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Funny Money?

Published on October 26, 2017

While the Tory party conference was, ahem, in full flow, I heard a debate among political commentators observing the current political landscape. Their conclusion was that fewer and fewer people don’t feel that they have a stake in the capitalist system. This disillusionment is driving support to the socialist dream of Jeremy Corbyn in which wealth is distributed fairly (from the few to the many). Those appearing most attracted to this vision are young people who haven’t experienced the turmoil of the 1970s. We were youths once; we knew it all back then and didn’t need history as a guide. I always saw Robin Hood’s antics as necessitated more by the absence of Good King Richard than Bad King John. Only latterly did I form the view that there have always been bad people in some positions of power for a long time. But it also doesn’t follow that everyone in power is a bad person –as we all learned at school, the converse is not true.

Can we acknowledge that the people at the top don’t pass a goodness test to get there? Rather they are the ones others look toward. It’s not unusual for difficult meetings in corporations to end with no conclusion other than “Let’s see what Steve/Bill/Larry says” and the arrival of the CEO produces a resolution.

Some leaders are there because they had the idea. Without the determination of Edison, Dyson and Ellison we wouldn’t have the items we can’t live without. And what do they do it for?

The love of doing it; and funny money.

I think that entrepreneurs are motivated to a greater or lesser extent by

  • The need to prove themselves (to someone who said they’d never make it);
  • A desire to make a difference; and
  • To give something to the world that will benefit it.

They have to spend money to prove that it works, and get pieces of paper (shares) which won’t even buy a loaf of bread when they’re issued. When they succeed, they get plaudits, shares worth a lot of real money, and a list of obligations – to employees, investors, tax men, the environment…

I think we would all be better off if these shares were what people instinctively, intuitively understood as “a stake in capitalism”. But, as you can see, they are derided, until they become objects of envy. The vast majority, I believe, prefer the so called certainty of owning a house, (complete with its vast mortgage) to having shares in the company in which they work, which are earned for good service and will be worth something provided that market and product are well managed. Bricks and mortar are seen as a safe store of value, and even preferable to a savings scheme which owns shares in quoted companies even though their value is the result of a market starved of supply.

What I think we’re missing is the risk inherent in the price of all assets. While an individual share is riskier than an individual house, a parcel of shares – say a bit of the largest 350 companies – actually isn’t. Although shares sometimes go down in value, over time they increase inexorably as wealth is created, whereas houses, the least productive assets would grow in line with inflation were the market freer.

The 50% of young people who are students resent the borrowings they incur to get a degree, which could itself be seen as a stake in society, and the Tory conference included a pledge to reform the system. I wonder if the reforms could incorporate an award of some shares, maybe dependent on length of course and class of degree? Maybe a special class of share in the University with some rights to income from its research and development would give these hard-working people (it was different in my day) a tangible financial stake in the system? Sound like funny money? Maybe as funny as shares in a bag less vacuum cleaner? Leadership can be a thankless task in the beginning.