Results to drive: Patient Capital one worth the wait?

Yes – ‘Patient Capital’ (PC) may be worth the lengthy drive; but it depends on one’s investment objectives and destination.

‘Patient Capital’ is a form of long-term capital investment. For market participants, it may only be attractive to those investors willing to wait at least five years for a return, which may be below market alternatives and whose non-quantitative benefits (such as a social, political or community objective) and associated risks outweigh the financial gains. Patient Capital is sometimes described as having the discipline of Venture Capital with an IRR of less than 10%! It even has been called “Impact Capital”. However, PC is also a policy for governments (such as China) and Sovereign Wealth Funds to realise their social goals.

Patient Capital one: allows an investor to drive towards the supposed greater returns of: R&D projects (invariably hard science or university spin-outs, such as Harvard  or Oxford); a cause (say micro-financing, or an investor’s pet project); a community initiative (eg, a hospital); or follow-on funding rounds for enterprises that are not able to access traditional forms of capital. As importantly, the Patient Investor can play a more direct, even stewardship, role in: supporting an entrepreneur; building the management team as well as; strengthening the governance of such entities. Essentially, PC represents the “core equity” of the enterprise. Capital one can rely on as an entrepreneur to drive and  build a viable business.

Patient Capital has become an emerging investment trend: a source of funding for particular types of businesses and projects as well as appealing to a certain type of investor. It is deployed across the lifecycle of enterprises, from: Seed, through Early-Stage/Ventures; to high growth small enterprises. By their nature, these assets/opportunities have limited absorption capacity for investment funds as well as an above average risk profile. Yet, the investment volumes remain small, as Beauhurst indicates.

As expected there are several main types of ‘Patient Investor’.

  • Business Angels making many small investments (hundred thousand to a few million pounds sterling).
  • Institutional investors making fewer, larger ticket investments (say in the tens of million) – in pursuit of their objectives. An example would be the Wellcome Trust and Syncona Partners. In addition, the likes of listed, longer-term, investment funds (eg, Woodford Patient Capital Trust, or BlackRock Smaller Companies Trust, etc) which try to balance several investment arenas.
  • Finally, Family/Private Offices are attracted to PC given the appeal of its potential holistic “impact” returns. As PC practitioners claim – it is hard to find a good company so when you do, stick with it!

Some observes claim the traditionally poor performance of UK VCs is forcing it to consider a great role in PC.

The holistic returns of Patient Capital can be compelling as the financial returns are matched to realising a social objective. ResearchGate papers by Raktas and Gate Capital Group suggest the IRR returns for PC investments could be 25%, which compares favourably with VC’s 15-20%. Findings supported by Insead research.

On an annual basis a PC-return could exceed a classic ‘buy&hold’ equity strategy (17% pa). The institutional funds focused on patient capital (such as Woodford and BlackRock) have lower and varied returns for their own structural reasons and vagaries of the public markets. The PC model seems better than the VC one of 5-year investment horizons, 2/20 and IRR of 15%. The key parameters are: risk, time and control. Patient Investors must assign probabilities to the hoped for 0-1-10-100X returns of original investment.

That being said there is a definite gap in the finance market for Patient Capital, especially in the UK; playing catchup to the government initiatives of European markets and ‘super angel’ networks of the US. China and Asia are emerging markets.

In conclusion, PC is not for everyone. Yet, if an investor is:

…comfortable with the time-horizon and risk-profile of the asset/investment/activity;

…has an interest in building a ‘better society’ (however defined); as well as…

adding to one’s bank balance then…

Patient Capital is worth the wait.


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Justin Jenk is business professional with a successful career as a manager, advisor, investor and board member. He is a graduate of Oxford and Harvard. Justin can be found at or

Drive to despair – price strategies for consumers

It is enough to drive one to despair. Despite the benefits of “dynamic pricing” (or surge pricing) many consumers are happy to over-pay prices by agreeing to follow a flat-rate, fixed tariff.

This situation is most evident in taxi fares; such as Uber; but is found for other products and services.

Consumer biases drive the problem. In short, many consumers mistakenly believe that by choosing a flat-rate they are obtaining a better deal than a metered one.

The reason being cognitive bias; a condition affecting people’s perceptions and judgements, such as pricing. Ted talks, as lecturer, Julia Galef, explains well. Cognitive bias has been deciphered by the Nobel laureate Daniel Kahneman in his tome; Thinking Fast and Slow”; as well as another three Noble laureatesYet, cognitive bias remains poorly understood by many, particularly John, Jane, me myself and Irene.

Price-setters/suppliers benefit. This inherent consumer weakness situation favours those suppliers/price-setters who understand the workings of cognitive bias behaviour.

In many industries, consumers can choose to pay either a metered or flat-rate price. These industries include: Utilities; Mobile phone companies; Online video streaming and gaming services; Rental Car companies; Retail Banking (ie monthly vs individual transaction charges); and Insurance companies.

A recent study at Researchgate by casts light on the economic benefits. Raktas’ study shows the benefit can be 5-59% improvement in costs/profits. Furthermore,

Uber’s impending flotation, and its eye-watering valuation (latest estimate USD120 billion) will provide further evidence of the value of understanding cognitive pricing.

Consumers drive themselves. What is surprising is that a consumer’s cognitive biases overwhelm economic logic and many chose the sub-optimal flat-rate. Thus, consumers literally drive themselves into sub-optimal pricing decisions. For the price-setter/supplier, fixed rates are more profitable if the rate is near the likely metered-one and “churn” is reduced.

Consumer protection? There is a range of protection available including more consumer-oriented firms and government policies. But at the end, consumers are best placed and the most powerful force to protect their own wallets.

‘Caveat emptor’ and exercise ‘choice’


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Justin Jenk is business professional with a successful career as a manager, advisor, investor and board member. He is a graduate of Oxford and Harvard. Justin can be found at or

The economics of winning a Nobel Prize

The economics of winning a Nobel Prize are significant and go beyond the cash value.

This year’s Nobel Prize winners have been announced and the ceremonies are soon upon us. The economics stack up in a particular way.

The Prize comes itself comes with a cash award and a medal. The cash component is Swedish Krona 8.0 million (approximately €1.2m or US$1.0m).  The prize money is split eqaully if there are multiple winners. In addition, winner receives a medal (composed of 175 grams of 24-karat gold) has an intrinsic market value of US$10,000; higher for its scarcity value.

But the Nobel Prize is not about the money. It is the recognition and prestige associated with it. Certainly for the individual, colective efforts of co-workers. One can trade on a reputation. Also this kudos translates into dollars and value for the associated institutions and universities through fund-raising, transactions as well as attracting better quality students and faculty. Ask Harvard or University of Chicago.

There are some interesting statistics about the Nobel Prize winners. There have been 560 Laureates to date, yet only 45 have been women. The youngest was 17 (for the Nobel Peace Prize; and 25 for the traditional ones, announced in Stockholm); the eldest 90 years old. As to nationality the US leads with 29%, followed by the UK (16%), Germany (14%), the bulk of the remaining 41% from greater Europe; then Asia and Latin America.

Looked at it another way what was the investment to win a Nobel Prize?  Certainly it is not a specific target for many institutions and individuals (and there are some). However the kudos of wining is certainly a motivational driver for many scientists. It has been estimated that in 2010 alone over US$ one trillion was spent on pure R&D activities. Consider that Just one basis-point (1/10th of a percent) is equal to US$ 1 billion (1,000,000,000). So was that the Nobel motivational investment?  Go figure!

Money in and money out. So what did the laureates spend their winnings on? Well while a million sounds a great deal, especially to a silver haired academic or author, it doesn’t go that far. There are some immediate costs just to attend the prize-giving celebrations. On average these incidentals (for clothes, travel, lodging and food, etc) can run up to $20,000 for the prize-giving weekend. Though the banquet, on 10 December in Stockholm, is for free.

Frank Wilczek–Physics 2004 stashed his cash in a savings account. Others paid down debts or mortgages. One laureate built a croquet lawn (Richards Roberts – Medicine 1993; several have funded family education, other transactions or endowed scholarships or given it to charity. The some laureates have felt it was a joint effort, as did   John Mather – Physics 2006; with 1,500 co-workers. He donated the prize to a dedicated foundation.

That was the feeling Dr. Alvin Roth gave Justin Jenk, who co-hosted the prize winner at the Stockholm School of Economics in 2012.

On a ligher note, the Nobel Prize is the inspiration for a whole sub-industry, such as these spoof awards. The trading dynmics and economics of this sub-industry are significant.

Finally how much is a year of life worth? The average age of Nobel Prize winner is 63 years. A study by the ‘Journal of Health Economics’  suggested that Nobel Prize winners  had an extra two year life expectancy compared to their peers. Now that is value.

Do read my other blog entry “Ebola leaves us naked” at or

Justin Jenk is business professional with a successful career as a manager, advisor, investor and board member. He is a graduate of Oxford and Harvard. Justin can be found at or

Ebola leaves us naked

People feel naked in the face of the deadly Ebola virus.

Ebola is causing widespread panic. Are these fears justified? Experiences from past disease outbreaks, medical science and diffusion theory suggest that the current hysteria is misplaced.

While the human tragedy is unquestioned, the real epidemic may not be the Ebola virus but the loss of public confidence in government authorities. Such a loss may cause more harm to many more individuals in the future through the combination of prejudice and apathy.

A number of factors are fueling this manic panic. The mortality rates are high and rapid (as  the ‘Forbes’ article shows). As yet there is not a vaccine. The source of the virus seems to be due to a species jump (as with SARS); in Ebola’s case, fruit bats. The public’s current fascination with vampires and Dracula helps not one lite bit. More worrying is the continuing uncertainty as to whether the spread of the virus is physical or has transmuted into being air-borne. Debate on ‘You tube’ debate is intense.

These factors of fear are being compounded by a general and increasing lack of trust in public authorities and sources of information. There are good grounds for concern, but maybe not hysteria.

The loss of public confidence has been made worse by the combination of insufficient or conflicting information. Worse still has been official lethargy and confusion. The present outbreak was already reported in the general press in January 2014, which meant it was a well-developed problem on-the-ground in West Africa during 2013. The site of naked women, men and children – the victims of official lethargy have failed to move politicians into action. The Ebola virus has spread from Guinea, Liberia, Sierra Leone and now to Nigeria as this interactive map and timeline reveals. From rural locations to thronging cities. Viruses require hosts to survive and spread– cities provide ideal locations. Medicins sans Frontières believe the risks are huge and have stated the situation is “out of control”. The unfolding events suggest a scandal at many levels. The WHO has a great deal to answer for. The UK government’s decision to screen arriving passengers achieves little – except to confirm the growing disaffection with government. Better to screen departures and monitor carefuklly passenger movements after arrival.

Diffusion theory clear sets out how any disease (or idea) can spread. It follows a certain pattern. Researchers at Oxford University have demonstrated the importance of distance in this process. In the past trading routes linking economic centres provided the conduits: trading goods and diseases. The fears of bubonic plague remain embedded in the public’s collective memory as the trading ships form Constantinople to Genoa brought the “black death” to Europe in the 14th century. Another important aspect of diffusion is often described as an S-curve, as explained in Justin Jenk’s blog on adoption rates and the effect of time.  In this current Ebola outbreak the ‘Wall St Journal’ has developed an excellent graphic.

Viral and bacterial evolutions and diffusion are well understood. The public health authorities’ reaction to the Influenza pandemic 0f 1919-21, the Smallpox epidemic of 1947 and the Polio challenge of the 1950s demonstrate that western societies have been able to deal with such threats in the past.

What the current Ebola outbreak exposes is the worrying observation that perhaps modern society has passed its peak and its inability to deal with such crises. While we may be technically more capable we seem to lack the ethical and political will to act; the London School of Economics has captured the essence of this debate.

Economics rule for big pharma and vested interests. Reports from Guinea suggest that cures are available, Yet modern concerns with regard to “human screening” have prevented effective and timely trials. Certain conspiracy theorists suggest more sinister reasons.

The economics of this and other diseases are crippling to the national economies of West Africa. South Africa remains burdened by the continuing destructive effects of its HIV crisis to its economy and society.

Human tragedy to tens of thousands has been created by the current Ebola outbreak as well as shown destructive effects on society and the economy.  Public confidence is also the victim.

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Justin Jenk is business professional with a successful career as a manager, advisor, investor, entrepreneur and board member. He is a graduate of Oxford and Harvard. Justin can be found at

Power Girl in the economy

Women in business? Women are the business.

While it may remain a ‘man’s world’, it is a simple fact, that women are the force factor of the economy.

Despite the continuing gap in pay (at least a 10% difference according to numerous sources) recent studies show that the purchasing power of Venuses represent nearly two-thirds of all consumer decisions; estimated at USD 15 trillion. That is overwhelming purchasing power that shapes behavioral economics and the economics of growth.

On average while women represent 45% of the workforce yet their representation in the C-suite or boardroom is much less. There are significant national differences. The EU average is 16% yet the Swedish average is 26% compared to the UK at 18% and most of the rest of EU27 below 12% according to an EU and Stockholm School of Economics study.

Writing for a ‘Daily Telegraph’ column, Justin Jenk cited the vital role played by women in corporate governance and the economy. The Harvard community has recognized this power of Venus. Harvard Business School has made it part of its offering through the gender initiative and the Harvard Business Review has written about it. Furthermore in a recent McKinsey study, it estimated that corporate performance was 50% higher for those companies with a higher representation of female senior executives and board members.

In the face of such benefits why the resistance.  The main challenge remains one of attitude. A recent study by London School of Economics reveals the legacy effects. The search for equality is correct but remains a long drawn out process. Recent legislative and social practices with regard to parental leave and child rearing.

Unleashing the full potential women in the workplace is something that benefits all of us. Gender equality in the workplace should be championed and nurtured. It is just good business and for the economy – women as well as men.

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Justin Jenk is business professional with a successful career as a manager, advisor, investor and board member.  He can be found at

“Fake it until you make it!” – body language

Your body language matters!

Try Amy’s “power position”. An intriguing topic that does work.

I met Professor Amy Cuddy at my Harvard Business School reunion. While Amy was very engaging and approachable on stage (and as in this video) she is  very modest, even shy, in person (when we met afterwards for dinner).

Do watch it: 14 million others have for a reason.

As Amy extolls us: “Fake it until you make it!”

Enduring technology – the launch of the “book-book”

Ikea’s recent “book-book” advertisement for the launch of its 2015 catalogue is a brilliant piece of native marketing. It has gone viral within 3 days with 3 million YouTube hits. It looks set to be on track to match Van Damme’s Volvo splits.

The campaign is clever as it operates on many levels. It utilises many classic marketing techniques (e.g., piggy-backing off another’s launch window as well as imitating success; in this case Apple’s iPhone series, the look, feel & tone of the video, timing, etc). Also the “launch” hits several intellectual and emotional buttons by: using self-depreciating humour in its parody of Apple launches while combining several fashionable topics – ‘technology’ (presentation of a book, a millennia old invention as something new) as well as ‘innovation’ (description a book’s features in modern techno-babble). Finally, the campaign, in a subtle way, raises a debate about the effects on modern society of ‘consumption’ (good) and ‘consumerism’ (bad). Economists and Sociologist acknowledge the powerful benefits of consumption but question the detrimental aspects of consumerism, which is becoming the defining aspect of modern society. As one writer observed: Muslims in Britain shop more often per day than they pray (5 times).

Ikea itself is no economic saint as more volumes mean revenues – just replacing old products with new ones; even if they are in a fine condition. But what is the carbon impact for all those additional Billy book-shelves? Planned obsolescence is not conducted in a holistic manner (as the Reddit debate reminds us). Also observers point to the disparities; such as 20% of the world’s population account for 76% of all consumption, etc. The aspiration dynamics imply that the sheer volume will just increase.

For the business executive the “book book” campaign provides a raft of specific and relevant issues with regard to the impact of: innovation; shortening product life cycles; impact on pricing; the costs of launches as well as how to manage communications and Consumer Experiences in a digital world. A recent article in the ‘Harvard Business Review’ claims that most product launches fail. Samsung recently tried a spoiler launch of its Galaxy Note 4, a few days before Apple’s iPhone 6 (9th September) launch. Yet Ikea’s successful campaign has gone steps further: promoting its furniture business ahead of a mobile phone launch based on a “book book”.

Lessons all round and food for thought.

Sweden and the Euro: the silence is deafening

The facts are that Sweden is more or less committed to joining the Euro by 2017.

Despite an undertaking to join the Euro with its 1995 EU membership, Sweden has always found a legal loophole and political posturing to avoid its Euro commitment. The reason that Sweden doesn’t fulfil all the criteria to join is its own (convenient) choice!

Given that there is an election in September, why has there been no public debate? Since 1995 the Swedish government has tried legalistic means to avoid making good its promise with 2017 set as a decision year. Few citizens know or understand the actual position. Furthermore, government bodies, politicians and business leaders seem to have consciously decided not to discuss the issue and its implications. The continuing Eurozone crisis, changes in EU voting and fraying patience from Germany will force Sweden will need to make good its committment to join by 2017 (or find another fudge). 

Currency union is just one, but now essential, part of the EU’s Economic and Monetary Union. Sweden has always been hypocritical about the European Union and its currency. Britain has prevaricated; Denmark refused flat out. Sweden’s actions are time-tested and similar to those practiced during World War 2: technically neutral but somehow engaged.

Sweden has benefited enormously from this conscious delay. Just in economic terms it has been avoiding the huge costs of bank bail-outs as well as retaining independent control of its banking system. December 2016 seems to be the end of that road.

The pressure for Sweden to honour its commitment has always been the there from the German authorities, which is intensifying and will not be easily avoided. 

  • The Euro crisis has not been resolved – in fact it appears to be getting worse, after a short lull. Wealthy Sweden is an obvious source of much needed funds for the bankrupt Club Med members of the EU. The recent collapse of Banco Espirito Santo is just the latest. Greece’s position hasn’t improved.
  • Even Germany is beginning to feel the economic effects.
  • In addition the legal-regulatory-political political pressures have increased dramatically with a single supervision mechanism for banks on its way by 2015 and a 2016 date set for joining the Euro.
  • New EU regulations will exclude non-Euro members from all decision-making but not the costs.

It is unlikely that Sweden can ask for more time; it has had 20 years to consider matters.

None of the Swedish political parties have the courage to spell out the risks (and rewards) of Euro membership nor the implications of ECB supervision of Swedish financial institutions. Odd! Sweden cannot be that hypocritical to pursue national self-interest given its moral chastisement to the world on so many other issues. Being the EU’s seventh largest economy, wealthiest in terms of per capita GDP and having nearly 50 percent of its trade with the Eurozone demands a through debate. The Norwegian and Swiss routes seem inappropriate for Sweden. Scotland has been warned.

Voters and EU members beware!

Red Bull giving wings to Easter

Red Bull has organized an Easter hunt with a twist. It has set out 1000 special trial packages of its new taste products across Sweden, with 25 in Stockholm. The clues are photos of the 1000 locations. The top ten contestants will receive additional prizes.

Sounds like a classic promotion with wings. What is interesting is how imaginative and resourceful the treasure seekers have been. The main tool has been to use Google Maps’ “Street view”. One contestant found seven stashes within 90 minutes; cycling from location to location using his smartphone. He avoided wasted journeys by getting friends to check possible locations. Those at picked sites find a polite sign.

This Easter hunt is another example of Red Bull’s well-established native marketing campaigns. It is one of the best at it. The results? Heightened awareness. Alignment with the brand’s values, associated with competition, adventure, daring, determination and sport. Free media mentions and increased traffic to its website. Finally a cost effective means to ensure trial of its new product tastes by its target consumer segment. Expect to see sales and profits take a lift.

4 chords to the bank – Swedish style

How is it that Sweden is the world’s largest exporter of music (Euro 650 million); after the UK and US?

While it may have begun with ABBA’s rendition of “Waterloo” in 1975, it is the creative energies of PoP, Cheiron and other music producers that have been the visible tip of a musical iceberg since 1992 that now accounts for 40 of the US Top 10 hits (for example; Ace of Base, Backstreet Boys, Lady Gaga, Britney Spears, Madonna, Katy Perry, etc.).

Danceable rhythms, heavy keyboards and funk mixed with computer and music skills all help to create bankable tunes. It is interesting to consider that just 4 chords are at the heart of most pop music hits – as the ‘Axis of Awesome’ demonstrate (see the YouTube clip).

There is something to the Swedish buisness beat that helps drive its contribution to, if not leadership of, numerous industry sectors. It is an example of a broader culture of successful innovation and commercialization. As the song goes: “Money, money, money…”