Few people in the United States today have the same level of insight into the tech world and tech businesses than Shervin Pishevar. As the founder and CEO of Sherpa Capital, one of the most important venture capital firms in Silicon Valley, Shervin Pishevar has proven that he has the golden touch when it comes to finding and funding the next big names in tech.
But as one of the most astute observers in the tech world, Shervin Pishevar has also come to a number of ominous conclusions about the structural difficulties currently facing the United States. In a recent tweet storm, the famous entrepreneur addressed a large number of pressing issues that are confronting the country. One of those issues is the unavoidable development of nomad entrepreneurs and the consequences that will face the United States if it handles their advent the wrong way.
Shervin Pishevar says that the world is becoming an increasingly globalized place for those who have the means to take advantage of the ways in which countries can directly compete with one another. For example, Pishevar points out that tax rates between various jurisdictions can radically differ as can the rules for such things as incorporating businesses and whether or not someone is taxed on earning that they make outside the country. In particular, Pishevar says that the United States has some of the worst rules in this regard, a leftover relic from a time when American society enjoyed far higher levels of general trust and feelings of civic duty than are prevalent today.
The consequence, he argues, is that the talented capitalist class is acutely aware of what a terrible deal they are often receiving for running businesses in the United States and maintaining citizenship in the country. Pishevar says that, when millions of dollars per year in personal and business taxes are at stake, today’s globally inclined entrepreneurs won’t hesitate to relocate to jurisdictions in which they are treated better. Because Pishevar says that he personally knows many entrepreneurs who are offshoring, this effectively means that the United States is already extremely uncompetitive. The country risks serious gross tax revenue declines if it keeps running off its most productive citizens.
The 2008 financial crisis was one of the worst in the history of the United States. The reasons behind it are numerous, and there is still vigorous debate about the role that various policies, financial vehicles, institutions and people played in bringing about the worst financial catastrophe since the Great Depression.
However, everyone who has studied the 2008 debacle almost universally agrees that certain financial instruments and the extremely loose regulations surrounding them were chief culprits. So-called mortgage-backed securities and credit default swaps were key components in the economic bomb that ultimately exploded, nearly bringing down the entire financial edifice of the United States with it.
Shervin Pishevar, one of the most successful entrepreneurs in Silicon Valley, recently unleashed a flurry of tweets on his account, which is followed by nearly 100,000 people. One of the more provocative ideas that Shervin Pishevar put forth was that some of the same dynamics that led to the 2008 crash are now being repeated, and for much the same reasons. Shervin Pishevar believes that volatility indexes and the funds that are centered around them are essentially scams, fueled by the same base motivations that led to the rise of collateralized debt obligations and credit default swaps.
Pishevar says that the real reason behind the huge popularity of volatility indexes, prior to their momentous crash last February, was the simple fact that many fund managers want to create volatility because that is what they are incentivized to do. Pishevar points out that the way that many fund managers are compensated is equivalent to a classical principal-agent scam. The manager wants to create as much volatility as possible because he is able to participate in the upside without personally assuming any of the downside risk. That means that the more frequently the fund registers huge wins, the more the manager will actually be paid over the long term.
Shervin Pishevar strongly warns that all investors should read and understand a fund’s prospectus before investing. In particular, they need to carefully read and, if need be, go over with a professional the compensation structure of the fund, making sure that the management is not incentivized to run very costly scams with the investors’ money.