And that leads to my second reason for pushing Clinton to inject some capitalism into her economic plan: The coalition she could lead. If there is one thing that is not going to revive growth right now, it is an anti-trade, regulatory heavy, socialist-lite agenda the Democratic Party has drifted to under the sway of Bernie Sanders. Socialism is the greatest system ever invented for making people equally poor.
.. I get that she had to lean toward Sanders and his voters to win the nomination; their concerns with fairness and inequality are honorable. But those concerns can be addressed only with economic growth; the rising anti-immigration sentiments in the country can be defused only with economic growth; the general anxiety feeding Trumpism can be eased only with economic growth.
.. It’s time that Hillary pivoted. The country today doesn’t need the first female president. It needs the first president in a long time who can govern with a center-left, center-right coalition, and actually end the gridlock on fiscal policy in a smart way.
Modern business, modern markets
Stock markets of the kind we recognise today owe their existence to the development of railways in the 19th century. Railways were large, capital intensive businesses, and their physical assets were specific to their particular purpose. There is little you can do with a railway except run trains on it.
.. This model was successfully extended to the large manufacturing corporations which were at the centre of the industrial landscape for much of the 20th century – breweries, automobile plants, petrochemical installations. The shareholders provided the plant, the workers operated it, the managers oversaw the process.
But this does not describe the typical corporation of the developed economy of the 21st century. Business is no longer capital intensive. Apple is today the largest corporation in the world with market capitalisation approaching $600bn, but owns operating assets valued at less than $20bn, and is typical of the ‘new’ companies that have come to dominate the global economy in the last two decades.
.. Modern businesses are typically cash generative at a much earlier stage of their lifetime.
.. When they come to market – and some are querying the need to do so – it is to provide a liquidity event for early stage investors and for employees rather than to raise funds for new investment.
.. In both Britain and the United States, amounts taken out of the market through share buy-backs and acquisitions for cash have exceeded the amounts raised through new issues over the last two decades. The stock market is no longer a means of putting money into companies, but a means of taking it out.
.. It is a corporate cliché that ‘our people are our most valuable assets’, and, like many clichés, it is often true. But if your most valuable asset goes home every evening, and can terminate his or her contract with you at short notice, your claim to ownership of such assets is tenuous.
.. A people business is intrinsically a partnership between its employees and its investors. The alignment of interests that follows from employees maintaining a substantial equity stake is an essential part of such a structure. Indeed, the transaction could only sensibly occur in the first instance on the basis of a relationship of mutual trust and confidence.
.. Shareholders in financial businesses which became limited liability companies and floated on public markets did not do well: neither former building societies nor investment banks proved rewarding for their shareholders. They fell victim to two problems: the asymmetry of risk allocation, in which employees shared the profits but not the losses from highly leveraged equity: and a clash of organisational culture within the firms which was incapable of maintaining a relationship of trust and confidence with outside investors.
.. It may be time to rethink the general hostility to multiple share classes which is visceral in Britain. Historically, these structures were typically used to maintain family control of a business in which the primary economic interest had passed to outsiders. But for Sergey Brin, Larry Page, and Mark Zuckerberg and their senior colleagues, the businesses they control are in a real sense still their businesses even after a majority of the shares are held by others; they are dependent on the founders not just for the realisation of their ideas, but for the development of their long-term value.
.. Our markets need to adapt to the changed nature of 21st century business if they are to remain relevant in a world in which capitalism has little need of capital.
The Facebook of ecommerce
Amazon in particular and ecommerce in general is good at search. Amazon, very obviously, is Google for products. It’s good at giving you the best-seller you’ve heard of or the water filter for your fridge (the long tail). It’s not so good at the things in the middle
.. Amazon is great at selling you what’s on the table in the front of the bookshop, and at selling one copy a year of a million or so obscure titles, but it’s not very good at showing you what’s on the shelves at the back of the bookshop. It’s not so good at selling the mid-list – things that you didn’t know existed, or didn’t know you wanted, before you saw them.
.. These are things where a lot of the role of a physical shop is curation, recommendation and demand generation rather than logistics: the shop shapes your choice but it also tells you about things you didn’t plan to buy, and you can’t search for things you hadn’t thought about.
Why America’s Business Majors Are in Desperate Need of a Liberal-Arts Education
Their degrees may help them secure entry-level jobs, but to advance in their careers, they’ll need much more than technical skills.
American undergraduates are flocking to business programs, and finding plenty of entry-level opportunities. But when businesses go hunting for CEOs or managers, “they will say, a couple of decades out, that I’m looking for a liberal arts grad,” said Judy Samuelson, executive director of the Aspen Institute’s Business and Society Program.
.. Almost one in five bachelor’s degrees earned in the United States is a business degree
.. Put simply, business majors seem to be graduating with some of the technical skills they’ll need to secure jobs, but without having made the gains in writing or critical-thinking skills they’ll require to succeed over the course of their careers, or to adapt as their technical skills become outdated and the nature of the opportunities they have shifts over time.
..“We have become so myopic in solving business problems that we don’t think about those problems from the perspective of other disciplines,” said Charles Iacovou, dean of the school of business at Wake Forrest University.