TED Conversations

Lucas Luniewski

CEO , FUTURITION

This conversation is closed.

What should be the right proportion of capital investments in venture projects?

As people all over the world talk about the crawling crisis, the insufficient growth and the limits of growth, they seem to forget about the source of it - which is to discover, develop, and sell.
This is how all the big, known, now considered as traditional and safe, businesses started. They had not been always so safe.
Is the limited proportion of investment in venture projects the real reason of the limits of growth they talk about? What's the right proportion then?
Are we still bound to the way of thinking from 20th century as living in 21th?

Share:
  • May 2 2012: In Venture Projects Hardly one can predict the future with certainty. Sudden Global Crisis, Slump in Demand or supply of raw materials, Political Crisis, Technological Changes etc are few factors that determines the fate of any venture. Market today are really unpredictable. In venture projects one should see how much project is flexible enough to cop up with the uncertainty in short can we mitigate risk is project plan properly incorporate ways for it if answer is yes then we can decide how much capital we should pour in to it. always think for long run then short run as return will come in long run only. Proportion should be based on projection keeping in view all the factors stated above.
  • thumb
    May 1 2012: how do we know that the question is the ratio? i would say, good projects should be funded, bad projects shouldn't. so the ratio of funded and unfunded projects should be, ideally, the same as the ratio of good and bad ideas. and this ratio varies with time and place.

    to be even more precise, the ideal situation is this: every idea is presented on the financial market. those, who handle savings fund these ideas. they will of course try to first fund the ideas promising the most return (ROI) at the smallest risk. on the other hand, savings are available dependent on the offered interest rate. the higher the rate, the more savings are coming in. at a certain point, the market is "cleared", that is, all the money available at a certain interest rate ended up in enterprises promising exactly as much returns so the interest can be paid. one more dollar of saving could be collected only at an interest rate that can not be earned with the proposed investments. the spectrum of investments follow a pattern. the sooner an investment grants returns, the lower the interest on the borrowed capital. so in times of fewer savings, short term investments win. as the amount of savings rise, the price of it, the interest, goes down, and long term investments start to get more funding. the distribution is shifted toward long term.

    enters the politicians, who love megaprojects. knowing that the requirement is low interest rates, they try to artificially lower them. the resulting effect is indeed an increase in long term investments. but because the actual amount of savings didn't go up, those projects are doomed to fail. this might be the reason behind the so called "skyscraper index". the artificially redirected money goes into crazy megaprojects that do not benefit anyone.