On Wall Street the top and largest hedge funds grant “pads” of anywhere from $25 to $500 million to young manager to invest. These pads operate autonomously and the young managers who run them take a direct cut (roughly 25% to 50%) of the firms share if the profits.  So if you run $100 million, and return 15%, the fund takes 20% of that ($3 million), and as a rock star manager, you might take 50% ($1.5 million).  These leaves out the manager’s take of the management fee.

Successful managers do not feel the need to leave and unlike Google or other large companies, great managers (startups) do not die at large funds, they thrive.

The pad methodology avoids bureaucracy.  Sure Google allows android and chrome os to compete, but these teams still report into a larger top down, single entity. It’s one structure without pads that are free to make their own decisions.  How else can one explain a team of engineers leaving Google to build Aardvark, only to return in under 24 months for $50 million. Couldn’t they have been a pad? Couldn’t they have operated autonomously and have the same team that acquired them assign some value in stock to what they had accomplished?

For it’s infinite flaws, the hedge fund complex has solved the “getting big” problem in a way tech companies have not.

We need to create autonomy in the big structures. We need capitilist pads of innovation, where creators can eat what they kill without the need to roam the prairie. Otherwise we are resigned to this cycle of great tech companies having relatively short lives compared to industrial counterparts.