Every time we hand our Offering Memorandum to an investor, we say, “This tells you how you are going to lose all your money.” In 60 pages of boring, nauseating, repetitive statements, it basically explains how everything can go bad.
Do you really think investors need 60 pages of what-ifs to tell them that something could wrong with an investment? Even if they do need the reinforced message, does it deter them? I was walking through the store the other day and noticed that some cigarette cartons have huge letters saying “Smoking Kills.” Seriously? How many people don’t know that? And does that “warning” stop anyone from smoking?
No matter what we do, we can’t be protected from everything. There are countless risks in life that we encounter every day just by getting up in the morning. I am no lover of the government, or attorneys for that matter, so it probably comes as no surprise that I think a big chunk of our business obligations are extreme overkill. It seems like “common sense” has left the system.
Are some protective measures necessary? Yes, but do we need even a 10th of what we are forced to provide? No.
Let’s use our own Offering Memorandum as an example. Is it going to stop Steve and me from doing anything illegal? You bet, because we follow the law, but more importantly, we believe in doing the right thing. I have no desire to wear an orange jumpsuit every day for any period of time (though I do like the color orange, as you may know if you have seen our office).
Some of you might say, “See, those regulations and laws do work.” Not so fast. They only work for the honest people — the people that follow the law.
I am sure many of you share my belief that a contract is no better than the person standing behind it. The integrity of the person on the other side of the handshake is the only thing worth anything.
We just had this conversation at one of our private dinners last night. If Steve and I had our way, our Offering Memorandum would be 2 pages long. It would tell you the risks that are involved, the terms and structure of the fund, and most importantly, it would be in language we could all easily understand. Wouldn’t that be better for investors?
Most investors understand that there are risks involved in any investment and for those who don’t, a 60 page Offering Memorandum isn’t going to help. The fact is, investments just go bad sometimes, especially if the people involved are dishonest. If the fund manager is a crook, there is no length of document that could stop them.
It’s the exact same way for gun control. Every time a new “protective” law is enacted, it only affects the law-abiding citizens. Someone who commits a crime with a gun is not researching the laws prior to doing it, I can assure you.
The biggest irony of the Offering Memorandum is that it’s not really there to protect the investor. It is there to protect the fund managers so when everything falls apart, we can say we told you so in 60 pages. Yuck! Why does it have to be so complicated?
Besides the superfluous nature of mandates like this, the real burden they put on law-abiding citizens and business owners is the time and financial investment. We have spent thousands of dollars and thousands of hours making sure we abide by all these burdensome regulations. It hasn’t made us any more or less honest or protected our investors one bit. It just leaves us with less money in our pockets as business owners, which translates to less money in our investors’ pockets and our employees’ paychecks. I can only hope that some of this will change with our country’s new administration.