guy in the bathroom stall next to you talking to a customer, and wondering if you should wait till he's done to flush.
The first ten years of the Internet Revolution were all about getting computers connected to the World Wide Web. But the next ten years are going to be all about getting people connected to eachother. There are now over 1 billion people online across the globe, and over 3 billion people with mobile phones who can send a text message. Imagine how much time we can all waste poking each other on Facebook!
More seriously, this sea change in how people spend their lives and leisure hours has created a challenge for those in traditional marketing roles. As with the explosion of cable television channels in the 90's and subsequent fragmentation of mass market media & advertising, online behavior in the 21st century has been moving away from large portal mass-produced websites like AOL & Yahoo, and towards a world filled with search engines, social networks, millions of tiny blogs & "long-tail" websites, user-generated content sites, news feeds, apps, widgets, RSS, email, SMS, IM, chat, twitter, bookmarks, etc, etc. Finding ways to effectively reach customers in the world of Web 2.0 has become a Sisyphean task, requiring a wide variety of online marketing skills and an endless number of communication channels.
And yet there also exists the everyday miracle of one clever, creative individual who executes a very cheap, viral, word-of-mouth campaign that reaches millions overnight. How can this be? We are both powerless and powerful at the same time. We are fragmented and yet unified. We are solitary shut-ins glued to our computers, but we are powerfully & instantly connected to thousands of others all over the earth. We are billions of people on the World Wide Web, and we are a billion people blathering on in a billion and one tongues.
This is social media. And like the social beings who create it,
It was in the middle of that mess that my personal journey began.
let me explain.
Back in late summer 2001, i had the good fortune of accepting a job offer at PayPal, while the rest of the dot-com world was crashing all around me. Little did i know, the towers of the World Trade Center in Manhattan would also come crashing down my first day on the job. While still in shock at a changed world offline, i began putting my toe in the waters of a brave new world online as well.
I had always been a geek of some kind -- music geek in grade school, math major in college, computer programmer after graduating, and a small-time internet entrepreneur in the mid-90's until my company got acquired in 1998. However, my new job at PayPal was in (developer) marketing -- pretty unfamiliar territory for a geek. I wasn't even sure how i got the job; a friend who was a PayPal angel investor had referred me to them, since he knew i'd been organizing several Silicon Valley tech & entrepreneur user groups for many years. I guess PayPal figured i was about as close as they could get to someone who knew how to market to developers, so they gave me a chance.
Now just to be clear: there is nothing more anathema to geeks & programmers than an asshole with a business card and a marketing title... well, except perhaps someone in sales; but at least geeks understand salespeople are necessary to make money that pays their salaries. So basically as far as developers are concerned, marketing folks are the absolute bottom of the food chain -- they're assumed to be both clueless and useless, and liars to boot.
As a former developer myself, i realized my job was going to be all about marketing to repressed loner, smart-ass geeks who thought i was a dumb, incompetent liar. Great.
Given the humbling & humiliating task ahead of me, and given my dirty little secret of not knowing one damn thing about traditional marketing, i realized i better come up with some pretty creative tricks / hacks... and fast.
Hack #1: change the official job title on my business card from "Director of Marketing" to "Director of Geek Marketing" (disguise & subterfuge, become part of the community).
Hack #2: stop trying to SELL developers on PayPal, and just focus on helping them USE the product & provide tech support, LISTEN to what they were asking for, and see if i could get the product team to fix bugs & build something geeks would use.
Hack #3: since they probably knew more than me, i appealed to developers to help answer questions, and recruited geek advisors and promoted them as experts to the rest of the community.
Hack #4: get all of our technical documentation & code samples out in the open on a no-login required site, without requiring anyone have to create a PayPal account to learn.
Hack #5: start a message board & blog (had to bend some rules and avoid corporate bureaucracy but i did it), and get an open channel of publishing & communication to the community.
I could go on, but i think you get the picture -- let's just say i did some VERY non-traditional marketing in the first year or two. And i really had to change how i thought about marketing in order to reach the people i was going after. In fact, much of my success was due to subverting, bending, and even breaking the normal rules of corporate marketing to get what i need to get done. And finally, i had to become part of the community itself, and i had to create some non-traditional publishing & communication models to engage the community to help me do my job.
Along the way of becoming a mole in the machine, i also discovered a number of other important new trends & techniques in online marketing: search marketing (both organic & paid), email newsletters & distribution lists, blogging, mini-apps & widgets, message boards & forums, RSS, screencasts, instructional video, social networks, and many, many other geeky pursuits which consisted mostly of me goofing off online and somehow getting away with saying i was doing real work. While it may have seemed like i was screwing around wasting a lot of time (cough, cough... nothing could be further from the truth!), turns out I was getting some world-class on-the-job training in social media marketing. Who knew?
As i spent more time diving deep into this Ocean of Social, i realized something important was happening & changing how people were communicating. Starting somewhere between 2001 and 2005, a whole bunch of non-geeks were getting computers, getting digital cameras & mobile phones, getting broadband connections, and getting online. The internet & the browser were just the beginning; by the time YouTube arrived in 2005 the Internet had already been taken over by the masses. By 2008, your mom or grandmother was probably stalking you on Facebook and trying to find out who you were hooking up with.
This was not your geeky old Internet -- THIS was the glory of the World Wide Web, and people were doing a WHOLE LOT MORE of the following:
Browsing the World Wide Web (from iPhones as well as computers)
Using Search Engines (aka "The Google") to find all kinds of Stuff
Reading Blogs, Looking at Pictures, Listening to Music, & Watching Videos
Creating Profiles & Browsing & Flirting & "Poking" on Social Networks
Sending messages & links via email, text/SMS, and internet messaging (IM) systems
As each of these activities in turn spawned entirely new ecosystems and communication channels dedicated to legions of fans, online populations similarly dedicated themselves to the creation and consumption of new media / social media in these online environments.
Not only had we become addicted to The Network, we had BECOME The Network:
We The People, In Order to Form a More Perfect Platform, Establish Internet Equality, Insure Domestic Social Connectedness, Provide for the Creative Commons, Promote the General Web-fare, and Secure the Blessings of Liberty to Our Blogs and Our Friends & Followers, Do Ordain and Establish this Network for the .COM, the .NET, the .ORG, and the Entire World Wide Web!"
Well, maybe it didn't happen quite like that... but i bet you in a hundred years, people will look upon the creators of the Internet, Search Engines, Social Networks, and some of the more famous websites akin to the way older generations think about our Founding Fathers. I mean, didn't Al Gore invent the Internets?
I rest my case.
And as we begin to explore what social media is about in the Second Age of Aquarius, i can think of no one more qualified to bring you kicking and screaming into the 21st century than Tamar Weinberg. Tamar is a friend, guru, and colleague who has been swimming in the ocean of search engines & social media for over [ten] years, and her annual "Best Of" list of internet marketing articles is an annual must-read for all things search, social, and beyond.