Gambler? No, I am a compulsive capitalist

By Luke Johnson, Financial Times

Are entrepreneurs really just gamblers at heart? I don’t believe so, but that view reflects my own prejudices. I have never enjoyed playing games of chance for money; when I gamble I prefer to be the house. So rather than bet as a punter, I have owned bookmakers, bingo halls, greyhound tracks and suchlike.
My attitude is partly influenced by my undergraduate degree, which included a course in statistics. That involved studying the laws of probability. Ever since, I have avoided financial transactions where the likelihood of losing appears high.
Yet some entrepreneurs undertake ventures at long odds. They back high-risk business ideas either because they are in denial about the hazards or because they are emotionally committed to the project. Gamblers wager because they feel lucky, for escapism, for entertainment, or because they lack the power to stop. The motivations are rather different.
I recently became chairman of a charity called Action on Addiction that deals mainly with substance abuse; but many experts also consider behavioural problems like pathological gambling to be an addiction too. And even though I don’t consider entrepreneurial speculation to be gambling, I do suspect that I am a compulsive capitalist – I cannot resist business opportunities. Plenty of serial entrepreneurs possess the same weakness.
Why do we do it? Boredom perhaps, a craving for stimulation, unslaked ambition, a new challenge, curiosity or simply habit – who knows? I suppose, like the parable of the scorpion who cannot resist stinging the frog carrying him across the river, it is just what we do.
My friends and wife sometimes despair: why yet another venture? Surely enough is enough. But it never is. And that might be why entrepreneurs who have already made it insist upon rolling the dice again – even when renewed perils cannot be rationalised. How else does one explain why Adolf Merckle, reputed to be worth $9bn, brought his industrial empire to the edge of ruin by losing huge sums in a misguided bet on the shares of Volkswagen? Tragically he committed suicide when the investment went wrong.
I like to think that the fundamental distinction between gambling and the sort of business investments I make is about a degree of influence over the outcome. Taking a flyer by buying a lottery ticket is something over which one has no control. By contrast, staking money on the success of a start-up is a matter of judgment and work – you can influence the result.
The appeal of gambling is the uncertain outcome; entrepreneurship is about eliminating uncertainties. Astute entrepreneurs are constantly trying to reduce their downside and improve their chances of winning. Moreover part of the lure of gambling is that it seems to be easy money. Whereas founding a business takes effort. I don’t condemn gambling as an immoral activity,
but I do believe taking business
risks in starting or buying an enterprise adds a great deal more value to society.
Unfortunately those who attack capitalism and don’t understand entrepreneurs tend to see gambling, speculation, equity investing, venture capital and so on as the same thing. But the critical difference is that gambling is a zero-sum proposition – players trading stakes, less the house cut. Investing, on the other hand, generates positive returns to society – in the form of inventions, products, resources and jobs.
This is why comparing the stock market to a casino is childish. At its heart the former is a device to raise finance for industry. Meanwhile the latter is an amusement centre for people to play games for cash. Issues like this are about more than semantics, they reflect bias against commerce. The stock market should fulfil its intended function and fuel the creation of wealth and jobs. Perhaps financial engineering like hedge funds and derivatives trading are rather closer to gambling than real business, and their growth has helped crowd out the proper purpose of capital markets. Too often, unfortunately, the truth about business is obscured and distorted by a bloated financial sector.

The writer runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts

O legado de Steve Jobs

Rodrigo Constantino, para o Instituto Liberal

Todos aqueles que admiram o empreendedorismo e o progresso capitalista estão de luto hoje. Morreu Steve Jobs, arrancado prematuramente da vida por conta de uma doença rara, que todos os seus bilhões não foram capazes de reverter. Tratava-se de um visionário, de um empresário perfeccionista e apaixonado pelo que fazia. Algumas lições importantes sobre este gigante da tecnologia merecem destaque.

Em 1983, Jobs perguntou para o então presidente da Pepsi, John Sculley: “Você quer passar o resto da vida vendendo água com açúcar ou quer ter a chance de mudar o mundo?”. Esta ambição ousada seria seu marco. Jobs queria mudar o mundo para melhor, e conseguiu. Pegou uma ferramenta exclusiva para especialistas e a levou até milhões de consumidores do mundo todo, facilitando suas vidas. Para Jobs, o computador era “o equivalente à bicicleta para nossa mente”. A Apple nos ajudou a “pedalar” mais que qualquer outra.

Steve Jobs trabalhava duro, era persistente, acreditava no que fazia e estava mais preocupado com a jornada em si do que com o destino final. A Apple e a Pixar são empresas inovadoras em suas respectivas áreas, e contribuíram para um mundo mais rico. Quando a Apple enfrentou dificuldades, após Steve Jobs ter sido demitido da empresa que ajudara a criar, muitos previram seu fim. Mas ela deu a volta por cima, sob o comando de Jobs, para se tornar a empresa mais valorizada do planeta. Hoje, são US$ 350 bilhões de valor de mercado!

Steve Jobs nunca fez o que fez pelo dinheiro; este foi um subproduto de sua paixão e genialidade. Por isso o sucesso. “Quem agüenta a barra se não for movido por amor?”, perguntava ele. Suas inovações criaram muito valor para os consumidores, e Jobs mereceu cada centavo que ganhou. Na verdade, seu legado é tão grande que faz sua fortuna parecer secundária. Empresários assim jamais deveriam sentir culpa pela riqueza, muito menos repetir o mantra filantrópico de “devolver” para a sociedade alguma coisa. Nada foi tirado. Ao contrário, Steve Jobs criou muita riqueza, e é absolutamente legítima a fortuna pessoal que veio como conseqüência. Absurdo é defender impostos extorsivos sobre estas riquezas.

Por fim, resta uma reflexão para nós brasileiros. Infelizmente, com este arcabouço institucional e cultural que temos, dificilmente seríamos capazes de “produzir” um Steve Jobs, ou algo parecido. Tivesse nascido por aqui, mesmo com toda a sua visão inovadora e sua incrível persistência, provavelmente Jobs seria massacrado pelos obstáculos criados pelo governo no processo. Que o legado de Steve Jobs nos sirva como alimento para esta reflexão necessária.

PS: Mesmo sendo um gênio da tecnologia, Steve Jobs sabia apreciar as coisas realmente importantes na vida. Em 2001, ele disse: "Eu trocaria toda a minha tecnologia por uma tarde com Sócrates".

Every Job Requires an Entrepreneur

By CHARLES R. SCHWAB, WSJ

In his speech before a joint session of Congress on Sept. 8, President Obama said, "Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers."

He is right. We can spark an economic recovery by unleashing the job-creating power of business, especially small entrepreneurial businesses, which fuel economic and job growth quickly and efficiently. Indeed, it is the only way to pull ourselves out of this economic funk.

But doing so will require a consistent voice about confidence in businesses—small, large and in between. We cannot spend our way out of this. We cannot tax our way out of this. We cannot artificially stimulate our way out of this. We cannot regulate our way out of this. Shaming the successful or redistributing income won't get us out of this. We cannot fund our government coffers by following the "Buffett Rule," i.e., raising taxes on Americans earning more than $1 million a year.

What we can do—and absolutely must—is knock down all hurdles that create disincentives for investment in business.

Private enterprise works. I founded Charles Schwab in 1974, when America was confronting a crisis of confidence similar to today's. We had rapidly rising inflation and unemployment, economic growth grinding into negative territory, and paralyzed markets. The future looked pretty bleak.

Sound familiar?

Yet I had faith that our economy would recover. My vision was simple: Investors deserve something better than the status quo. I launched the company with four employees, a personal loan on my home, and an audacious dream. I didn't know exactly how we were going to do it, nor could I foresee that over the decades we would end up building a business that serves over 10 million accounts. But we went for it.

What's the potential power of the entrepreneur's simple leap of faith? The success of a single business has a significant payoff for the economy. Looking back over the 25 years since our company went public, Schwab has collectively generated $68 billion in revenue and $11 billion in earnings. We've paid $28 billion in compensation and benefits, created more than 50,000 jobs, and paid more than $6 billion in aggregate taxes. In addition to the current value of our company, we've returned billions of dollars in the form of dividends and stock buybacks to shareholders, including unions, pension funds and mom-and-pop investors.

The wealth created for our shareholders—a great many of them average Schwab employees—has been used to reinvest in existing and new businesses and has funded a myriad of philanthropic activities. We've also spent billions buying services and products from other companies in a diverse set of industries, from technology to communications to real estate to professional services, thereby helping our suppliers create businesses and jobs.

That's the story of one company. There are thousands more like it, and a consistent supportive voice from Washington could enable thousands more ahead.

The simple fact is that every business in America was started by an entrepreneur, whether it is Ford Motor Co., Google or your local dry cleaner. Every single job that entrepreneur creates requires an investment. And at its core, investing requires confidence that despite the risks, despite the hard work that will certainly ensue, the basic rules of the game are clear and stable. Today's uncertainty on these issues—stemming from a barrage of new complex regulations and legislation—is a roadblock to investment. We have to clear that uncertainty away.

As we did after 1974, our country can and will thrive again. But the leaders of both parties, Republicans and Democrats alike, must lend their voices to encourage and support private enterprise, both for what it can do to turn our economy around and for the spirit of opportunity it represents.

They need to review every piece of existing legislation and regulation with a clear eye to what impact it will have on business and growth. If something is a job killer, put a moratorium on it. Stop adding to the litany of new laws and regulations until we've had time to digest those in place and regain some certainty about the future. Proposed laws and regulations should be put to a simple test: What will this do to encourage businesses and entrepreneurs to invest? What will it do for jobs?

Mr. Schwab is founder and chairman of the Charles Schwab Corporation.