The self-inflicted kind

An important difference between private and public market investment is the investor’s influence over the outcome. In public markets, where minority short-lived positions are typical, this is at most indirect, noticed by Soros and others as reflexivity. It may take place in the collective, or when certain vocal investors are involved.

In private markets, the collective and the investor’s voice are a constant force that acts directly, unabashedly, on enterprise formation. There are conditions to investment, there is the magnitude itself, there’s usually board representation, management access, preferential ranking… and this is all in cases without overt control, which would only magnify the force of the direction.

When public markets, which can be fickle and have every right to be, (with individual positions that are usually liquid, small, and passive), are the cue for the way private capital behaves, this is a second order of reflexivity that may come with [un-constructive] consequences… because the private round is by design different: long-term in nature, theoretically patient, and directly influential, as described. Inconstancy, thus, doesn’t translate well, not how it might elsewhere in the wild.


All volatility is not equal. That which, perhaps, adds to efficiency and long-term option value in one case, may lead to the opposite in another.