Baxnet Ideas · Founder note
The First Human-Potential Fund Should Probably Be a Mutual
TL;DR: If people create the returns, they should not remain entries in somebody else's portfolio. The first fund should make them members.
Imagine the first serious human-potential fund backs 100 people.
It pays for qualifications, childcare, equipment and enough time away from ordinary work to make a difficult move possible. Five years later, some of those investments have returned money. Some have failed. The fund has also accumulated something less visible: a better way to assess plans, a network of people who have made them, and a growing record of what support helped.
Who owns all of that?
In an ordinary fund, the answer is fairly simple. The investors own the economic interest and the manager runs the vehicle. The people whose progress produced the returns appear in the portfolio.
That feels like the wrong starting point here.
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The fund will become more valuable than its contracts
The first version of a fund may be held together by thoughtful founders and unusually patient investors. That is useful, but it is not a constitution.
If the idea works, the fund will develop its own methods. It will learn which kinds of support matter, build relationships with educators and employers, attract better applications and establish a reputation that makes future capital easier to raise. Former participants may start mentoring new ones. Personal evidence, even when carefully limited, will help improve its judgement.
Much of that value will have been created by the people it backed. Their attempts taught the fund how to operate. Their repayments replenished it. Their introductions and advice made the next attempt less lonely.
Yet a conventional ownership structure can leave them with no lasting claim on the institution. Once their agreement ends, they leave. The fund keeps the learning, network and brand.
The more I think through personal intelligence as infrastructure for this kind of finance, the less comfortable I am with that arrangement. Better information should not merely help an outside vehicle become better at pricing people. It should help the people involved build an institution that remains accountable to them.
Mutual is an answer to the ownership question
I do not mean a conventional mutual fund that pools investors’ money to buy shares. I mean a member-owned organisation.
The UK government’s guide to mutual ownership describes a mutual through the degree to which members democratically control the business and share in its profits. That is the useful design test, even before choosing a particular legal form.
The International Cooperative Alliance makes the model more concrete. Its principles include democratic member control, member participation in capital and the allocation of surplus to reserves, member benefit or purposes approved by members. It also deals directly with external finance: capital can come from outside, but on terms that preserve member control and autonomy. Those principles have been refined over generations of actual cooperative work.
For a human-potential fund, the people being backed should become members rather than temporary counterparties.
That membership would not give everyone a vote on every application. Underwriting requires privacy, specialist judgement and the ability to say no. Members would instead control the constitutional questions: which outcomes the fund values, what evidence it may request, how directors are appointed, how surplus is used and which changes require member approval.
This is ordinary governance work. It matters because the fund’s incentives will eventually outlive the good intentions of its first team.
The people who need capital cannot be expected to provide it
There is an obvious problem. A person asking for £12,000 to retrain is unlikely to have £12,000 available to capitalise a mutual. Requiring the people being backed to fund the vehicle themselves would recreate the barrier it is meant to remove.
External investors still have a real job. They provide early risk capital, accept that some attempts will fail and wait while the fund learns. They should be able to earn a clear return when it works.
The limit should sit around control. Writing the largest cheque should not buy a permanent right to redefine a good outcome, sell the institution or turn its evidence base into a more aggressive underwriting asset. Financial rights can be substantial and time-bounded. Constitutional control should remain with the membership.
That may require a hybrid structure rather than a neat off-the-shelf wrapper. It will certainly require regulatory work. The Financial Conduct Authority notes that UK cooperative societies can be run for the economic, social and cultural benefit of members, while any society carrying out regulated financial activity may also need the relevant authorisation. Registration and financial regulation are separate questions.
So the word probably in the title is doing some work. The exact legal answer will depend on the contracts, jurisdiction and source of capital. The ownership principle should be settled first.
A mutual can still make hard decisions
Member ownership is not a promise that every member gets funded twice, repayments disappear or unsuccessful investments are quietly called successes.
The fund still needs independent underwriting and published conflicts rules. Somebody has to stop a popular but weak proposal. It needs reserves. It must measure whether its support caused a change that would not otherwise have happened. It also needs a procedure for removing directors who become careless with other people’s money.
Democratic governance can be slow. Mutuals can find external capital harder to raise because they cannot casually exchange control for cash. Member participation may become thin once the organisation grows. None of this is solved by writing “one member, one vote” in a document and moving on.
The rules and operating model have to deal with those problems. Giving the institution to outside capital would not make them disappear.
The first version might reserve board seats for current and former participants, use independent investment committees for individual decisions and require a member vote for changes to outcome measures or data policy. Surplus could first rebuild reserves, then lower future financing costs or support opportunities selected through an agreed member process. The first version will probably get some of this wrong. Its members need a way to change it.
Personal intelligence should strengthen membership
A personal intelligence engine has a fairly narrow role in this structure.
Before an investment, it can help somebody assemble evidence for a plan and decide what they are willing to share. During the attempt, it can keep the person’s own account of progress separate from the fund’s contracted measures. Afterwards, it can produce a record that both sides can inspect without giving the fund permanent access to the rest of the person’s life.
Across many members, the fund may learn that childcare often matters more than another training module, or that a six-month pause protects more value than forcing a failing plan to continue. Those lessons can improve the institution. The underlying private histories do not need to become its property.
Membership gives the people who generated that learning somewhere to stand. They can question a new evidence requirement, challenge a narrow definition of success and decide whether surplus should reduce costs for the next group or be returned in another form.
The first hundred people would then leave behind more than repayments. They would leave a better institution for the next hundred, and still have a voice in what it becomes.