Notes

1 One of the best books ever written about risk is Peter L. Bernstein's Against the Gods: The Remarkable Story of Risk (New York: John Wiley & Sons, 1998). It is highly recommended reading.

2 And, of course, luck. But Lady Luck always favors the bold.

3 If you could invest $1 million and compound it at 50 percent per year for 10 years tax free, your money would grow to $134,000,000. Venture capital profits aren't tax free, of course, but they are tax deferred (profits are generated many years after the investments are made) and almost always receive long-term capital gains treatment.

4 As discussed in Chapter 2, Andrew W. Mellon was probably the first American venture capitalist in the modern sense of the term. Mellon and his family and family bank provided the seed capital for such ventures as Alcoa, Koppers, Gulf Oil, and many other firms, as well, of course, as Mellon Bank itself (founded by Andrew's father, Thomas).

5 For this reason, purchases of extremely large blocks of a particular stock will often occur not on a stock exchange but in a negotiated transaction. In such a transaction the buyer(s) will often get a bargain, a true “quantity discount” relative to the price at which the stock is selling on the exchange. On the other hand, the seller will also get a bargain, because the discount he will give the buyer will be lower than the discounted price likely to result from the market impact of such a huge sale.

6 Even more extreme events are also characteristic of ...

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