HYBRID VIGOR: VOL 3 ISSUE 26 "Skin in the Game"

As a bicoastal who admittedly doesn’t follow basketball the way I did in my youth, I root for the Knicks (who won a championship a few months before my family moved from New York to California in 1970) and the Warriors (who won one five years later as I had become firmly entrenched as a Bay Area kid).  You’d think I’d be happy that one of the best players in the league is joining one of my teams. You’d be wrong.

There’s something pure and necessary about competition and loyalty. In the popular media of my native and current home, there’s a huge (should I say “yuge?”) myth that the fans demand a winner every year. Baloney. What the fans want is an honest effort for the money they spend, put out by a group of players they can feel ok about rooting for, and preferably by players that have spent most or all of their careers with the team. That’s not to say there’s no room for a mercenary here and there, but there’s something distasteful about it.

Similarly, though most readers of this publication have a reasonable long affiliation with the convertible asset class, it’s been tough staying loyal.  It’s been hard to make a living from our quirky hybrids in recent years, whether on the buyside, sellside, or at some hybrid startup dropped in the middle of a forgotten spot in Westchester.  It’s been sad to see a lot of good people leave the business entirely, but we all need to find a way to make a living. For our part, we’re sticking with our convertible anchor, but when we can add to it with related assets, like options and high yield, we gladly do so. It all fits, anyway.

For Kevin Durant, look, he has a right to work wherever he wants, just like everyone else. Unlike most everyone else, he’s becoming very wealthy from his career. Good for him—he plays a difficult and exhausting game at a level few people can imagine.  But the overall sport suffers when competition declines. Putting too many stars on the same team detracts.  It makes it harder to be a real fan.  And Mr. Durant wasn’t exactly going to have a hard time supporting his family in Oklahoma.  It seems somehow wrong that he’s rewarded for a decision that hurts the game.

It’s good for the markets and the economy when there are plenty of viable ways for companies to raise capital. The convertible market was surely overbrokered not long ago, but now the talent pool in the market is growing thin. It’s a vital and necessary part of our capital markets that has long punched far above its weight.  We need as many of our competitors as possible to keep fighting. As Lin-Manuel Miranda says as Alexander Hamilton, “When you got skin in the game you stay in the game. But you don’t get a win unless you play in the game.”  And while there’s never a bad time to quote the best show I’ve ever seen, it seems especially relevant in the week when we celebrate our Founding Fathers.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).