In a follow-on (in a fashion) to an (R)D earlier this month on financialization and gambling, Liz Hoffman on the striking changes underway in the financial sector…
Wall Street is starting to look a bit like a stage drama where nobody is playing the part that casting assigned.
To build a giant Louisiana data center, Meta raised $29 billion in equity from Blue Owl (a firm known for private credit) and private credit from PIMCO (a firm known for public bonds). Google has piles of cash and a red-hot stock, but is instead bringing its pristine credit rating to the deal table, backstopping crypto miners. The $7 billion that KKR and Apollo are putting into Keurig Dr Pepper is “equity” in the sense that it will help KDP reduce its debt load. But it isn’t coming from their traditional PE funds.
You think companies are built with equity and debt? That’s cute, today’s masters of the universe will chuckle while patting your head.
What used to be called simply “investing” or “lending” has been replaced by “capital solutions” — hybrid equity, kickers, and cash flows tailored to match the returns promised to investors on the other side. Growing pots of money now resemble liquid sand, moldable into whatever shape will fit the money hole in front of it. This shift has been obscured by narratives, overcooked in my view, about a battle between private credit and banks: “There’s one system,” Goldman Sachs President John Waldron told me a few weeks ago, and it’s changing quickly.
Goldman reorganized itself along these lines earlier this year… Apollo, one of the original private-equity firms, is now 80% credit… and firms from Chicago buyout shops to Middle Eastern sovereign wealth funds have launched “capital solutions” arms. Lawyers are jumping in downstream.
Prioritizing what companies actually need over whatever widgets Wall Street happens to sell is good customer service. Personal wealth management got a lot better when firms started asking “how much do you need to retire?” instead of “would you like to buy this structured note?”
And the rise of insurance money in investing has created patient capital that in many cases fits those money holes better than blunter instruments. Much of KKR and Apollo’s Keurig investment will end up in their insurance arms, backed by long-term contracts with the coffee-pod maker, people familiar with the matter said.
But flexible capital will almost certainly overflex, and not everyone with “go-anywhere” money should go anywhere. I suspect that before this cycle is over, we’ll see a few instances that leave everyone asking, “why did they own that?”… Sometimes “capital solutions” just code for investing in distressed companies, which is nothing if not a capital problem in search of a solution, trade publication Private Debt Investor wrote…
As we go back to basics, we might note that it’s International Accounting Day– a celebration of the field on this date each year that commemorates the publication of Luca Pacioli’s seminal work, Summa de Arithmetica, Geometria, Proportioni et Proportionalita, in 1494, which introduced the double-entry bookkeeping system—a foundational element of modern accounting.
Portrait of Luca Bartolomeo de Pacioli, attributed to Jacopo de’ Barbari
Modern capitalism began among the European merchant families of the early Renaissance—the Fuggers of Augsburg, Medicis of Florence and, in Venice, one Antonio de Rompiasi, who in 1464 hired a tutor in mathematics for his three sons. Like any sensible teacher, young Luca Pacioli aimed to make his lessons memorable and clear. Good humanist that he was, 30 years later he gathered all the world’s knowledge of the subject into a single massive volume.
His “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” was the 615-page work of a mature professor who had spent decades working across northern Italy. The book was revolutionary on more than one count. It integrated computation using Hindu-Arabic numerals with the logic of classic Greek geometry; it was written in the Italian of the marketplace rather than Latin; and it was circulated in large numbers thanks to the new technology of printing. Yet its greatest significance lay in a slim ‘how to’ chapter that described the double-entry accounting system used by Venetian merchants.
With examples from dealers in butter to lemons to silk, Pacioli set out the method for tracking income and expenditure and the calculation of net profit or loss, which for the first time allowed an immediate snapshot of a firm’s financial position. This slim section would facilitate the birth of the modern corporation.
“Without order there is chaos,” Pacioli observed in a breezy style that is still in vogue in business books today. His manual is stuffed with quotes from scripture and Dante and pithy advice such as “Don’t learn from ignoramuses who have more leaves than grapes.” He wrote the accounting chapter to help would-be traders in Venice, then the capital of the financial world, “sleep easily at night”. Without double-entry book-keeping, “their minds would keep them awake with worry”. He could not suspect that what might be called “Book-keeping for Dummies” would become the backbone of business for centuries.
Like many monumental works of 15th-century printing, Pacioli’s treatise has survived in its original form. Some 120 copies still exist, from an initial run of about 1,000. Now today’s moguls have a chance to own this first folio of finance. Christie’s, the auction house, is offering a first edition in its original vellum binding for sale in New York on June 12th. The starting price is $1m for what it unabashedly calls “the most influential work in the history of capitalism.”
Pacioli’s later life augments the glamour of the first printed use of ‘plus’ and ‘minus’ signs. Impressed by the book, Leonardo da Vinci convinced his patron Lodovico Sforza to hire Pacioli to teach at the court of Milan. Pacioli and Leonardo collaborated on the treatise “Divina Proportione,” which married maths with art through the study of perspective. Not one, but two Renaissance masters were thus responsible for the exquisite harmony of “The Last Supper”…
As we count carefully, we might recall that it was on this date in 1902 that a US patent (#701,839) was issued to Americus F. Callahan of Chicago, Ill., which he called the outlook envelope– what we call the window envelope.
“Portrait of Luca Pacioli [the father of double-entry accounting] with a student”
You’ve never heard of Yuji Ijiri. But back in 1989 he created something incredible.
It’s more revolutionary than the cotton gin, the steam engine, the PC and the smart phone combined.
When people look back hundreds of years from now, only the printing press and the Internet will have it beat for sheer mind-boggling impact on society. Both the net and the printing press enabled the democratization of information and single-handedly uplifted the collective knowledge of people all over the world.
So what am I talking about? What did Ijiri create that’s so amazing?
Triple-entry accounting.
Uh, what?
Yeah. I’m serious.
But don’t feel bad if you slept through the revolution. It wasn’t televised or posted on Reddit. When Professor Ijiri died in 2017, most people didn’t catch his obituary. His most famous book, Momentum Accounting & Triple-Entry Bookkeeping, has a grand total of zero reviews on Good Reads. So you’re not alone if you missed it…
As we don our green eye shades, we might recall that it was on this date in 1995 that the longest federal government shutdown in US history took place under former President Bill Clinton while Republicans, led by Speaker Newt Gingrich, controlled both houses of Congress. It lasted over three weeks, until January 6, 1996.
Can you converse in Klingon? Ask an Elf the time of day? Greet a speaker of Esperanto? These are among the more than 100 constructed languages you’ll find in this book. For each one, author Stephen D. Rogers provides vocabulary, grammatical features, background information on the language and its inventor, and fascinating facts.
What’s more, easy-to-follow guidelines show you how to construct your own made-up language–everything from building vocabulary to making up a grammar…
As we muse that tsun oe nga-hu ni-Na’vi pangkxo a fì-‘u oe-ru prrte’ lu,* we might recall that it was on this date in 1896 that the first Certified Public Accountants (having passed exams required by legislation passed earlier that year) received their certificates (in New York).
Portrait of Luca Pacioli– the author of the first text on bookkeeping– attributed to Jacopo de’ Barbari, 1495 (source)
* “It’s a pleasure to be able to chat with you in Navi.”
A Dictionary of Made-up Languages
Portrait of Luca Pacioli– the author of the first text on bookkeeping– attributed to Jacopo de’ Barbari, 1495 (source)
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