“Most financial innovations look like toys at first. The toys build the infrastructure, and the infrastructure quietly builds what comes next.”

Retoro Capital Investments

How a “Toy” Quietly Built What's Coming Next

As any parent knows, serious tools for adults start out as toys for children. From reading "pony pal" trite fiction as kids to dense medical textbooks in college, 3D printing plastic toys to mechanical engineering, and figuring out a Minecraft mod to becoming a data scientist, the pattern repeats again and again.

For a long time, it was like this with blockchain, cryptocurrency, and it was especially easy to dismiss NFTs as nonsense. I mean, Bored Ape thumbnails worth thousands? :eyeroll:

Monkey pictures and memes fueled noise and speculation; the entire thing was ridiculed as useless "tulip bulb" chasing, but underneath that was growing a technology that would change the way we invest forever.

We just don't learn that history has a habit of repeating itself in uncomfortable ways.

Blockchain and NFT technologies are ringing in a new era of private market investing into alternative non-public assets:

• Direct ownership of real estate

• Precious metals

• Collectibles

• Art, even if it looks like JPEGs of monkeys.

These technologies can quantify and tokenize secondary trading of non-fungible, unique assets to a more open market. Eventually, this will mean private assets will look a lot more like publicly traded assets, including more liquidity with improved private valuation data to create index or interval-like funds that may become the private standard in similar ways to the S&P 500 benchmark.

Additionally, this increased accessibility to private funds is also fueled by securities regulations that enhance access for small businesses to attract private investors at unprecedented rates.

Most major financial innovations are dismissed as unserious or wastes of time before they look inevitable. The toy phase comes first, the tools come later.

The monkey days are over, and the new tools are starting to arrive.

The Pattern We’ve Seen Before

Every major leap in investing infrastructure has followed the same arc:

• Early internet: chat rooms, animated GIFs, and GeoCities became eTrade and Robinhood

• Early fractional shares, considered nuisance shares, are now a standard of low-cost trading

• Early index funds: “Why would I want to be average?” became the benchmark to beat

• Early ETFs: Even Jack Bogle, the champion of index funds, said they would just encourage speculation, until they became mainstream in serious investors' portfolios

• Early crypto: meme coins and monkey JPEGs are becoming blockchain tech, validating authenticity and enabling trading and data for private assets

The surface behavior people were playing around with wasn’t the innovation. The real power was the infrastructure underneath those "early toys."

NFTs Weren’t About Art

Whether you liked NFT apes or not, they stress-tested something important, proving that markets could handle:

• Provable digital ownership

• Instant settlement

• Demand for fractional interests

• Transferability without paper

• Secondary trading at global scale

NFT art was not the destination, but money flowing into it fueled the motivation to develop the sandbox for building capital markets plumbing. The serious use cases for blockchain, NFTs, and smart contracts were always going to come later, after the "toys."

Why Public Markets Feel So “Easy” Today

Public market investing feels simple because decades of infrastructure do the hard work for us. In the 1970's and 80's, my grandfather learned the hard way to play in the stock market and did well for himself. I was inspired by that as a kid and spent many years trying to learn how to invest. I interviewed managers of publicly traded funds, devoured Morningstar reports, and kept giving up because I found an easier way that didn't require all the research and upkeep. The way he built his successful stock portfolio has changed due to technology that was initially dismissed and criticized.

Today, we take for granted:

• Index funds promoted by Jack Bogle of Vanguard and Burton Malkiel

• Fractional shares are not fully realized until 2019

• Near-instant liquidity with 2024 T+1 settlement

• Frequent share or net asset pricing (NAV)

• Transparent pricing

• Electronically Traded Funds

• 2026 rollout of 24/7 trading for public tokenized assets

None of that happened naturally or without pushback and criticism. These innovations were engineered through technology and adoption breakthroughs that still took decades to implement, such as data availability, standardized securities, centralized ledgers, market makers, and regulated public exchanges.

Convenience and diversification are now designed outcomes. As I slowly onboarded these innovations during my attempts at learning stock market trading, I realized I didn't need to be a trading genius: I just needed a few benchmark index funds on set-it-and-forget-it.

That ease of public markets is what drove me to private markets, where experience, entrepreneurship, and execution still matter to take advantage of inefficient markets. To be sure, public markets still face high degrees of manipulation and inefficiencies, but private markets are far less efficient, making it easier for a non-financial expert like me to "beat alpha" there, whereas in public markets the margins have become so slim I need experts to exploit them on my behalf.

For investors and entrepreneurs managing underlying businesses, active management and experience will always matter. However, I see that for myself, as I become more passive even in private markets, those same technologies are slowly turning private markets to go the way of public...almost.

History of the Tech and Pushback

“Bogle’s Folly” and the Myth of Mediocrity

When John Bogle, founder of Vanguard, launched the first retail index fund in 1976, the reaction wasn’t curiosity; it was outright ridicule. The idea was nicknamed “Bogle’s Folly.”

Critics argued:

• Diversification guaranteed average results

• Indexing admitted defeat before trying

• Serious investors should concentrate, not spread capital

• No professional would accept “mediocre” returns

At the time, these arguments sounded reasonable. As late as the 2010s, top mutual fund managers told me the same thing, quoting Charlie Munger that, "Diversification is just a cover for ignorance creating mediocrity."

But when I looked into those managers' performance against the stock market as a whole, let's just say I didn't invest because even back then, I could already see that "machines" were beating the humans.

Indexing didn’t win because it was philosophically elegant. Computing power was limited, rebalancing was manual and expensive, and market data was slow and incomplete. The idea of indexing existed, but they didn't win until the technology infrastructure made it possible.

Now with decades of data behind it, the passive holding of the S&P 500 is the strategy to beat, with less than 20% of active professionally traded funds beating it over 10 and 20-year periods. Outperforming now often requires advanced strategies that are just as hands-on as the trading days of yore.

Even Warren Buffett won a million-dollar bet spanning 2008-2017 bet that a simple index strategy (ironically, Vanguard 500) would outperform a hand-picked basket of hedge funds. What's worse, during that time, even his Berkshire-Hathaway portfolio had not outperformed the S&P 500.

Index funds are not a magic formula to win, however, because the underlying thesis of what to put in an index is still by design. The key has been to watch which indices consistently outperform the total market and use the convenience of ownership with automatic rebalancing to free us up to do other things with more impact.

Fractional Shares

Fractional ownership has been around for decades, but no one wanted them. Events like stock splits created nuisance shares, and adoption came later.

In Bogle's day, fractional ownership was clunky and expensive to manage, difficult to trade.

It won because technology eventually made it practical.

Over time, markets gained:

• Cheap computation

• Standardized securities

• Automated rebalancing

• Transparent pricing

• Deep secondary liquidity

Only after those tools matured did the data become undeniable.

“Diversification Is Mediocrity” Until It Isn’t

For decades, many respected investors favored concentrated portfolios, often with around just a dozen carefully curated holdings. And at the time, the logic was sound:

• Fewer positions meant deeper conviction

• Skill should beat averages

• Focus signaled sophistication

That approach still works for some, but a very few outperform a simple index strategy. As market infrastructure matured, something changed. Once transaction costs collapsed, information became ubiquitous, and execution friction disappeared, a simple diversified approach tracking the S&P 500 stopped being “average” and became the benchmark most active strategies failed to beat. It wasn't because concentration stopped working, but because competition intensified and alpha decayed faster.

Diversification wasn’t mediocrity anymore; it was efficiency. But those inefficiencies still exist in private markets today.

The Real Lesson of History

I'm no stock market historian. I put away most of my interest in actively managing it in favor of using my time and energy where my efforts could have more impact. I still hold public stocks, but I don't watch them or trade them. I dollar-cost-average and lump sum my way into a few select ETFs focused mostly on total growth with some about liquid income, and let it ride.

Indexing didn’t prove concentration wrong. It proved that as tools mature, the bar rises.

What once required exceptional skill to outperform eventually became harder to sustain and less forgiving of mistakes. The winners are no longer those with the strongest opinions or even the most information; they are those aligned with how markets evolved.

Private Markets Today Feel Harder Because They’re Earlier

Private investing hasn’t caught up to public-market infrastructure yet. There is still a long way to go with many hurdles before anything replicating a set-and-forget private index fund can exist.

When you think about it, your buddy's landscaping business is technically a private market company, and you could invest in it as a micro joint venture. That would look nothing like investing in larger companies with securities regulations, taking on limited partners. So let's limit, for the purposes of this article, the definition of "private companies" or "private markets" that are offering securities to limited partners.

But even for those businesses offering securities facing higher scrutiny, albeit still less than publicly-traded companies, there are inefficiencies where we can still win.

These inefficiencies show up as:

• Fragmented ownership records

• Who's in your professional network

• Manual cap tables

• Illiquidity by default

• Higher minimums

• One-off deals instead of portfolios

• Slow and cumbersome purchase and trading of shares

Private markets aren’t broken, though; they’re simply earlier, but on the move to become more advanced as tech advances.

Scott Galloway, NYU professor and successful founder, often cites the unfair advantage he has in private markets by having access to pre-IPO founders and a financial safety net most people don't have. He says his higher risk approach is not easily replicated, and that's still true. But the merging of these inefficiencies with early tech and regulatory changes is opening up these "unfair" opportunities to more investors with less risk.

If we can build that safety net of financial resilience with large liquid reserves, increase our network of private-market executives of smaller companies, and take advantage of new fund structures more open to accredited and unaccredited investors with lower minimums, we can start to approach the ease of public markets with the bigger margin of private markets. The win is in that gap, but it is shrinking.

What’s Quietly Being Built Now

The same tools tested during the NFT era are now being applied to serious assets:

• Private credit

• Real estate

• Private equity

• Fund interests

Specifically, these innovations refer to:

• Digital ownership records

• Programmable compliance

• Fractional exposure

• Structured secondary liquidity windows

• Lower minimums

This doesn’t eliminate risk, and more access to data and liquidity is increasing volatility. However, this improves access, structure, and transparency.

How Evolving Securities Regulations Are Fueling Change

506c funds can now be publicly advertised, a huge change after decades of "who you know" meant "the rich get richer" in private, word-of-mouth-only funds. Large new fund structures, such as Regulation Crowdfund or Reg CF, and Regulation A funds, allow any adult to invest regardless of financial status, with minimums often much lower.

The possible accredited (certified) investor exam that continues to be proposed and approved by the House is part of the SEC's larger mission to make capital more widely available for smaller businesses, which in turn means more Americans need to be able to enter private markets.

Evolving tech like smaller special-purpose vehicles or SPVs that are cheaper to launch and manage open access to more capital raisers. And options for creating customizable funds through better tech like investor portals for tax report generation and tracking, single sign-on to see a variety of investments on one dashboard, micro "family office" style dashboards with fractional advisors allow more families to treat managing and growing wealth like the business that it is.

Why the Future Still Won’t Ever Look Like a Private-Market ETF

Private markets are not turning into public markets, but taking cues from it. There's a long way to go, and even as we get closer, here's where things will never be able to fully replicate the current "easy button" index investing of public markets.

Due to less regulation in how private companies operate, there will still be huge variations and gaps in data, accounting, reporting, disclosures, and more.

What is emerging instead:

• Index-like baskets that allow dollar cost averaging

• Vintage-specific portfolios

• Rule-based diversification

• Optional, but not guaranteed liquidity

It will look closer to how private credit and insurance pools already work, just cleaner.

A Practical Bridge Between Today and Tomorrow

As will always be the case, the future isn’t here yet. But we investors don’t need to sit on the sidelines waiting for a perfect system.

Today, accredited investors can already participate in more customizable private-market structures that reflect where things are headed.

At our private fund, Retoro Capital Investments, that means:

• Customizable allocation where our investors choose which properties they want to invest in, no blind pool where we make all the decisions, and still receive a single K-1 for all investments in the fund with your unique returns.

• The ability to allocate as little as $50k, earning 10% APR across multiple first-lien loans for diversification

• Or concentrate $200k+ into a single loan position for enhanced economics, paying 12% APR

Our diversified allocations targeting 10% APR cash flow, with optional reinvestment of earnings, can potentially compound up to 13%+ IRR over a 5-year horizon.

Concentrated allocations targeting 12% APR, where voluntary lockup and reinvested gains can potentially compound toward 15%+ IRR over five years.

All our positions are backed by first-lien real estate loans, where risk is defined, collateralized, and underwritten conservatively.

If you'd like to talk to us about investing in our private fund for accredited investors, you can easily get to know us at Retoro Capital Investments and by talking to us (real people) on the phone by scheduling at partnerwithrci.com. We look forward to helping you expand into private lending for your diversified portfolio.

The Bigger Picture

What's on the horizon for private market investing? We’re watching the same advancements everyone else is:

• Tokenization for fractional share ownership

• Secondary liquidity on alternative trading system platforms is already in use

• Smarter portfolio construction through lower minimums and higher diversification

• Better dashboarding and monitoring of investments

Like you, we’re doing two things at once:

1. Taking advantage of the tools already available

2. Designing for what becomes viable next

The direction is clear: more customization, more transparency, more convenience without more risk.

Final thought

The monkey JPEGs were never the point; they were the toy phase that taught markets how to handle digital ownership at scale. The serious applications always come later in quieter, regulated, and far more useful ways.

You don’t need to wait for the future of private markets to arrive fully formed. You can already invest in enhanced ways that reflect where things are headed. As this tech advances, private market returns will regress to the mean by "asymptotically" approaching market efficiency just as public markets have, and teasing out those asymmetric opportunities will become more and more difficult for investors.

Now is the time to take advantage of the ease of technology while addressing the efficiency gaps that still yield outsized returns if investors become more educated, informed, connected, and ready to make decisions to build a better portfolio.

All opinions are those of the author, who is not a certified financial planner or tax expert, and no one can predict future investment success based on past performance.

And remember, the sooner you start, the sooner you can wish you'd started sooner!

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